Regulatory updates

A passively managed mutual fund seeks to mirror the performance of an index such as ETFs and index funds where portfolios of index funds can be easily tracked. Even though both active and passive MF schemes are covered under the purview of the current MF Regulations²⁴ The SEBI (Mutual Funds) Regulations, 1996 (MF Regulations) and the current regulatory framework for MFs inter-alia provide for regulation of MFs and the schemes managed thereunder. , the provisions thereunder have been envisaged, primarily keeping in mind the actively managed schemes and the risks and complexities associated therewith. In this regard, SEBI has proposed a relaxed framework (MF Lite Regulations) for passive MF schemes. The proposed framework consists of the following sections: The SEBI (Mutual Funds) Regulations, 1996 (MF Regulations) and the current regulatory framework for MFs inter-alia provide for regulation of MFs and the schemes managed thereunder.

• Ease of entry and relaxed provisions for MFs intending to launch only passive schemes under MF Lite registration.
  (Section I)
• Ease of compliance, relaxed disclosures and other regulatory requirements for passive schemes under existing MFs as well as schemes that may be launched under the MF Lite registration. (Section II)

The comment period for this proposal ended on 22 July 2024.

To access the text of the consultation paper please click here

With an aim to expand the regulatory scope of PIT regulations, it has been proposed to rationalise the following terms as follows:

Connected person: The definition of ‘connected person’ under PIT Regulations is proposed to include persons deemed to be connected to the reporting entity by virtue of their proximity with connected persons²⁵ Owing to their close relationship with connected persons, such deemed connected persons are considered to be in a position where they can potentially indulge in insider trading. . While defining such deemed connected persons, reference would be drawn from the definition of ‘related party’ under the Companies Act, 2013 and on SEBI’s experience

• Relative: The definition of ‘relative’ would be rationalised under PIT Regulations for the purpose of establishing insider trading. For this purpose, reference would be drawn from the definition of ‘relative’ under the Income Tax Act, 1961.
• Immediate relative: The definition of ‘immediate relative’ is proposed to be retained under the PIT Regulations. However, subsequent to the proposed changes to PIT Regulations, the relevance of the term ‘immediate relative’ would be limited to disclosures and Code of Conduct under PIT Regulations.

The comment period for this proposal ended on 18 August 2024.

To access the text of the consultation paper please click here