Sebi amends mutual fund rules

Sebi has amended mutual fund rules, which require fund houses to invest in their own schemes depending on the risk level to ensure ‘skin in the game’.

The current rule requires an investment of 1% of the amount raised in a New Fund Offer (NFO) or an amount of Rs 50 lakh, whichever is less.

In a notification, Sebi said the asset management companies (AMCs) will have to invest in their own schemes based on its risk level.

“The asset management company shall invest such amounts in such schemes of the mutual fund, based on the risks associated with the schemes, as may be specified by the Board from time to time,” Sebi said.

However, the regulator has not quantified the minimum amount that needs to be invested by the fund houses. In case of violation of the new provisions, Sebi may pass an order suspending the launch of any scheme of a mutual fund for a period not exceeding one year and forfeit the amount invested by an asset management company in any of its schemes.

This is subject to the condition that the no order will be passed without giving an opportunity of hearing to the party, the regulator said.

The new mutual fund rules will come into force on the 270th day from the date of their publication in the official Gazette, according to the notification dated August 5.