Sebi board to meet today: Ethics reforms, mutual fund rules & more on agenda

The Securities and Exchange Board of India (Sebi) board will meet on Wednesday, December 17, marking the fourth meeting under Chairperson Tuhin Kanta Pandey's tenure. Key on the agenda will be a report submitted by a high-level panel on November 10, which recommended a series of ethics and governance reforms. These include requiring senior Sebi officials to publicly disclose their assets, introducing a stricter ethics framework, establishing a secure whistleblower mechanism, and instituting a ban on expensive gifts.

Further recommendations from the panel involve a two-year cooling-off period for post-retirement assignments and the creation of a Chief Ethics and Compliance Officer role. The board's deliberations also included reviewing mutual fund regulations, particularly proposals related to the definition of the total expense ratio (TER) and brokerage provisions.

Board discussions on mutual funds will focus on proposals to clarify how expenses are charged to investors. Currently, only GST on management fees is charged above the TER, with other statutory costs absorbed within it. The proposals, stemming from Sebi's consultation paper of October 28, consider excluding statutory levies—such as securities transaction tax, commodity transaction tax, stamp duty, and GST—from the TER.

Instead, these would be passed on separately to investors, rather than being included within the TER cap. This move is intended to improve transparency, as "in which SEBI said excluding statutory levies would improve transparency and ensure that any future changes in government taxes are reflected clearly, PTI reported.

 Also on agenda is removing the additional 5 basis points charge for asset management companies across schemes, which SEBI said this additional expense was transitory in nature and was introduced to offset the impact of crediting exit loads back to schemes."

The meeting's agenda further is likely to cover potential changes to the Stock Broker Regulations, 1992, as part of a wider regulatory overhaul. One measure proposed is a formal definition of algorithmic trading as Sebi has suggested introducing a formal definition of algorithmic trading to address gaps in the existing regulatory framework, PTI said. 

Additionally, the board is likely to examine relaxing of know-your-customer (KYC) norms for non-resident Indians and the possible introduction of a closing auction session in markets. Any decisions from this meeting are expected to influence how market intermediaries and mutual funds operate, as well as the overall governance standards at Sebi.