DSP

2022 - 12 - 30

Post cover — Image courtesy of "Economic Times"

Sebi fines DSP Investment Managers for bearing expense ratio of ... (Economic Times)

Sebi said even though the amount of expense of scheme borne by the AMC was miniscule at Rs 53238, it cannot ignore the gravity of violations involved in the ...

He had been in and out of hospital in recent months after a tumor was found on his colon. The [DSP Nifty 50 ETF](/topic/dsp-nifty-50-etf)was launched in 2021 December and the total expense ratio was supposed to be 0.16%. The regulator said the practice of paying the expenses of the scheme from AMC books can only be afforded by profitable AMCs or AMCs with deep pockets whereas small AMCs won’t be able to bear such expenses from their books. [Srei Lenders to Hold Challenge Auction Tuesday to Select Winner](/epaper/delhicapital/2022/dec/30/et-front/srei-lenders-tohold-challengeauction-tuesdayto-select-winner/articleshow/96606340.cms) [CAD Surges to Record $36.4 billion in Sept Quarter](/epaper/delhicapital/2022/dec/30/et-front/cad-surges-to-record-36-4-b-in-sept-quarter/articleshow/96606333.cms) However, the fund house charged just 0.07% from the scheme and soaked up the remaining 0.09% on its own books.

SEBI punishes DSP AMC, trustees for undercutting scheme ... (Moneycontrol.com)

The capital market regulator imposed a penalty of Rs 1 lakh each on the fund house and its trustee company for absorbing a chunk of its recently launched ...

That is what alerted SEBI to what really happened at the fund house and DN50, in particular. On the one side is the defence by DSP Investment Managers that costs need to be competitive to attract investors; a line that arguably many other fund houses would also echo. But DSP Investment Manager’s biggest defence was this: the total expenses it incurred on DN50 (the costs that the AMC absorbed plus what it charged to the scheme; 0.16 percent) was far less than the upper limit of one percent that SEBI has mandated for passive funds. Here too, the fund house pointed out that SEBI doesn’t prohibit fund houses from absorbing a portion of a scheme’s expense. In its defence, the fund house said that the costs of running an MF scheme, even a passive scheme like an ETF, can push the total costs up and that might make the scheme (DN50, in this case) unattractive when compared to its peers. SEBI argued that these reports are specifically meant for fund houses and trustees to report any divergence from SEBI rules. In 2018, SEBI had issued a circular mandating that fund houses must charge all MF scheme-related expenses to the schemes only. The 2018 circular put a stop to that when it restricted the ability of fund houses to spend. With increase in the AAUM (average assets under management), the operating expenses as % of AAUM will gradually reduce and the total scheme expenses will be below the TER charged,” wrote the AMC to SEBI.SEBI’s charge And the intent behind absorbing a portion of the scheme’s costs was not to mis-sell. The circular had made it mandatory for fund houses to charge all scheme-related expenses to the schemes only. SEBI objected to this saying it violates a circular that the regulator had issued in October 2018.

SEBI fines DSP Investment Managers for expense ratio violation (The Hindu BusinessLine)

Regulator levies ₹1-lakh penalty on DSP Investment Managers and DSP Trustee for bearing extra expense ratio of its DSP Nifty 50 ETF on its books.

If a scheme discloses TER lower than in reality, the disclosed TER is misleading. The reason for the AMC bearing the excess expenses is the competitive market. DSP Mutual Fund in its compliance test report for the March quarter and Half Yearly Trustee Report ended March informed SEBI that the total expense as a percentage to average asset under management (AUM) was higher than the total expense ratio (TER) charged to the scheme (DSP Nifty 50 ETF); the excess expenses were borne by DSP Investment Managers.

SEBI का DSP AMC और ट्रस्टी कंपनी पर एक्शन, एक्सपेंस रेश्यो घटाने पर ... (मनी कंट्रोल)

सेबी ने कहा कि फंड हाउस के द्वारा एब्जॉर्ब किया पोर्शन (0.09 फीसदी) 0.02 फीसदी की तय लिमिट ...

