SEBI Plans to Simplify Mutual Fund Norms and Classification

The Securities and Exchange Board of India (SEBI) is reviewing its mutual fund regulations, including the scheme categorisation framework and restrictions on asset management company (AMC) activities. As per reports, this is to simplify compliance and reduce regulatory burden across the mutual fund industry.

Focus on Clause 24(b)

One of the major areas under review is Clause 24(b) of SEBI’s mutual fund regulations. This clause restricts AMCs from engaging in any business other than portfolio management services, offshore fund management, and advisory services, unless explicitly allowed by SEBI. It is currently the only clause in the mutual fund regulation that carries a restriction on business activities. Reports suggest that SEBI is considering modifications to this clause to provide more operational flexibility to fund houses.

Changes to Scheme Categorisation

SEBI is also working on revising the existing mutual fund categorisation framework. At present, SEBI has defined 36 categories of mutual fund schemes. However, there have been concerns over the proliferation of schemes with similar themes and overlapping investment strategies. The aim of the revision is to streamline categories and simplify scheme nomenclature for better investor clarity.

Suggestions have been sought from the Association of Mutual Funds in India (AMFI) to make mutual fund scheme names more accessible and understandable, especially for investors outside metro cities.

Broader Regulatory Streamlining

According to reports, SEBI is focusing on reducing compliance requirements and reviewing older regulations. This includes examining the institutional mechanism framework, which mandates surveillance systems within AMCs to monitor potential market abuse. Discussions are ongoing to identify areas where regulatory processes can be simplified.

A shift from results area (KRA)-driven approach to a more collaborative regulatory framework is also being explored, with increased dialogue between SEBI and industry participants.

Conclusion

The proposed revisions is SEBI’s effort to re-evaluate and streamline mutual fund regulations. The changes under consideration include easing restrictions on AMC activities, simplifying scheme categorisation, and reducing procedural complexity within the regulatory system.

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