Sebi amends mutual fund regulation to introduce new asset class

The SIF, which got the regulator’s approval in September this year, will have a minimum investment limit of Rs 10 lakh, according to an official gazette issued on Monday (December 16).

Under the new asset class, mutual funds will be allowed to launch open-ended, close-ended and interval investment strategies with subscription and redemption frequency appropriately disclosed in the offer document.

Any scheme under the SIF will not invest more than 20 per cent of its NAV (net asset value) in debt instruments comprising money market instruments and non-money market instruments issued by a single issuer which are rated not below investment grade by a credit rating agency.

However, the investment limit can be extended to 25 per cent of the NAV of the investment strategy with the prior approval of the Board of Trustees and Board of Directors of the asset management company.

The 20 per cent limit will not apply to investments in government securities, treasury bills and triparty repo on government securities or treasury bills, as per the notification.

“No Specialized Investment Fund under all its investment strategies should own more than fifteen per cent of any company’s paid up capital carrying voting rights,” the notification said.

All schemes under SIF will not be allowed to invest more than 10 per cent of their NAV in the equity shares and equity-related instruments of any company.

The regulator said that the asset management company should ensure that the SIF has distinct identification, separate from that of the mutual fund, to maintain clear differentiation between the offerings of the new asset class and that of a mutual fund.

“The asset management company shall comply with the provisions relating to branding, advertising, standard disclaimers, guidelines on usage of sponsor or asset management company or mutual fund’s brand name and maintenance of a separate website, as may be specified by the Board from time to time,” the notification said.

The regulator further said that for an applicant to launch a mutual fund lite asset management company (AMC), the sponsor should have a sound track record and general reputation of fairness and integrity in all business transactions and should have contributed at least 40 per cent to the net worth of the AMC.

The regulator said the mutual fund lite asset management company should have a networth of at least Rs 35 crore deployed in assets. The net worth, however, can be brought down Rs 25 crore in case it has profits for five consecutive years.

The MF Lite regulations are intended to reduce compliance requirements, increasing penetration, facilitating investment diversification and fostering innovation.