SEBI punishes DSP AMC : अपनी तरह के पहले मामले में कैपिटल मार्केट रेगुलेटर सेबी (SEBI) ने डीएसपी इनवेस्टमेंट मैनेजर्स और उसकी ट्रस्टी कंपनी (DSP Trustee Co) पर पेनाल्टी लगाई है। यह कार्रवाई एक स्कीम के एक्सपेंस रेश्यो (expense ratios) को एब्जॉर्ब करने यानी अपनी बुक्स में दर्ज करने पर की गई है। डीएसपी इनवेस्टमेंट मैनेजर्स की दलील है कि उसने कस्टमर्स पर से उसका बोझ कम करने के लिए ऐसा किया है। वहीं, सेबी ने कहा कि एक लिमिट से ज्यादा एक्सपेंस रेश्यो एब्जॉर्व करने पर यह कार्रवाई की गई है। DSP Investment Managers, डीएसपी म्यूचुअल फंड (DSP Mutual Fund) की एसेट मैनेजमेंट कंपनी है। DSP Investment Manager की अपने बचाव में सबसे बड़ी दलील यह है कि DN50 पर कुल खर्च सेबी की 1 फीसदी की अपर लिमिट से काफी कम है। इसलिए, फंड हाउस ने कुछ भी गलत नहीं किया है और साथ ही इसके पीछे डिस्ट्रीब्यूटर को ज्यादा कमीशन और मिस-सेलिंग का कोई इरादा नहीं था। फंड हाउस ने यह भी कहा कि सेबी ने फंड हाउस पर स्कीम के एक्सपेंस को एब्जॉर्ब करने पर कोई रोक नहीं लगाई है। SEBI punishes DSP AMC : सेबी ने यह कार्रवाई एक स्कीम के एक्सपेंस रेश्यो को एब्जॉर्ब करने यानी अपनी बुक्स में दर्ज करने पर की है। डीएसपी इनवेस्टमेंट मैनेजर्स की दलील है कि उसने कस्टमर्स पर से उसका बोझ कम करने के लिए ऐसा किया है। वहीं, सेबी ने कहा कि एक लिमिट से ज्यादा एक्सपेंस रेश्यो एब्जॉर्व करने पर यह कार्रवाई की गई है

Sebi Punishes DSP AMC Trustees for Cutting Scheme Fees to Lure ... (EquityPandit)

India's capital markets regulator, the Securities and Exchange Board (SEBI), has fined DSP Investment Managers, the asset manager of DSP Mutual Fund, ...

This brought SEBI to the attention of the actual situation of fund houses and DN50, esp. SEBI said the portion absorbed by fund houses (0.09%) is still well above the absorption limit (0.02%) that SEBI will eventually allow in 2019. In 2019, SEBI did allow asset managers to charge a portion of the book, which is limited to two basis points of scheme assets, provided the scheme’s costs exceed the payout cap (1% for ETFs). SEBI has argued that these reports are exclusively for fund houses and trustees to report any discrepancies from SEBI rules. But DSP Investment Manager’s most prominent defence is that the total fees it incurs on DN50 (costs absorbed by AMC plus fees it charges to the scheme; 0.16%) are well below SEBI’s 1% passive investment cap for funds. “Thus, if the scheme bears all expenses, the scheme’s operating costs as a percentage of AUM (assets under management) will initially be high as it plans to expand its AUM,” the fund house wrote to SEBI June 2022, as part of its defence. The intent to absorb some of the project’s costs is evident. As AAUM (average assets under management) increases, operating expenses as a percentage of AAUM will gradually decrease, and total scheme expenses will lower than that charged by TER,” AMC wrote to SEBI. The fund house argues that to scale, it needs to keep costs low (albeit by charging the scheme an artificially low expense ratio) to make it attractive to investors. In 2018, SEBI issued a circular requiring fund houses to charge only scheme fees for all MF scheme-related fees. In their defence, fund houses say the cost of running an MF scheme, even a passive scheme like an ETF, drives up overall costs, which could make the scheme (DN50 in this case) underperform compared to its peers. The notice requires fund houses to charge schemes for all scheme-related fees.

Sebi fines DSP group firms Rs 1 lakh for charging TER from AMC ... (Business Standard)

Sebi noted the defaulters paid 0.09% expenses of the scheme out of 0.16% from their own books in case of DSP Nifty 50 ETF.

