Regulation 52 - Limitation on fees and expenses on issue of schemes - Securities and Exchange Board of India (Mutual Funds) Regulations, 1996

Limitation on fees and expenses on issue of schemes 52. (1) All expenses should be clearly identified and appropriated in the individual schemes. 1 [(2) The asset management company may charge the scheme with investment and advisory fees which shall be fully disclosed in the offer document.] (3) 2 [***] (4) In addition to the fees mentioned in sub-regulation (2), the asset management company may charge the 3 [scheme] with the following expenses, namely:- (a) 4 [***] (b) recurring expenses including:- (i) marketing and selling expenses including agents commission, if any ; (ii) brokerage and transaction cost ; (iii) registrar services for transfer of units sold or redeemed ; (iv) fees and expenses of trustees ; (v) audit fees ; (vi) custodian fees ; 5 [(vii) costs related to investor communication ; (viii) costs of fund transfer from location to location ; (ix) costs of providing account statements and dividend/redemption cheques and warrants ; (x) insurance premium paid by the fund ; (xi) winding up costs for terminating a fund or a scheme ; (xii) costs of statutory advertisements ;] 6 [***] 7 [(xii-a) in case of a gold exchange traded fund scheme, recurring expenses incurred towards storage and handling of gold; 8 [***]] 26 [ (xiiaa) in case of a silver exchange traded fund scheme, recurring expenses incurred towards storage and handling of silver; ] 9 [(xii-b) in case of a capital oriented scheme, rating fees; 10 [***]] 11 [(xii-c) in case of a real estate mutual fund scheme, insurance premia and costs of maintenance of the real estate assets (excluding costs of development of such assets) over and above the expenses specified in regulation 52 to the extent disclosed in the offer document;] 12 [(xii-d) listing fees, in case of schemes listed on a recognised stock exchange; and] 25 [ (xiie) in case of schemes investing in exchange traded commodity derivatives, recurring expenses incurred towards storage and handling of the underlying goods, due to physical settlement of such contracts. ] 13 [(xiii)] such other costs as may be approved by the Board. (5) Any expense other than those specified in sub-regulations (2) and (4) shall be borne by the asset management company 14 [or trustee or sponsors]. 15 [***] 16 [(5A) In case of a scheme other than an index fund scheme or an exchange traded fund, where, as per the scheme information document, the scheme will invest a minimum of sixty-five per cent of its net assets in equity and equity related instruments, the scheme will be considered as equity oriented scheme for the purpose of limits of total expense ratio as specified in these regulations.] 17 [(6) The total expense ratio of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits:- (a) in case of fund of funds scheme - (i) investing in liquid schemes, index fund scheme and exchange traded funds, the total expense ratio of the scheme including weighted average of the total expense ratio levied by the underlying scheme(s) shall not exceed 1.00 per cent of the daily net assets of the scheme. (ii) investing a minimum of sixty-five per cent of assets under management in equity oriented schemes as per scheme information document, the total expense ratio of the scheme including weighted average of the total expense ratio levied by the underlying scheme(s) shall not exceed 2.25 per cent of the daily net assets of the scheme. (iii) investing in schemes other than as specified in clause (a)(i) and (a)(ii) of this sub-regulation, the total expense ratio of the scheme including weighted average of the total expense ratio levied by the underlying scheme(s) shall not exceed 2.00 per cent of the daily net assets of the scheme: Provided that the total expense ratio to be charged over and above the weighted average of the total expense ratio of the underlying scheme shall not exceed two times the weighted average of the total expense ratio levied by the underlying scheme(s), subject to the overall ceilings as stated at clause a(i), a(ii) and a(iii). (b) in case of an index fund scheme or exchange traded fund, the total expense ratio of the scheme including the investment and advisory fees shall not exceed 1.00 per cent of the daily net assets. (c) in case of open ended schemes other than as specified in clause (a) and (b) above, the total expense ratio of the scheme shall not exceed the following limits: Assets under management Slab (In Rs. crore) Total expense ratio limits for equity oriented schemes Total expense ratio limits for other than equity oriented schemes on the first ₹ 500 crores of the daily net assets 2.25% 2.00% on the next ₹ 250 crores of the daily net assets 2.00% 1.75% on the next ₹ 1,250 crores of the daily net assets 1.75% 1.50% on the next ₹ 3,000 crores of the daily net assets 1.60% 1.35% on the next ₹ 5,000 crores of the daily net assets 1.50% 1.25% On the next ₹ 40,000 crores of the daily net assets Total expense ratio reduction of 0.05% for every increase of ₹ 5,000 crores of daily net assets or part thereof. On balance of the assets 1.05% 0.80% (d) in case of close ended and interval schemes, (i) the total expense ratio of equity oriented scheme(s) shall not exceed 1.25 per cent of the daily net assets of the scheme. (ii) the total expense ratio of close ended and interval scheme(s) other than schemes specified in clause d (i) above shall not exceed 1.00 per cent of the daily net assets of the scheme.] 