SEBI: AMCs Should Not Absorb Expenses Pertaining To Mutual Fund Schemes

SEBI vide  its order dated December 29, 2022, imposed a penalty of Rs. 1 Lakh on DSP Investment Managers Private Limited (AMC) for bearing expenses of the DSP Nifty 50 Exchange Traded Fund (DSP ETF) out of its own pockets.

Background

SEBI noticed in one of the compliance test reports submitted by DSP that the actual Total Expense Ratio (TER) of the mutual fund was higher than what was being charged to the investors, thereby indicating that the excess amount was absorbed by the AMC. It was observed that the AMC charged investors for a TER value of only 0.07 per cent while the actual TER that should have been charged to the investors amounted to 0.16 per cent.

This led to the conclusion that the balance 0.09 per cent of the TER was absorbed by the AMC and paid from their own pockets. SEBI considered this activity of the AMC to be in violation of the SEBI Circular dated October 22, 2018.