SEBI Working On Better Beyond-30 Cities Incentive Scheme For Mutual Fund Industry

The Securities and Exchange Board of India is working towards instituting a better incentive for the mutual fund industry, to reach out to first-time investors in B-30 or beyond-30 cities, said Manoj Kumar, executive director of SEBI, at the CII Mutual Fund Summit in Mumbai.

In March, the markets regulator had suspended the incentive given to mutual funds for distributing schemes to investors in smaller cities. The beyond-30 cities refer to the 30 cities beyond the top 30. SEBI allowed mutual funds to charge 30 basis points more for retail flows from these smaller cities as an incentive to distributors.

At a Confederation of Indian Industry event, Kumar said that in its examinations, the regulator found that there were instances of practices that were not desirable. Meaning, there were cases where the incentive was being misused.

The regulator has now asked the industry body, Association of Mutual Funds in India, to suggest a better way to incentivise the outreach to investors in smaller cities and towns.

SEBI is also working on an “MF Lite” regulation model, Kumar said.

This alternative regulatory approach has been in the works for some time, according to a person familiar with the matter, who spoke with BQ Prime on the condition of anonymity.

The approach will initially be to carve out a regulatory framework for institutions that only seek to launch passive investment schemes. The compliance and other regulatory requirements for these institutions would be lower under the proposed MF Lite model, the person quoted above said.