SEBI Approves New Asset Class and MF Lite Framework to Boost Investment Flexibility
The board has cleared the way for another new asset class that would permit more flexibility for fund managers to indulge in investments catering to those investors who have a higher risk-taking capacity. This will be complemented by a liberalized framework called Mutual Funds Lite (MF Lite) to be permitted with specific focus on fund houses that predominantly concentrate on passively managed schemes.
During a recently held board meeting of Securities and Exchange Board of India (SEBI), comprising members from the finance ministry and the Reserve Bank of India, there were several issues related to the Chairperson not discussed. But sources close to the events said that in fact discussions did take place on the issue of employee dissatisfaction and that the press release regarding the same is being retracted.
SEBI has put forward an important statement by reducing the period for rights issues, making it come down from 317 working days to just 23 working days. This would aim at helping listed companies raise capital more speedily from their existing shareholders, thereby making them better equipped to meet financial requirements more efficiently.
SEBI also amended the insider trading regulations by defining “relatives” and “connected persons.” It also brought in stricter disclosures in the off-shore derivatives instruments (ODIs) and separated portfolios, which meant regulatory gaps over FPIs.
The new asset class, labeled as “Investment Strategies”, is expected to attract high-risk investors, sitting between mutual funds (MFs) and portfolio management services (PMS). The minimum investment for this product has been kept at Rs 10 lakh. This will also likely check the increasing unauthorized investment schemes that often dupe investors with exaggerated returns, bringing out into the light the financial risks.
The MF Lite framework that has been approved has relaxed the sponsors’ eligibility criteria, including net worth, track record, and profitability. The responsibility of the trustees is altered with changes in the application procedure. The intent of this framework is to ease market entry, thereby attracting new players, reducing compliance burden, and improving liquidity increase investment choices for participants in the mutual fund space.
More internal controls during the same board meeting were brought in by Sebi, comprising a series of reforms looking at smoothening several processes. This method of raising capital is likely to become more attractive than preferential allotments, which takes 40 working days. The board approved a more streamlined filing system for listed companies, with documents submitted to just one stock exchange automatically shared with other exchanges.
Besides this, a framework called “Informal Guidance” has also been issued by Sebi, which will allow participants in the market to directly solicit legal advice from the regulator for better application of rules and regulations.
