SEBI announces MF Lite framework for passive funds

The MF Lite consultation paper also spoke about the introduction of hybrid passive funds.

Market Regulator SEBI announced a much awaited liberalised Mutual Funds Lite (MF Lite) framework for passively managed schemes of mutual funds.

In a press release post the SEBI Board meet, the regulator noted that under the MF Lite framework there would be a series of relaxed regulatory requirements designed to facilitate easier entry into the mutual fund market. The first being eligibility criteria for sponsors.

Also read: SEBI board meeting: Slew of decisions announced but mum on Madhabi Puri Buch and F&O framework

Under the framework,  the barriers related to net worth, track record, and profitability would be lowered, allowing more entities to enter the mutual fund space. Secondly, simplified responsibilities for trustees are expected to ease compliance burdens and encourage new market participants. Third, 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 a July 2024 consultation paper, SEBI proposed a relaxed regulatory framework for the mutual funds (MF) sector for passively managed funds. As per the consultation paper, the capital markets regulator noted that fund houses that choose not to offer actively managed schemes do not require the same level of oversight as those that do.

At a recent AMFI Board meeting, SEBI Chairperson Madhabi Puri Buch had hinted that MF Lite would be launched soon.

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