Mutual Fund regulations amended to make way for MF Lite, minimum investment set at Rs 10 lakh

Under the framework, the barriers for sponsors related to net worth, track record, and profitability would be lowered.

Mutual fund regulations have been amended to launch Mutual Fund Lite for investors who have a higher risk profile. Under this, a Specialized Investment Fund is not allowed to accept from an investor, an investment amount less than ten lakh rupees across all investment strategies, though this restriction will not apply to accredited investors.

Through a gazette notification dated December 16, 2024, the Securities and Exchange Board of India (SEBI) announced the passing of SEBI (Mutual Funds) (Third Amendment) Regulations 2024.

Also read: SEBI's proposals for algo-trading norms could end illegal PMS arrangements within families

The other two conditions for the fund are as follows:

1.The Fund Manager of Specialized Investment Funds should have the relevant NISM certification as may be specified by the Board from time to time.

2.All provisions applicable to the schemes of a mutual fund under these regulations shall also apply to the Investment Strategies launched under the Specialized Investment Fund, unless otherwise specified.

In September, after meeting with its Board, SEBI had announced that it will soon be launching the framework for MF Lite and the amendment comes after this.

The regulator had said that, under the framework, the barriers for sponsors related to net worth, track record, and profitability would be lowered, allowing more entities to enter the mutual fund space.

Secondly, responsibilities for trustees will be simplified to ease compliance burdens and encourage new market participants. Thirdly, in regards to approval Process and Disclosures, the amendments would allow for streamlining the approval process and reducing the disclosure obligations for passive schemes, making it less cumbersome for asset management companies (AMCs) to operate in this segment.

In the consultation paper, the regulator had said that fund houses that choose not to offer actively managed schemes do not require the same level of oversight as those that do.