Market regulator Sebi imposes Rs 3 lakh penalty on Nippon Life India AMC

The Securities and Exchange Board of India (Sebi) on Thursday imposed a total penalty of Rs 3 lakh on Nippon Life India Asset Management and its trustee for irregularities in the total expense ratio (TER). The market regulator observed that the fund house had charged scheme expenses to the books of the asset management company (AMC).

Sebi's examination found that Nippon Life had charged less than 1 per cent expense to the schemes in five exchange-traded funds (ETFs) and charged certain scheme expenses to the AMC books. With this, the AMC was able to bring down the expenses on the ETFs to a much lower level while bearing the expenses itself.

 

Sebi allows AMCs to pay expenses of very small value but high volume out of the AMC’s books up to a maximum of 2 basis points of the respective scheme’s assets under management. However, Nippon Life India has been alleged to have charged more than this threshold on its books.

A lower TER plays a key role in the selection of a scheme by investors, particularly direct schemes.