HomeMarket NewsSEBI’s new mutual fund rules a ‘mixed bag’, may hurt research quality: Sandeep Parekh
Sandeep Parekh, Managing Partner at Finsec Law Advisors, believes the new brokerage cap will negatively affect the quality of institutional research available to funds and that the revised TER structure will favour large asset managers, potentially hindering distribution in smaller towns.
The Securities and Exchange Board of India (SEBI) has unveiled a sweeping overhaul of mutual fund regulations—the first in nearly three decades—triggering wide debate across the industry.
While the regulator has attempted to strike a middle ground on key issues such as the Total Expense Ratio (TER) and brokerage fees, the changes could have unintended consequences, particularly for research quality and smaller fund houses, according to Sandeep Parekh, Managing Partner at Finsec Law Advisors.
Speaking on the revised framework, Parekh reiterated his broader discomfort with regulatory price controls. “My view has been that the regulator should not be getting into price fixation. It should do that only if competitive forces are not working—let us say there’s a monopoly or an oligopoly,” he said, arguing against fee caps on financial products from first principles.
Parekh described the unbundling of brokerage and research costs as a “mixed bag”. While it improves transparency for investors, he warned it could weaken the research ecosystem that supports fund management.
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“The smaller funds will not be able to afford the research reports which came bundled till now,” he said, noting that the changes would “adversely impact both the funds and the brokers”.
Parekh elaborated that even large mutual funds cannot replicate the specialised, in-depth research provided by brokerage houses, which employ analysts dedicated to specific sectors. “It’s much more efficient for a brokerage hiring a transport expert and then d