SEBI Introduces Changes to Mutual Fund Regulations for Ease of Operations
MAS Team | 02 May 2024
The Securities and Exchange Board of India (SEBI) has recently made significant changes to mutual fund regulations aimed at enhancing the ease of doing business in the financial sector.
In a move to promote convenience for investors, SEBI has made the nomination process optional for jointly-held mutual fund accounts. This decision is part of SEBI's ongoing efforts to simplify procedures and facilitate smoother operations within the mutual fund industry.
Furthermore, SEBI has granted fund houses the flexibility to appoint a single fund manager to oversee both commodity and foreign investments. This strategic decision is expected to result in cost savings for fund management, thereby benefiting both investors and fund managers.
These regulatory changes follow a thorough review conducted by a working group appointed by SEBI, which analyzed various aspects of mutual fund regulations and proposed measures to promote operational efficiency.
The public consultation that ensued based on the working group's recommendations highlighted the need for optional joint mutual fund account nominations and the appointment of a single fund manager for diverse investment portfolios.
According to SEBI's circular, the deadline for existing individual mutual fund holders to nominate or opt out of nomination has been set as June 30, 2024. Failure to comply with this requirement will result in the freezing of accounts for withdrawals until the nomination process is completed.
Experts in the financial sector have welcomed these regulatory changes, particularly the relaxation of nomination requirements for joint holders. They believe that this move will simplify the nomination process, allowing surviving members to become nominees and streamline transmission procedures in case of unforeseen circumstances. Subsequently, the last surviving member can assign a nominee, further ensuring continuity and convenience in mutual fund operations.
Additionally, SEBI has introduced optional provisions for dedicated fund managers in commodity-based funds such as Gold ETFs, Silver ETFs, and other commodity market participants. The appointment of a dedicated fund manager for overseas investments is also made optional under the revised regulations.
The introduction of a single fund manager for domestic, overseas, and commodity funds is expected to reduce operational costs and enhance efficiency in fund management processes.
These regulatory changes reflect SEBI's commitment to fostering a conducive environment for mutual fund investments while ensuring transparency, convenience, and cost-effectiveness for investors and fund houses alike.