Explained: Sebi set to introduce MF-Lite for passive MFs. Here’s all you need to know
SEBI) prepares to introduce MF-Lite regulations for passive funds, it's important to understand what MF-Lite is and what investors should know about this emerging asset class.
Sebi in a consultation paper has proposed a regulatory framework in the Mutual Funds (MF) segment viz, “the MF Lite Regulations” for the passively managed MF schemes. This proposed regulation intends to reduce the compliance requirement, foster innovation, encourage competition and promote ease of entry for the MFs interested in launching only passive schemes.
“We had a very detailed consultation on that and if as a part of that you feel that there needs to be relaxation in terms of how to do distribution of those kind of passive funds. We are open to any kind of suggestions so that we can facilitate growth of these funds across the country,” Buch said at an industry event.
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Under this proposed framework, mutual funds who are willing to manage only passive funds shall be covered. However, if there are any existing mutual funds who opt for management of active and passive both. So to ensure uniform applicability and to provide a level playing field across all passive funds, two approach has been adopted:
- Ease of entry and relaxed provisions for MFs intending to launch only passive schemes under MF Lite registration. (Section I)
- Ease of compliance, relaxed disclosures and other regulatory requirements for passive schemes under existing MFs
