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The capital market regulator, SEBI plans to introduce ‘Mutual Fund Lite’ regulations for passive schemes.
The regulator said in its Annual Report for 2022-23, “Since the current MF regulatory framework was built around active fund management, SEBI is planning to introduce Mutual Fund Lite regulations for passive funds, wherein investment decisions are not discretionary, but tied to changes in the underlying benchmark index.''
I have previously covered How SEBI Plans to Reduce Compliance Checks for Passive Funds with Mutual Fund Light Regulations.
Given that, earlier in May 2023, SEBI’s Whole-Time Member Mr Ananta Barua said, “The regulator will come out with mutual fund lite regulations for passive funds.”
Recently, in its 2022-23 Annual Report, SEBI stated, “The current regulatory rules applicable for fees and expenses charged by mutual fund schemes will be reviewed to encourage new participants, discourage cross-subsidisation across schemes, and curb malpractices.”
As an update on the earlier news on ‘Mutual Fund Lite Regulations’, these new regulations are expected to significantly reduce the compliance requirements of such funds and to foster innovation in the passive fund ecosystem.
In conclusion, SEBI is moving towards a segmented approach to rules, granting relaxations to eligible investors and taking into consideration a regulatory framework with less onerous compliance requirements for mutual funds that offer passive investment products.
The capital market regulator's chairperson said, "SEBI is currently engaged with the Mutual Fund industry to introduce ‘MF Lite’ for such entities. We believe that greater adoption of such a segmented approach can facilitate development of the market and ease of doing business without compromising the basic tenets of investor protection and risk mitigation in the market ecosystem.”
SEBI to Ease Compliance Constraints for Passive Funds by Introducing Mutual Fund Light Regulations
SEBI Annual Report 2022-23