18 [(6A) In addition to the limits specified in sub-regulation (6), the following costs or expenses may be charged to the scheme, namely- 27 [ (a) brokerage and transaction costs which are incurred for the purpose of execution of trade up to 0.12 per cent of trade value in case of cash market transactions and 0.05 per cent of trade value in case of derivatives transactions; ] (b) expenses not exceeding of 0.30 per cent of daily net assets, if the new inflows from such cities as specified by the Board from time to time are at least - (i) 30 per cent of gross new inflows in the scheme, or; (ii) 15 per cent of the average assets under management (year to date) of the scheme, whichever is higher: Provided that if inflows from such cities is less than the higher of sub-clause (i) or sub- clause (ii), such expenses on daily net assets of the scheme shall be charged on proportionate basis: Provided further that expenses charged under this clause shall be utilised for distribution expenses incurred for bringing inflows from such cities: Provided further that amount incurred as expense on account of inflows from such cities shall be credited back to the scheme in case the said inflows are redeemed within a period of one year from the date of investment; (c) additional expenses, incurred towards different heads mentioned under sub-regulations (2) and (4), not exceeding 19 [0.05] per cent of daily net assets of the scheme 20 [or as specified by the Board:] ] 21 [Provided that such additional expenses shall not be charged to the schemes where the exit load is not levied or applicable.] (7) Any expenditure in excess of the limits specified in 22 [sub-regulations (6) and (6A)] shall be borne by the asset management company 23 [or by the trustee or sponsors]. (8) The provisions of sub-regulations (3), (4), (5) and (6) will come into effect 24 [from 1st April, 1997] for those schemes of mutual funds which have been launched prior to notification of these regulations. ************* NOTES:- 1 Substituted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2012, w.e.f. 01-10-2012. Prior to its substitution, Sub-regulation (2) read as under; (2) The Asset Management Company may charge the mutual fund with investment and advisory fees which are fully disclosed in the offer document subject to the following namely:- (i) One and a quarter of one per cent of the weekly average net assets outstanding in each accounting year for the scheme concerned, as long as the net assets do not exceed ₹ 100 crores, and (ii) One per cent of the excess amount over ₹ 100 crores, where net assets so calculated exceed ₹ 100 crores. Provided that in case of an index fund scheme, the investment and advisory fees shall not exceed three fourths of one percent (0.75%) of the weekly average net assets. 2 Omitted by the SEBI (Mutual Funds) (Amendment) Regulations, 2010, w.e.f. 29-7-2010. Prior to its omission, sub-regulations (3) read as under; (a) For schemes launched on a no load basis, the asset management company shall be entitled to collect an additional management fee not exceeding 1% of the weekly average net assets outstanding in each financial year. 3 Substituted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2012, w.e.f. 01-10-2012, for the words mutual fund . 4 Omitted by the SEBI (Mutual Funds) (Amendment) Regulations, 2008, w.e.f. 16-4-2008. Prior to omission, sub-regulation (4)(a) read as under; *[initial expenses of launching close-ended schemes, which shall be accounted in the books of account of the scheme in accordance with the Tenth Schedule;] [*Inserted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2006, w.e.f. 22-5-2006] 5 Sub-clause (vii) to (xii) inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 1998, w.e.f. 12-1-1998. 6 The word and omitted by the SEBI (Mutual Funds) (Amendment) Regulations, 2006, w.e.f. 12-1-2006. 7 Inserted by ibid. 8 The word and omitted by the SEBI (Mutual Funds) (Third Amendment) Regulations, 2006, w.e.f. 3.8.2006. 9 Inserted by ibid. 10 The word and omitted by the SEBI (Mutual Funds) (Amendment) Regulations, 2008, w.e.f. 16-4-2008. 