Sebi to issue mutual fund light regulations for passive funds; seeks to ease compliance burden


NEW DELHI: The market surveillance authority Sebi will be using a mutual funds easily The new rules for passive funds are part of an effort to ease compliance burdens, boost growth and lower costs for investors, a senior official said on Friday.
Passive funds are an investment vehicle that tracks a market index or a specific segment of the market. These funds include passive ones index fundExchange Traded Funds (ETFs) and funds of funds that invest in ETFs.
The regulator wants to reduce compliance requirements for passive funds that are tied to changes in the underlying index and operate on a non-discretionary basis.
In order to enable passive investments such as index funds and ETFs, the regulator is introducing Investment funds Light regulations, said Sebi Whole Time member Ananta Barua.
“These regulations will give index funds and ETFs more flexibility, allowing them to offer investors transparency, diversification and lower costs.”
“By reducing the compliance burden, Sebi aims to encourage the growth of passive investment in the Indian mutual fund industry,” said Barua during his speech at the mutual fund summit organized by industry association Assocham in the state capital.
According to him, Sebi has revised the requirements for sponsoring a mutual fund and allows companies with sound financial conditions, including private equity funds, to become sponsors without having to show a mandatory profit record.
In order to increase liquidity in the debt market and address risks, Sebi has introduced prudential rules for open-ended investment funds, particularly debt funds, he added.
“These regulations include minimum liquidity buffer requirements, limits on investments in a single company or a single sector, and self-tests to assess the impact of market movements on the fund’s net asset value (NAV),” he said.
Barua also emphasized that Sebi is committed to promoting good governance practices in the mutual fund industry.
“Fiduciary oversight of asset management companies (AMCs) has been strengthened and they now have additional responsibilities for oversight of fairness of fees and expenses, AMC performance, prevention of market abuse and avoidance of conflicts of interest.”
“Additionally, mutual funds are encouraged to exercise leadership by actively participating in voting and corporate governance matters of the companies in which they invest,” he noted.

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