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SEBI allows e-IPOs, reforms in IPO, MFs

Capital markets regulator Securities and Exchange Board of India (SEBI) on Thursday announced allowing e-IPOs. To begin with, the option of e-IPOs will be available at over 1,000 points for electronic bidding in public offers.

SEBI said that it will frame new rules for investment advisers and fast-track clearance to public offer documents of companies.

SEBI also allowed mutual funds flexibility in using expense charges.

 The markets regulator said that 30 bps expense ratio hike for Tier II cities will be allowed. Entry load for MFs may not be re-introduced. SEBI chairman, UK Sinha said that these steps have been taken to expand market reach.

Sebi will set up a committee for national mutual fund policy.

The regulator has sought tax incentives in equity funds under Rajiv Gandhi Equity Savings Scheme.

Companies will be allowed to achieve the minimum 25 per cent public shareholding rule through the allocation of bonus or rights shares.

Also, investing in mutual funds might become more expensive, but retail investors will be assured of a minimum number of shares in initial public offers as SEBI  announced extensive changes in its rules for MFs and IPOs.

Talking to reporters after a board meeting, Sinha said the board discussed and approved some ‘very far-reaching reforms’ which include steps for expanding the reach of IPOs and MFs across the country.

In a major decision that could make it expensive for investors to put money in mutual funds, SEBI decided that any service tax would be charged to ultimate investor, not to the asset management company (AMC) as is the practice at present.

Besides, the AMCs would be allowed to charge additional expense ratio (the charge levied by fund houses towards fund management fees and other expenses) for catering beyond a threshold limit in the smaller cities.

The various decisions also include allowing mutual funds flexibility in using fund expense charges and said a committee is being set up to frame a national mutual fund policy.

The regulator would also frame new rules for investment advisers, Sinha said.

However, the board could not take a decision on having safety net for investors.

Sinha said that various steps taken for revival of mutual fund industry would ‘impel and motivate AMCs to go beyond the 15 cities’.

Regarding the service tax issue, Sinha said that Sebi’s impression is that the impact will not be more than 2-3 basis points on investors and this is already a practice in various other sectors, including the financial sector.

Also, the exit load will be credited back to the scheme, as against the current practice of it being given back to the AMC.  
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