Considering potential adjustments to business activity restrictions for mutual funds, SEBI deliberates on loosened regulations.
The Securities and Exchange Board of India (Sebi) has proposed allowing asset management companies (AMCs) and their subsidiaries to offer new services related to fund management, aiming to broaden the business activities of AMCs while maintaining protections for mutual fund investors and ensuring governance to mitigate conflicts of interest.
One of the key proposed additional services is the ability for subsidiaries of AMCs registered as pension fund managers to act as Points of Presence (POP) for pension schemes. These subsidiaries would be permitted to offer POP services for pension funds, receiving compensation as allowed by the Pension Fund Regulatory and Development Authority (PFRDA). However, AMCs must ensure that mutual fund investors' interests are not compromised while providing such services.
Another proposed expansion involves AMCs marketing and selling only the direct plans of their mutual funds internationally, potentially through overseas subsidiaries. While AMCs may register as distributors globally, they are not allowed to receive any commission or fees for distributing direct plans of mutual funds.
AMCs could also extend their investment management and advisory services to pooled funds with limited investors such as family offices or offshore funds. Portfolio management and advisory services in this context must be provided through a separate unit with a dedicated team to maintain operational efficiency and regulatory oversight.
Sebi has also proposed relaxing the broad basing requirement for AMCs to serve pooled non-broad based funds. The regulator suggests that AMCs may be allowed to distribute other than mutual fund schemes managed or advised by them outside India through their subsidiaries, subject to compliance with relevant regulations.
It is worth noting that AMCs may continue to do this through overseas subsidiaries, but they cannot receive any commission or fees for distributing direct plans. Furthermore, AMCs must ensure that the interests of mutual fund investors are not affected by the additional services offered.
The deadline for public comments on Sebi's proposals is July 28. The proposals related to pooled non-broad based funds seek to address potential conflicts, such as diversion of resources, by requiring AMCs to ensure resources dedicated to pooled non-broad based funds are proportionate to the fee earned.
The Securities and Exchange Board of India (Sebi) is currently conducting an ongoing probe regarding Jane Street. However, Sebi has not yet made a final decision on the matter involving Jane Street. An interim order against Jane Street is not a show-cause notice, according to SEBI sources.
- The proposed changes in market regulations may allow asset management companies (AMCs) to offer decentralized finance (DeFi) services, aiming to expand investment opportunities in the finance sector.
- As part of the new proposals, AMCs could seek to participate in trading activities on cryptocurrency exchanges, subject to compliance with relevant regulations.
- With the relaxation of regulations, AMCs might consider diversifying their portfolio by investing in businesses that operate within the Defi space, offering more innovative investment options.
- To oversee such expansions, AMCs may establish dedicated teams for monitoring and ensuring compliance with regulations when venturing into new business activities like trading and DeFi.
- The Securities and Exchange Board of India (Sebi) is encouraging a more open and competitive investment market, as demonstrated by its proposals to permit AMCs to engage in diverse financial activities that maintain investor protections and adhere to stringent governance standards.
