SEBI Eases Rules for AMCs to Attract Overseas Investments

The Securities and Exchange Board of India (SEBI) has proposed significant changes to Regulation 24, aiming to attract foreign capital by granting asset management companies (AMCs) greater operational freedom. 

The reforms focus on allowing AMCs to provide broader services without needing separate licenses, paving the way for expanded global investment engagement.

SEBI’s Regulation Shift to Boost Foreign Investment

SEBI proposes to relax Regulation 24(b), enabling AMCs to offer portfolio management and advisory services to non-broad-based pooled vehicles, such as family offices and offshore funds, without obtaining a separate PMS license. This move targets improved efficiency and aims to drive more foreign capital into India’s mutual fund landscape over time. 

Prior to this change, AMCs had been restricted from extending portfolio services to non-broad-based entities unless they cleared complex structural compliance guidelines. The new guidelines now include safeguards around fee structures and a segregation of fund decision-makers to mitigate conflicts of interest.

Regulatory Background and Restrictions

Introduced in 2011, Regulation 24 restricted AMCs from conducting activities outside of traditional mutual fund operations without additional approvals. The original rationale was to limit conflict of interest between mutual funds and advisory/passive funds due to differing fee structures. SEBI had mandated fund management for only broad-based entities, defined as those having at least 20 investors with each holding under 25% of the corpus. 

This regulatory guardrail limited the scope for international mandates and global expansion by Indian AMCs.

Scope for AMC Growth and Expansion

The latest revision recognises the maturity of India’s mutual fund sector and removes dated restrictions. With over 40 AMCs and rising interest from global investors, the revisions provide a potential for assets under management (AUM) growth through expanded services. Removal of unnecessary licensing requirements is expected to allow AMCs to better manage offshore funds and institutional mandates.

Read More: 5 AMCs Register Over ₹15,000 Crore AUM Surge in June; SBI Mutual Fund Records Highest Inflow!

Guardrails and Investor Protection Measures

SEBI has proposed clear guardrails to protect investor interests in this expanded framework. AMCs must segregate investment personnel handling pooled vehicles from those managing mutual funds. Additionally, SEBI will prescribe standard fee structures for services provided to non-broad-based pooled funds. These measures are intended to ensure fair treatment across investor segments while leveraging global capital inflow advantages.

Conclusion

SEBI’s regulatory changes mark a pivotal moment for India’s mutual fund industry, enhancing its competitiveness by unlocking global investment avenues. By simplifying rules and safeguarding investor interest, these developments aim to reshape India’s role in the global financial ecosystem.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund Investments are subject to market risks, read all the related documents carefully before investing.