SECP asks mutual funds to disclose expenditures

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Thursday directed asset management companies (AMCs) to make their expenses publicly disclosed.

“This will bring about uniformity in the mutual funds industry and provide investors with an opportunity to make informed decisions based on enhanced disclosures of expenses incurred by the mutual funds over the specific periods,” the commission said in a statement. 

The SECP introduced the concept of total expense ratio (TER) for mutual funds through amendments to the Non-Banking Finance Companies and Notified Entities Regulations, 2008, and capped the TER according to the various categories of mutual funds.

The statement said in a bid to further streamline the calculation methodology, the SECP has now required all AMCs to calculate the TER of each mutual fund on a monthly basis in accordance with a standardised formula, taking into account the  total expenses and net assets of that particular mutual fund.

The commission also made it mandatory for the AMCs to adjust the net asset value of the mutual fund on each quarter end, if the fund’s TER exceeds the limit prescribed in the regulations. The AMCs are also required to reimburse the excess amount to the mutual fund on the basis of annual TER calculated at the end of each financial year.