Under SEBI regulations, what are the maximum permissible limits for brokerage and transaction costs incurred for execution of trades that can be charged to a mutual fund scheme?

[ A ]Up to 1.50 percent of trade value across all asset markets without distinction

[ B ]Flat Rs. 1,000 per trade executed by the dealer regardless of transaction size

[ C ]Up to 0.06 percent of trade value in case of cash market transactions, and up to 0.02 percent of trade value in case of derivatives transactions[ CORRECT ]

[ D ]Zero percent because all broking costs must be borne 100% by unitholders directly

Takeaway

Option C is correct: Up to 0.06 percent of trade value in case of cash market transactions, and up to 0.02 percent of trade value in case of derivatives transactions

Derivation

SEBI regulations allow AMCs to charge brokerage and transaction costs incurred for the purpose of trade execution to the scheme up to specified regulatory ceilings: (1) up to 0.06% of trade value for cash market transactions, and (2) up to 0.02% of trade value for derivatives transactions. Any trade execution costs exceeding these caps must be borne directly by the AMC out of its own book. This question tests trade cost limits under Regulation 52. A common trap is confusing execution brokerage caps with base management fee slabs.

Why the others fail

A — Up to 1.50 percent of trade value across all asset markets without distinction

1.50% is excessively high and violates SEBI's tightly capped broking limits of 0.06% for cash and 0.02% for derivatives.

B — Flat Rs. 1,000 per trade executed by the dealer regardless of transaction size

Brokerage limits are calculated as percentage basis points of transaction value, not flat fixed rupee fees per ticket.

D — Zero percent because all broking costs must be borne 100% by unitholders directly

Permitted brokerage within regulatory limits is charged directly to the scheme NAV, not billed separately to individual unitholders.