SEBI releases guidelines for MF Lite framework, to be effective from Mar 16
This story was originally published at 19:31 IST on 31 December 2024
Register to read our real-time news.Informist, Tuesday, Dec. 31, 2024
MUMBAI – The Securities and Exchange Board of India on Tuesday released the Mutual Fund Lite framework for passively managed schemes of mutual funds, which will come into effect from Mar. 16. The SEBI board had on Sept. 30 approved the framework to promote ease of entry and encourage new players, reduce compliance requirements, enhance market liquidity and facilitate investment diversification.
The framework allows all asset management companies, whether registered under MF Lite or the mutual fund regulations, to launch Hybrid Passive Funds, the regulator said in a circular. These funds will replicate a composite index consisting of equity and debt, allowing investors to invest in a single product that has exposure to both instruments.
The circular specified that asset management companies can launch hybrid passive schemes only in three categories - balanced with 40-60% in equity and 40-60% in debt, equity-oriented with 65-80% of equity and 20-35% debt, and debt-oriented with 65-80% in debt and 20-35% in equity.
Asset management companies can launch one exchange-traded fund and one index fund in each category. The minimum subscription amount at the time of a new fund offer for hybrid ETFs or index funds should be INR 100 million.
Fund houses can launch close-ended debt passive schemes, irrespective of being registered under the mutual fund regulations or the MF Lite framework, the circular said. "AMCs shall launch close-ended debt passive funds based only on target maturity indices. The existing standard framework for the construction of the index for target maturity indices shall also be applicable for close-ended passive schemes. However, the rating of the underlying instruments may go below 'AAA' up to investment grade in case of such funds," the circular said.
Under phase-I of the implementation of the framework, passive funds based on only domestic equity passive indices, domestic target maturity debt passive funds and domestic constant duration passive funds based on such debt indices with collective AUM, which exceeds a threshold of INR 50 billion and above as on Dec. 31 of each financial year, will be covered.
All gold and silver exchange-traded funds and the fund of funds based on them, overseas exchange-traded funds and fund of funds having a single underlying overseas passive fund will also be covered under MF Lite. However, all fund of funds investing in more than one index will not be covered under phase-I of the implementation of the framework, the circular said.
The circular said new players who wish to launch only passive mutual funds will have to register under the MF Lite framework. Existing mutual fund houses, which have active and passive funds, can hive off their passive funds covered by the MF Lite framework into a different entity but under a common sponsor, the circular said.
If an existing fund house intends to launch only passive funds, it can surrender its existing registration and migrate as an MF Lite. If the assets under management of MF Lite AMC exceed INR 1 trillion, then it must not launch any new scheme or take further subscriptions to the existing scheme, the circular said.
It also said the Association of Mutual Funds in India, in consultation with SEBI, will prescribe a standard Investment Management Agreement for the MF Lite framework.
The scheme information documents will be mandatory for passive schemes floated by asset management companies under the MF Lite framework. MF Lite AMCs need not file a separate key information memorandum for the respective scheme, the circular said. SEBI also allowed MF Lite AMCs to submit trustee reports to the board on a yearly basis instead of a half-yearly basis, the circular said. End
Reported by Kshipra Petkar
Edited by Saji George Titus
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
