In a bid to bring in increased transparency in mutual fund schemes and make them more investor friendly, SEBI has asked fund houses to prominently disclose on a daily basis the total expense ratio (TER) of all schemes under a separate head, "Total Expense ratio", on their website.
"During volatile time in the fixed income market, some short to medium tenor fixed income schemes, would charge a expense ratio based on market movement which could vary from one month to another," says the CEO of a domestic fund house. Though the expense ratio was within regulatory limits, it would not portray the right picture. On account of this, the expense ratio would vary for the same scheme from one month to another, something that would confuse distributors and investors.
Hence to increase transparency the regulator has now asked asset management companies to communicate to investors of the scheme through email or SMS any change or increase in the base TER charged to any scheme atleast three working days prior to effecting such change and be prominently displayed on the website. Additionally AMCs shall also provide the exact weblinks of the heads under which TER is disclosed in their website. The circular will be applicable immediately for any new schemes to be launched and for all existing schemes from March 1, 2018 .