11 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 2009, w.e.f. 8-4-2009. Prior to its substitution, sub-regulation (xii-b) read as under; *[(xii-b) in case of a real estate mutual fund scheme, insurance premia and costs of maintenance of the real estate assets (excluding costs of development of such assets) over and above the expenses specified in regulation 52 to the extent disclosed in the offer document; and] [*Inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 2008, w.e.f. 16-4-2008.] 12 Inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 2009, w.e.f. 8-4-2009. 13 Sub-clause (vii) renumbered as sub-clause (xiii) by the SEBI (Mutual Funds) (Amendment) Regulations, 1998, w.e.f. 12-1-1998. 14 Inserted ibid.. 15 Omitted by the SEBI (Mutual Funds) (Amendment) Regulations, 2008, w.e.f. 16-4-2008. Prior to this, proviso of sub-regulation (5) read as under; *[Provided that initial expenses of launching a close-ended scheme shall not exceed six per cent of initial resources raised under that scheme:] #[Provided further that any excess over the 6 per cent initial issue expense shall be borne by the asset management company.] [*Substituted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2006, w.e.f. 22-5-2006] [#Inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 1998, w.e.f. 12-1-1998] 16 Inserted by the SEBI (Mutual Funds)(Fourth Amendment) Regulations, 2018 w.e.f. 01-04-2019. 17 Substituted by the SEBI (Mutual Funds) (Fourth Amendment) Regulations, 2018, w.e.f. 01-04-2019. Prior to this substitution, the regulation read as: (6) The total expenses of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits:- (a) in case of a fund of funds scheme, the total expenses of the scheme including weighted average of charges levied by the underlying schemes shall not exceed 2.50 per cent of the daily net assets of the scheme. (b) in case of an index fund scheme or exchange traded fund, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half percent (1.5%) of the daily net assets; (c) in case of any other scheme- (i) on the first ₹ 100 crores of the daily net assets 2.5%; (ii) on the next ₹ 300 crores of the daily net assets 2.25%; (iii) on the next ₹ 300 crores of the daily net assets 2.0%; (iv) on the balance of the assets 1.75%: Provided that in respect of a scheme investing in bonds such recurring expenses shall be lesser by at least 0.25% of the daily net assets outstanding in each financial year. [Prior to the above substitution, sub-regulation (6) was substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 2010, w.e.f. 29-7-2010, which read as under; *[(6) The total expenses of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits :- (i) On the first ₹ 100 crores of the average weekly net assets 2.5%; (ii) On the next ₹ 300 crores of the average weekly net assets 2.25%; (iii) On the next ₹ 300 crores of the average weekly net assets 2.0%; (iv) On the balance of the assets 1.75% : Provided that such recurring expenses shall be lesser by at least 0.25% of the weekly average net assets outstanding in each financial year in respect of a scheme investing in bonds : Provided further that in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall not exceed 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis. Provided further that in case of an index fund scheme, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half percent (1.5%) of the weekly average net assets.] [*Amended by the SEBI (Mutual Funds) (Amendment) Regulations, 2003, w.e.f. 19-5-2003 and SEBI (Mutual Funds) (Second Amendment) Regulations, 2007, w.e.f. 31-10-2007] 18 Inserted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2012, w.e.f. 01-10-2012. 19 Substituted for the figure 0.20 by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2018, w.e.f. 30.5.2018. 20 Inserted ibid. 21 Inserted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2018, w.e.f. 30.5.2018. 22 Substituted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2012, w.e.f. 01-10-2012, for the words, symbols and number sub-regulation (6) . 23 Inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 1998, w.e.f. 12-1-1998 24 Substituted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 1997 , w.e.f. 15-4-1997, for after three months from the date of notification of these regulations . 25. Inserted vide NOTIFICATION No. SEBI/LAD-NRO/GN/2019/011 dated 26-04-2019 26. Inserted vide Notification No. SEBI/LAD-NRO/GN/2021/56 dated 09-11-2021 w.e.f. 09-12-2021 27. Substituted vide Notification No. SEBI/LAD-NRO/GN/2022/70 dated 25-01-2022 w.e.f. 01-04-2023 before it was read as (a) brokerage and transaction costs which are incurred for the purpose of execution of trade and is included in the cost of investment, not exceeding 0.12 per cent in case of cash market transactions and 0.05 per cent in case of derivatives transactions;