SEBI Proposes Ease Of Doing Business Initiatives For Mutual Funds

The Securities and Exchange Board of India has proposed ease of doing business initiatives for mutual funds.

The paper released on Friday suggests several initiatives, including the option to appoint a single fund manager for both domestic and overseas commodity funds. Under this proposal, the current mandatory appointment of dedicated fund managers for commodity and overseas investments may become optional.

Asset management companies are required to ensure the competency of the chosen fund manager, confirming their expertise and experience in commodities and overseas securities. The responsibility for compliance and reporting lies with the board of the AMCs.

Another initiative focuses on the nomination process for mutual fund units.

One more change being suggested is related to how you nominate someone to receive your mutual fund money if something happens to you. Right now, when people jointly own these funds and one person passes away, the one still alive gets the money instead of the nominated person.

This could create problems like unclaimed money or fraud. So, the proposal suggests that making a nomination should be optional when you jointly own mutual fund units, making things smoother and faster.

The third change they're suggesting is about how much money mutual funds can invest in companies related to them.

Usually, mutual funds can invest up to 25% of their money in companies connected to the mutual fund itself. However, for certain types of funds that follow a specific theme or sector, they are allowed to invest more—up to 35%.

Now, the recommendation is to relax the limit for certain types of funds, such as exchange-traded funds and index funds, so they can invest according to the index they follow, avoiding mistakes in tracking the market.