Total Expense Ratio – change and disclosure
Summary
This circular mandates Mutual Fund AMCs to disclose the Total Expense Ratio (TER) daily on their websites in a downloadable format. It requires prior notice via email or SMS for any increase in base TER, while decreases due to regulatory limits require immediate communication. The regulation modifies previous disclosure formats and applies immediately to new schemes and existing ones from March 1, 2018.
Text
AMCs shall prominently disclose on a daily basis, the TER of all schemes under a separate head – “Total Expense Ratio of Mutual Fund Schemes” on their website in downloadable spreadsheet format as per Annexure A.
Any change in the base TER... in comparison to previous base TER charged to any scheme shall be communicated to investors of the scheme through notice via email or SMS at least three working days prior to effecting such change.
Further, the notice of change in base TER shall be updated in the aforesaid section of website at least three working days prior to effecting such change.
However, any decrease in TER due to decrease in applicable limits as prescribed in Regulation 52 (6)... would not require issuance of any prior notice to the investors.
Further, such decrease in TER shall be immediately communicated to investors of the scheme through email or SMS and uploaded on the website in terms of clause (a) above.
The above change in the base TER in comparison to previous base TER charged to the scheme shall be intimated to the Board of Directors of AMC along with the rationale recorded in writing.
The changes in TER shall also be placed before the Trustees on quarterly basis along with rationale for such changes.
In partial modification to the aforesaid circulars the above provision has been substituted by the following: “The mutual fund would update the current expense ratios on the website at least three working days prior to the effective date of the change. Additionally, AMCs shall provide the exact weblink of the heads under which TER is disclosed in their website.”
This circular shall be applicable – (i) immediately for new schemes to be launched on or after the date of this circular and (ii) for all the existing schemes with effect from March 1, 2018.
This circular is issued in exercise of the power conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with the provision 77 of SEBI (Mutual Funds) Regulation, 1996 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Total Expense Ratio – change and disclosure. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.