The capital The -

SEBI penalises DSP AMC, trustees for TER violations (Fortune India)

Capital market regulator Securities and Exchange Board of India (SEBI), in one-of-its-kind order, has fined DSP Investment Managers (the asset management ...

SEBI said the said circular will get diluted with this varied practice of charging and disclosing incorrect TER of the scheme, which will create anomalies in the Mutual Fund industry and will lead to unhealthy competition. The circular requires that all scheme-related expenses will necessarily be paid from the scheme only, within the regulatory limits and not from the books of the asset management companies (AMC), its associate, sponsor, trustee or any other entity. The SEBI order stated the fund house bore the expense ratio of the Nifty 50 ETF Scheme on its books, and thus they have been penalised under Section 15HB of the SEBI Act, which allows SEBI to charge a penalty up to Rs 1 crore for violation of this act.

SEBI Levies Rs 51 Lakh On Promoters Of Apex Frozen Foods, Two ... (Outlook India)

Markets regulator SEBI on Thursday levied a Rs 51.14 lakh fine on the two promoters of Apex Frozen Foods Ltd (AFF) and two others for violation of insider ...

Therefore, I observe that the application for pre-clearance of trades by them while being in possession of UPSI and being an insider should not have been made and hence not in compliance with the provisions of insider trading regulations," SEBI's adjudicating officer Barnali Mukherjee said. Prasad had traded in the shares of AFF during the UPSI period, thereby violating norms. Madhavi had traded shares in the firm during the UPSI period, thereby violating insider trading rules.

Sebi Fines DSP Mutual Fund For Under-Charging Its Nifty 50 ... (Outlook India)

DSP mutual fund was undercharging the expenses incurred on managing its Nifty 50 ETF to make it attractive for investors until the scheme's assets under ...

DSP tried to justify its position of undercharging the Nifty 50 ETF by giving reasons to Sebi in a letter dated June 2022. "The operating cost of the scheme as % of AUM (assets under management), if all expenses are to be borne by the schemes, will be high initially when the scheme is scaling up its AUM. Sebi laid down in its 2018 circular that all scheme-related costs should be charged to the schemes only, and no AMC, associates, sponsors, trustees, or any other firm shall bear or pay the said mutual fund management expenses.

What To Make Of SEBI's Order Against DSP AMC? (BQ Prime)

It highlighted the Mutual Fund Regulations to say that the maximum an AMC can charge for an index fund scheme or ETF is 1% of the daily net assets. DSP Nifty 50 ...

A portion of the scheme operating expenses were borne by the AMC in order to keep the scheme expenses lower in line with TER charged by other similar schemes and in the interest of investors.” That said, there's logic in saying that the investor should have a clear picture of the scheme's expense ratio while comparing it with its peers. According to him, the Mutual Fund Regulations allow the AMC or sponsor to pay for expenses beyond the 1% regulatory cap. DSP, in its response to the regulator, said that this is an incorrect reading of the 2018 Circular. It went on to rely on a 2018 Circular to say that all scheme-related expenses must be paid from the scheme itself, and not from the books of the AMC, its associate, sponsor, trustee or any other entity through any route. DSP Nifty 50 ETF could have charged up to 1% of expense to the scheme, but it charged only 0.07% while the actual expense incurred by the scheme was 0.16%.

SEBI Imposes Penalty on DSP Investment Managers for Expense ... (Moneylife)

The DSP Nifty 50 ETF was launched in 2021 December and the total expense ratio was supposed to be 0.16%. However, the fund house charged just 0.07% from the ...

This sends a very powerful message to the market - that SEBI is done with catching all the mischief and fraud in the market and now is ready to outlaw a trivial, competitive-market based, honest and investor-beneficial action. Mr Parekh added that this is great for investors, who really are being subsidised by the AMC - and it is the market forces at play which keep the costs down for investors. If a scheme discloses TER lower than in reality, the disclosed TER is misleading. Mr Parekh explained that Regulation 52(5) allows the AMC or sponsor to pay for expenses beyond the 1% regulatory cap. The reason for the AMC bearing the excess expenses is the competitive market. The DSP Nifty 50 ETF was launched in 2021 December and the total expense ratio was supposed to be 0.16%.

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