Brokerage and transaction costs levied on mutual fund schemes should be within the stipulated total expense ratio limit and any additional cost has to be borne by the asset management company concerned, according to Sebi.
Total expense ratio (TER) is a measure of the total costs associated with managing and operating a mutual fund.
Providing a clarification on a query related to levying service tax on mutual fund schemes, Sebi said service tax on brokerage and transaction cost paid for execution of trade, should be within the limit of TER as specified under MF norms.
"Brokerage and transaction cost can be capitalised in the concerned mutual fund scheme's books to extent of 12 basis points and 5 basis points for cash market transactions and derivative transactions respectively.
"Any payments towards brokerage and transaction costs, over and above 12 bps (0.12 per cent) and 5 bps (0.05 per cent) for cash market transactions and derivative transactions respectively is to be borne by the scheme within the TER limit specified under... Sebi (MF) regulations," Sebi said.
The Securities and Exchange Board of India (Sebi) has conveyed its views in response to an 'informal guidance' sought by Emkay Global Financial Services.
"Any expenditure in excess of the specified TER limits, has to be borne by Asset Management Company, Trustees or sponsors," Sebi said.
Management, trading, legal and auditor fee and other operational expenses generally come under TER.
Under the norms, the maximum TER fund houses can charge is 2.5 per cent for equity funds and 2.25 per cent for debt schemes.
