Eases disclosure norms for debt market securities.
The Securities and Exchange Board of India (Sebi) today decided to reduce the costs for mutual fund investors by doing away with the initial issue fee for close-ended schemes.
The Sebi board, which met here today, also cleared the draft proposal for listing debt securities, eased disclosure norms for existing debt market securities and paved the way for permanent registration of capital market intermediaries.
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Speaking to reporters after the board meeting, Sebi Chairman M Damodaran said it is part of the regulator’s endeavour to make mutual funds cheaper.
The new rule is for prospective schemes.
Currently, initial issue expenses on closed-ended funds are amortised over the period of the fund. It allows funds to spend the amount collected as fees (currently, about 6 per cent for a three-year fund) in stages and not at one go.
Following the Sebi move in 2006 to scrap the amortisation benefit for open-ended schemes, there was a spurt in closed-ended schemes. Of the 34 new fund offers in 2007, 24 were closed-ended.
Sebi said all mutual fund schemes will henceforth meet sales, marketing and other such expenses from the entry load.
Sebi also inducted a new board member, Mohan Gopal, who is the director of the National Judicial Academy.
On debt securities, the regulator decided that entities issuing debt securities for the first time will have to make detailed disclosures. This was a part of the draft Sebi regulations that had been put out for public comment. The regulator also said an offer to 50 or more people will require a mandatory listing.
Draft regulations on securitised debt instruments, which have been languishing in the absence of regulations, were also cleared today.
Damodaran also said guidelines for Real Estate Investment Trusts (REITs) and real estate mutual funds would be considered in the next board meeting.
Sebi has invited public comment on the draft guidelines for REITs, which would allow people to invest in real estate in an organised manner.
Referring to the issue of reducing the cost and time of initial public offers, Damodaran said a sub-committee of the Primary Market Advisory Committee has gone through various issues and submitted its report, which will be considered sometime in February.
Replying to questions on the introduction of short-selling by institutional investors, Damodaran said, “It will be introduced in the first week of February if not on February 1.” Retail investors are already allowed to short-sell on the exchanges.
