SEBI Announces New Rules to Simplify Mutual Funds; No Changes for Index Derivatives

On September 30, 2024, India’s market regulator, SEBI, held a meeting. They decided not to change the rules for index derivatives. Many people were hoping for new rules after SEBI shared some ideas earlier this year to help protect small investors. Here are the main ideas from that discussion:

Bigger Contracts: One idea was to make contract sizes up to four times larger.

Pay Upfront: Another idea was to collect payments for options in advance.

More Weekly Contracts: They suggested allowing two contracts to expire each week instead of just one.

Right now, investors can use daily index contracts, but these changes could provide more options.

SEBI also introduced a new plan called Mutual Funds Lite (MF Lite) for funds that are managed passively. This plan aims to help more companies start mutual funds by making some rules easier. Here’s what the MF Lite plan includes:

1. Easier Rules for Fund Sponsors: SEBI will make it easier for sponsors to start mutual funds.

2. Simpler Rules for Trustees: The rules for trustees will be easier to follow, which helps new companies.

3. Faster Approval Process: Getting approval for passive funds will be quicker, and companies will have to share less information. This will make it easier for asset management companies to work.

SEBI also made a few other important changes:

New Options for Rich Investors: There is a new way for wealthy investors to put money into riskier products, with a minimum investment of 1 million rupees.

Faster Fundraising Rules: Changes to rules for rights issues will now cut the time needed to raise money by half.

These updates are meant to encourage more investment in the market and help companies manage their mutual funds more easily.

SEBI Full Updates

New MF Lite Rules: SEBI will introduce new rules for passive mutual funds, making it easier for companies to offer these types of funds.

New Investment Products: SEBI has approved rules for a new investment product within the mutual fund framework.

Easier Regulations: They have approved simpler rules for mutual funds that only offer passive investment options.

New Asset Class for Wealthy Investors: SEBI has introduced a new asset class that allows high-net-worth investors to invest in riskier regulated products.

Derivatives Exposure for Investors: Asset managers can now create products that let investors gain exposure to derivatives.

New Asset Class: The new asset class will require a minimum investment of ₹10 lakh.

Faster Fundraising Rules: SEBI has approved changes to rights issue rules, which will cut the time needed to raise funds by half.

Trading Options for Investors: Investors will have the option to trade in the secondary cash market using either UPI block or a 3-in-1 trading facility.

More Scrips for T+0 Trading: The number of scrips eligible for optional T+0 trading will be increased.

Phased Increase in Scrips: The number of scrips available for T+0 trading will gradually rise from 25 to 500.

Broker Access to T+0: Stock brokers can now provide investors with access to the optional T+0 trading system.

Institution Access to T+0: Institutions, including foreign portfolio investors (FPIs) and mutual funds (MFs), will also have access to the T+0 settlement cycle.

New Block Deal Window: An optional block deal window will be introduced as part of the T+0 settlement cycle.

Instant Settlement Proposal: There is currently no plan to move from optional T+0 to optional instant settlement.

Regulatory Changes for IAs and RAs: Changes will be made to regulations for investment advisers (IAs) and research analysts (RAs) to simplify compliance requirements and reduce burdens.

Summary Proceedings: SEBI has approved changes to the rules to include provisions for summary proceedings.

Faster Rights Issue Timeline: Rights issues will now be completed in 23 working days from the date of the issuer’s board meeting that approves it.

Comparison to Current Timeline: This is a significant improvement compared to the current timeline of 317 days.

Faster than Preferential Allotment: This new process will be quicker than the preferential allotment route, which takes 40 days.

No More Draft Filing Requirement: Companies will no longer need to file a draft letter of offer with SEBI for issuance observation.

Filing with Exchanges: Instead of filing with SEBI, companies will now file for in-principle approval with the stock exchanges.

Compliance Confirmation: Stock exchanges will confirm that the issuer complies with the Listing Obligations and Disclosure Requirements (LODR).

Simplified Letter of Offer: The Letter of Offer will only include relevant and necessary information.

No Merchant Banker Requirement: The requirement for the issuer to appoint a merchant banker will no longer be mandatory.

Optional Merchant Banker: Appointing a merchant banker will be optional, as long as the rights issue is completed within 23 days.

Promoters Can Renounce Entitlements: Promoters will be allowed to give their rights entitlements to specific investors.

Allotting Under-Subscribed Portions: The issuer can allocate any remaining under-subscribed parts of the rights issue to specific investors.