Sebi board gives approval for new asset class, MF Lite regulations

The Securities and Exchange Board of India (Sebi) on Monday approved the introduction of a new asset class, which gives greater flexibility to fund managers and aims to cater to investors with high-risk tolerance. The regulator also cleared the liberalised Mutual Funds Lite (MF Lite) framework for fund houses that launch only passively managed schemes.

The regulator also drastically shortened the time frame for rights issues from 317 days at present to just 23 working days, to help listed companies quickly raise capital from their existing shareholders. The Sebi board also decided to amend the insider trading rules to more clearly define relatives and connected persons. Further, Sebi tightened the disclosure requirements for offshore derivatives instruments (ODIs) and segregated portfolios in order to plug any regulatory gaps with foreign portfolio investors (FPIs).

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Sources said the board—which has representation from the finance ministry as well as the RBI—didn’t take up the issue of allegations of “conflict of interest” levelled against chairperson Madhabi Puri Buch by the main opposition Congress party. However, the issue of employee unrest and the withdrawal of the press release on the matter was discussed.

Termed “Investment Strategies,” this new asset class will be aimed at high-risk investors and will look to bridge the gap between mutual funds (MFs) and portfolio management services (PMS). The minimum ticket size for this product will be Rs 10 lakh.

“The new product also aims to curtail the proliferation of unregistered and unauthorised investment schemes/entities, which often promise unrealistic high returns and exploit investors’ expectations for better yields, leading to potential financial risks,” Sebi said while explaining the rationale for launching the new asset class.

Meanwhile, the new MF Lite framework will come with more relaxed requirements relating to eligibility criteria for sponsors, including net worth, track record and profitability, responsibility of trustees, approval process, and disclosures. “The framework intends to promote ease of entry, encourage new players, reduce compliance requirements, increase penetration, enhance market liquidity, facilitate investment diversification, and foster innovation,” Sebi said.

Sebi on Monday announced a slew of reforms at its board meeting in Mumbai.

Shortening the rights issue timeline is aimed at making it more attractive than the preferential allotment route, which takes 40 working days.

Further, the Sebi board approved streamlining the filing system for listed companies. Going forward, companies will have to file relevant reports and documents on one exchange, which will be automatically disseminated to the other exchange.

Sebi also eased the timeline for making post-board meeting stock exchange disclosures.

The Sebi board also cleared a new framework for “Informal Guidance,” which is used by market participants to seek legal advice from the regulator.

First Published: Sep 30 2024 | 9:49 PM IST