Actively reviewing clause that restricts AMCs from entering unrelated biz: SEBIs Manoj Kumar

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The Securities and Exchange Board of India (SEBI) is working on reviewing and removing restrictions associated with the clause 24(B), executive director Manoj Kumar said at CIIs Mutual Fund Summit 2025 held in Mumbai on April 15.

The market regulator's clause 24(B) deals with the restrictions on business activities of an asset management company (AMC) .

Kumar noted that 24(B) clause  is one of the serious obstacles for the mutual fund industry. “We are doing a significant review of regulation 24. Those who are familiar with the regulation may recall that this is the only restrictive clause of the entire mutual fund regulation. We are trying to review the entire regulation because we have come to the conclusion that mutual fund regulation is the lengthiest regulation of all the regulations,” he said.

The regulation says: The asset management company shall not undertake any other business activities except activities in the nature of portfolio management services, management of offshore funds, advisory services and such other activities as financial services as may be permitted by the Board: Provided that asset management company may itself or through its subsidiaries undertake such activities as are mentioned above, subject to compliance with such conditions, as the Board may specify from time to time."

In simple terms, AMCs are restricted from entering unrelated businesses unless SEBI explicitly allows it.

While Kumar did not mention by when they will be announcing or releasing changes or the nature of the changes, he added that they are actively working on it.

Kumar added that the regulator, under the new chairperson Tuhin Pandey is re-examining many provisions and is focusing on working together actively with the industry.

“For example, institutional mechanism framework which we have articulated that has a very robust practice to be done before we launch it but still there are some issues so we are taking this up the industry,” he noted.

Similarly, he added that they have recently announced relaxation in the skin in the game. “We believe that it was a good concept but there were some operational issues which we have tried to address and hopefully industry will rejoice after seeing the changes which we have brought,” he added.

Kumar said that the regulator is looking to move from KRA-based system to creating an environment where regulators work together with the industry. “We are extremely collaborative regulators and co-creation, I think, we have already highlighted."

"Many of the changes which we are looking at is through co-creation only. So we are giving more emphasis on that and that's why we have adopted this, where we will rely on creativity of the industry, where we will try to give more flexibility towards information, etc. And if we can bring this little regulatory focus approach, we can withstand the volatility which is happening in the market."

Kumar also noted that the regulator is actively working on TER (total expense ratio) issue. “We are examining different models and finding the best way forward,” he said. The regulator is also working on overhauling categorization and also nomenclature.

“We have urged AMFI to find ways to simplify nomenclature in order to help spread mutual fund awareness and pick up beyond B-30.”