SEBI to revamp mutual fund rules, making them more investor-friendly
What's the story
The Securities and Exchange Board of India (SEBI) is reviewing mutual fund regulations with an aim to make them more investor-friendly and industry-friendly. The announcement was made by Manoj Kumar, SEBI's Executive Director, at the 17th Mutual Fund Summit organized by the Indian Chamber of Commerce (ICC). He said that "we are reviewing the entire mutual fund regulatory framework to enhance ease of doing business for all stakeholders."
Regulatory review
Need for simplification of current regulations
The current regulations governing the mutual fund sector are among the longest and most complex, making them difficult to navigate. This has led to calls for simplification in order to keep up with changing investor needs and industry innovations. Kumar said that "the process has started and soon we will come out with draft regulations for feedback and consultation process before it is finalized."
Strategic roadmap
Roadmap to strengthen India's securities market
Kumar also shared SEBI's strategic roadmap to strengthen India's securities market, with mutual funds playing a key role in driving inclusive financial growth and investor protection. He said India has seen major market transformations under SEBI's leadership. These include the transition to an electronic trading ecosystem in 1998 and achieving 100% dematerialization of shares, making India the only jurisdiction globally to do so. "The third transformation is unfolding now through the mutual fund revolution," he added.
Investor expansion
Limited investor base
Despite India's mutual fund industry surpassing ₹72 lakh crore in assets under management (AUM) and monthly SIP contributions reaching ₹28,000 crore, the investor base is limited to just five crore in a population of 140 crore. To expand this base, SEBI is reviewing scheme categorization norms for better investor understanding while ensuring all offerings remain "true to label" to prevent mis-selling.
Product innovation
New product category SIF introduced
To provide more options to investors, SEBI has introduced a new product category, referred to as SIF. This is aimed at investors with ticket sizes between ₹10 lakh and ₹50 lakh. Mutual funds were chosen to manage these products due to their strong governance and experience in handling retail flows.
Disclosure model
SEBI reaffirms disclosure-based regulatory model
Responding to industry concerns over stress test disclosures for mid- and small-cap funds, Kumar reaffirmed SEBI's disclosure-based regulatory model. He stressed that informed investors are key to market resilience. While some disclosure requirements may seem burdensome, he assured stakeholders that SEBI is open to feedback and streamlining processes. "Our goal is not to disrupt but to allow business to thrive," he said.