The Securities and Exchange Board of India (SEBI) is poised to deliberate on a series of significant regulatory changes at its board meeting scheduled for Wednesday, December 17, 2025. The agenda is expected to include a potential overhaul of norms governing mutual funds and initial public offerings (IPOs), impacting millions of investors and market participants.
Key Focus: Mutual Fund Expense Ratios and Charges
One of the most critical items for discussion stems from a discussion paper released by SEBI in October 2025 proposing a review of mutual fund regulations. The draft proposals suggest a direct reduction in costs for investors by lowering the Total Expense Ratio (TER) that asset management companies can charge.
The key recommendation is a cut of 15 basis points (bps) for open-ended schemes and up to 25 bps for closed-ended schemes. The TER encompasses all expenses charged to the fund, ultimately affecting investor returns. The mutual fund industry has reportedly expressed concerns regarding these revised TER limits.
In a move aimed at enhancing transparency, the regulator has also recommended excluding statutory levies like Securities Transaction Tax (STT), Goods and Services Tax (GST), and stamp duty from the TER calculation. Furthermore, the draft proposes a revision in brokerage and transaction charges that are currently permitted over and above the TER limit.
It suggests slashing brokerage charges from 12 bps to 2 bps for cash market trades and from 5 bps to 1 bps for derivatives. Industry sources indicate that the SEBI board might take a more liberal stance, potentially setting the limit between 3 to 7 bps.
Overhauling IPO and Governance Norms
The board will also tackle important amendments to the Issue of Capital and Disclosure Requirements (ICDR) regulations. A long-pending issue on the table is the lock-in requirement for pledged shares held by non-promoters at the time of an IPO.
Current rules mandate a six-month lock-in for pre-issue capital held by persons other than promoters. However, a technical challenge arises because the existing depository system does not allow the lock-in of shares under pledge, creating complications for companies during the public issue process. SEBI's review aims to resolve this operational hurdle.
Additionally, to simplify the process for retail investors, the board may discuss replacing the abridged prospectus with a more concise document. This change is intended to boost retail investor engagement and participation in public issues by making information more accessible.
Strengthening Internal Governance at SEBI
In a significant step towards internal transparency, the board will review recommendations from a high-level committee (HLC) on conflicts of interest. This committee was formed to scrutinize the investments and liabilities of SEBI's own board members and senior officials.
The HLC has put forward ten key recommendations, which include:
- A multi-tier disclosure regime for assets and liabilities.
- Stricter investment restrictions for senior personnel.
- Formalized processes for recusal in cases of conflict.
- Establishing a robust whistle-blower mechanism.
A major proposal is that the SEBI Chairman, Whole-Time Members (WTMs), and employees at the Chief General Manager (CGM) level and above should make public disclosures of their asset and liability statements. This move is seen as crucial for bolstering public trust in the market regulator's integrity.
The outcomes of this board meeting are set to shape the regulatory landscape for India's capital markets in the coming year, with a clear focus on reducing costs for investors, simplifying processes, and enhancing governance standards.
