SEBI working on ‘MF Lite’ for easier compliance for ETFs, other passive investments

livemint.com:

capital market regulator has been gradually shifting towards a segmented approach to regulations. For accredited investors, for instance, SEBI has established a framework. This group of investors is much more skilled than normal investors and needs less regulatory protection.

Products made available to these investors may be subject to only minimal regulation. "Relaxations to the regulatory framework provided for Large Value Alternative Investment Funds is an example of such a segmented approach," explained Madhabi Puri Buch in the report. Buch said that not every investor in the market has the same level of risk aversion or return expectations .

Moreover, not every investor is equally knowledgeable about the different investment options available on the securities market. In a similar vein, no issuer in the market has the same risk profile. Also Read: Concord Biotech IPO subscribed 2.72 times on day 2; retail portion booked 2.26 times "It is seen that having a ‘one size fits all’ approach to regulating securities markets causes market participants and investors to lose capital raising flexibility or investment flexibility and tends to increase the compliance requirements on issuers.

This is because, in a ‘one size fits all’ approach, the compliance requirements would need to cater to the protection of interests of the least sophisticated investor, which is the small, retail investor, for perhaps the highest risk products," added Buch. According to Buch, the level of product sophistication is another variable that SEBI is taking into account before adopting a segmented strategy. For instance, typical Mutual Fund schemes that raise funds from the public must go by a number of regulations.