SEBI released the annual report for the financial year 2022-23, 'MF Lite' rules may apply
Mutual Funds Lite Regulations: SEBI SEBI has released the annual report for the financial year 2022-23 today. Indian Exchange SEBI is stressing curbing dormant funds. It is believed that SEBI will soon implement MF Lite regulations. SEBI is working closely with mutual funds to implement this rule. Let us know in detail about the annual report for the financial year 2022-23.
Capital markets regulator SEBI has joined forces with the mutual fund industry to introduce 'MF Lite' regulations for passive funds. A move that will reduce the compliance burden and promote innovation.
A passive Fund is an investment vehicle that tracks a market index or a specific market segment. These funds include passive index funds, exchange-traded funds (ETFs), and funds that invest in ETFs.
SEBI has released the annual report for the financial year 2022-23 today. In this report, SEBI has stated that the current MF regulatory framework was built around active fund management. Due to this SEBI is planning to introduce mutual fund lite regulations for passive funds. Investment decisions are not discretionary but are linked to changes in the underlying benchmark index.
These new regulations are expected to significantly reduce the compliance requirements of passive funds and encourage innovation in the passive fund ecosystem. Mutual funds raise money from people. Mutual fund schemes have to follow several rules. SEBI said that it is at the discretion of the fund manager to decide whether to invest in regular mutual funds or not. This is because millions of small investors rely on mutual funds. Because of this, mutual funds have a strict requirement for an asset management company and investment team.
If a mutual fund chooses to offer only passive investment products such as ETFs and index funds, those investment decisions are not discretionary. In such a situation, a change in the underlying benchmark index is necessary.
SEBI is currently engaged with the mutual fund industry to launch 'MF Lite'. Earlier in May, Sebi whole-time member Anant Baruah had said that the regulator will come out with rules for mutual funds for passive funds.
SEBI in its annual report said that regulatory rules applicable to fees and expenses charged by mutual fund schemes will be reviewed to encourage new participants. The regulator had issued a consultation paper in May. It proposed a sweeping change in the total expense ratio of mutual funds.
SEBI is also considering allowing them to sell credit default swaps with the objective of taking exposure in synthetic corporate bonds to provide an additional investment product for mutual funds.
SEBI said that many new service launches are expected in the coming year. This will be the first time on a global scale. It has a service like the Investor Risk Reduction Access Platform. Specialized Window Broker - and will also launch a SaaS-based model to deal with cyber security incidents.
Apart from this, SEBI will also issue key areas to facilitate financial inclusion in the securities market in the coming years.
