Direct Mutual Fund Plans Will Be Default Option From November 1: SEBI Chief

NDTV Profit Ignite 2026: Direct mutual fund plans will become the default option on asset management companies' digital platforms from November 1, Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey said at NDTV Profit Ignite on Wednesday. Investors choosing regular plans will have to be informed about their higher expense ratios.Speaking at the event, Pandey also addressed a key concern for India's stock market: why foreign investors continue to weigh their options across countries even as Indian markets grow in size and sophistication. "Because in terms of markets, we are fairly world class. But in order of compliance, if we are on the higher side, we should certainly lower that burden and make it better," he said.The SEBI chief said the regulator would examine whether Indian market participants face higher compliance costs than their counterparts in other emerging and developed economies. He also confirmed that SEBI would soon issue a consultation paper proposing changes to some existing requirements.Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better PayDirect Mutual Fund Plans To Be Default From November 1In his opening remarks, Pandey announced that direct mutual fund plans would become the default option on asset management companies' digital platforms from November 1.Direct and regular plans invest in the same mutual fund scheme and hold the same portfolio. The difference is primarily in distribution costs. While direct plans are purchased without a distributor, regular plans include distribution-related expenses. As a result, direct plans generally have lower expense ratios, which can affect investors' returns over time.Investors will still be able to choose regular plans. However, those opting for them must be informed about the higher expense ratio.Pandey stressed that easier access to investments must go hand in hand with greater awareness. "Easy access does not guarantee understanding," he said.He cited SEBI's investor survey, which found that 63 per cent of households were aware of at least one securities market product, but only around 9.5 per cent participated in the market. "Investing must be a choice made with open eyes, knowing what you buy, what it costs, and what you risk," he said.Why Is SEBI Looking To Reduce Compliance Burden?Foreign portfolio investors (FPIs) invest in Indian stocks and other securities, but their decisions depend on more than the country's economic growth or corporate earnings. They also consider taxes, currency movements, market liquidity and the cost of complying with local rules.The SEBI chief said investors calculate their returns after accounting for taxes and converting the proceeds into their own currencies. They then compare those returns with what other markets offer before deciding where to invest. "Every investor, both domestic and foreign, would really be looking at how to get the best returns out of the resources they have," he said.The regulator's role, he added, is to ensure that its own rules do not create unnecessary costs for investors. "We should really be saying as a regulator what is within our remit is whether we are putting excessive burden on them, whether we are globally benchmarking," Pandey said.Pandey said rules must evolve as technology and market practices change. Requirements introduced years ago may become repetitive or overlap with newer systems, increasing costs without necessarily improving oversight. "Nothing should be set in stone," he said, adding that discussions with market participants could help identify areas where regulations can be improved.SEBI Plans Consultation Paper On FPI RulesSEBI is working with the Reserve Bank of India (RBI) to make the process of bringing foreign investors into Indian markets faster and easier.Pandey said the regulator was examining how onboarding and continuing compliance could be made easier through a fully digitised process. It is also reviewing disclosure requirements and concentration norms that can act as barriers for investors. "We have taken several measures, but if you say that we don't have to do more, I would say we need to do more," he said. Notably, a consultation paper invites feedback from investors, companies and other market participants before a regulator finalises a decision.Pandey, however, cautioned against expecting regulatory changes to immediately reverse foreign fund outflows. He said investment flows also depend on the broader economic environment, perceptions of market fairness, liquidity and the functioning of market infrastructure institutions.SEBI To Review IPO And SME Listing RulesPandey also said SEBI was reviewing the framework for initial public offerings (IPOs), follow-on public offers and small and medium enterprise (SME) listings.India ranked first globally by the number of IPOs in 2025, he said, highlighting the depth of the country's primary market. However, he believes more companies could raise money by listing on stock exchanges.Pandey suggested that industry associations and chambers of commerce could identify promising businesses and help them prepare for listing.He also stressed the need to make IPO disclosures easier for ordinary investors to understand. SEBI is working on a system under which third-party monitoring agencies would report to stock exchanges on whether companies are using IPO proceeds for the purposes stated in their offer documents.On SME listings, the regulator is considering changes to reduce issuance costs, revise company classifications and make trading more efficient. Pandey also flagged companies that remain listed despite having little economic activity."Such companies remaining in the listed space without much economic activity and sometimes, you know, acting just like shell companies, they pose risks to the market," he said.SEBI wants to identify and remove such companies from the market.SEBI Warns Against WhatsApp, Telegram Investment ScamsPandey also took a strong stand against fraudulent investment recommendations circulated through messaging platforms.He said SEBI would deal firmly with malpractice involving WhatsApp and Telegram groups that lure investors with promises of exceptional or guaranteed returns. "It's a fake world. In that fake world, you know, people are believing and losing tonnes of money," he said.The regulator has introduced SEBI Check, a tool that allows investors to verify whether a bank account, UPI address or QR code is linked to a regulated securities market entity.Pandey said investors could use the tool to conduct these checks before transferring money. He also cited SEBI's work with Google to display verified labels for trading apps on the Google Play Store in India, alongside action against misleading financial influencers.