The Securities and Exchange Board of India (SEBI) on Wednesday (December 17, 2025) revised the total expense ratio charged by mutual funds, reviewed the two-decade-old brokerage regulations, and proposed to discuss public comments on the high-level committee (HLC) regarding its report on conflict of interest.
The markets regulator, in its board meeting, also announced measures for simplification of IPO documents for the benefit of investors and allowed credit rating agencies (CRAs) to carry out ratings for unlisted debt instruments.
SEBI decided to cut the maximum expense ratio charged on investors by up to 15 basis points as part of a comprehensive review of the mutual fund regulation at the third-quarter board meeting held in Mumbai.
The changes have been applied to slabs determined by the assets under management of the mutual funds.
According to the new regulations, the expense ratio will now be called ‘Base Expense Ratio’ (BER), which will exclude stamp duty, GST, and STT, among other levies. The total exchange ratio will be a sum of BER, brokerage, regulatory levies and statutory levies. The cap on the brokerage segment has now been cut to 6 bps for cash market and 2 bps on derivative transactions.
In the consultation paper on MF regulations, the regulator proposed that the cash market brokerage may be capped at 2 bps and derivatives at 1 bps. One bps is one hundredth of a percentage.
In line with the proposals, the additional exit load of 5 bps, which was usually charged in the event of a premature redemption, has been completely done away with.
“It was very clearly brought to our notice that the sell-side research is a bundled cost. We were trying to propose that they can unbundle it and can pay brokerage at a lower level and pay for research separately, but that business model is not available today,” SEBI Chairperson Tuhin Kanta Pandey said while addressing a press conference.
He added that attempts to unbundle sell-side research costs and brokerage charges were not successful in Europe and the U.K.
Sell-side research is brokerage reports that are given by securities brokerage companies. Brokerage includes cost for research and the brokerage commission.
The mutual fund regulation reviews also include simplification of old rules, reorganisation of roles and responsibilities of AMCs, and reorganisation of provisions related to the prudential investment limits and valuation of securities.
SEBI also revamped the stock brokers’ regulations to simplify language, updating contemporary changes among other changes. Both mutual fund and brokerage regulations were more than two decade old.
The regulator also simplified norms for public issues by doing away with the need for an offer document summary and instead replacing it with the abridged prospectus. The document will be made available to the investor in the form of a QR code.
While IPO disclosures have been simplified, criticisms on the quality of companies coming to the market, pricing of the shares and increasing offer for sale component as a share of total IPOs persist.
Responding to the criticism, Mr. Pandey said that there was nothing exceptional and that it was not “met with facts” and depicted the maturity of Indian investors.
“Indian [investors] are very mature. They can have different kinds of investors; you have different kinds of people, and they take the chance. Our case as a regulator is enabling different types of risk capital coming into different risk areas and having investor protection in terms of very good disclosures,” Mr. Pandey said.
To be sure, the share of OFS in an average IPO, which is about ₹1,680 crore, was 63% in 2025 and has been increasing in the past three years.
The comment assumes significance after Chief Economic Advisor V. Anantha Nageswaran, at a recent event, dubbed IPOs as ‘exit vehicles’ for private equity funds.
SEBI also said that it had reviewed the high-level committee report on conflict of interest, and “certain concerns” were expressed by employees.
The board also decided upon other regulations, such as easing lock-in rules in IPOs, permitting debt issuers to offer incentives in public, and allowing credit rating agencies to rate unlisted debt instruments.
Published – December 17, 2025 09:37 pm IST
