Sebi To Curb Institutional Participation in MFs

Tags: Sebi, MF, Mutual Funds, Investors, Investment, MF Industry, 

The 2008 market crash, which hit retail investors hard, has forced the Securities and Exchange Board of India (Sebi) to plug the system’s loopholes and check the monopoly
large investors in a mutual fund (MF) scheme. Sebi is looking to ensure that redemptions by a few investors do not destabilise the scheme and create a
on the fund, impacting retail investors. Backdrop. In December 2003, Sebi implemented a regulation unique
the Indian MF industry (popularly known as the ‘20-25’ rule), which put a restriction on fund houses to maintain a minimum of 20 investors, with a single investor not holding more than 25 per cent of the scheme’s corpus. The regulator is revisiting the rules, and it is likely increase the minimum number of investors required in a mutual fund scheme from 20 and bring down the maximum holding by a single investor from the current level of 25 per cent. In view of this, MF houses have started restructuring their portfolios by either shifting their corporate clients to broad-based schemes in their stable, or adding new investors.