Sebi brings out stricter regulatory norms for collective investment schemes

Seeking to put in place a stricter regulatory framework for collective investment schemes, markets watchdog Sebi has decided to enhance the net worth criteria and track record requirements for entities managing such schemes.

The regulator has also approved changes to listing obligations and disclosure requirement regulations for simplification of procedure for transmission of securities.

It also gave the nod to amend regulations to enable Sebi-registered custodians to provide custodial services in respect of silver or silver-related instruments held by silver ETFs of mutual funds.

These decisions were taken at a board meeting of Sebi held on Tuesday.

Amid instances of investors getting defrauded by fraudulent money pooling schemes, the regulator would also restrict a Collective Investment Management Company (CIMC) and its group/associates/shareholders' shareholding in a scheme at 10 per cent or representation on the board of another CIMC to avoid conflict of interest.

Besides, the mandatory investment of CIMC and its designated employees in the Collective Investment Schemes (CIS) have to align their interests with that of the CIS.

Sebi said the net worth criteria would be enhanced and a requirement of having a track record in a relevant field as an eligibility requirement for registration as a CIMC would be put in place.

Among others, there would be a "mandatory requirement of a minimum number of investors, maximum holding of a single investor and minimum subscription amount at CIS level," Sebi said.

The regulator said there would be a rationalisation of fees and expenses to be charged to the scheme as well as a reduction of timelines for the offer period of the scheme, allotment of units and refund of money to investors.

The changes have been proposed to "strengthen the regulatory framework for CIS in line with Mutual Fund regulations to remove regulatory arbitrage," the release said.

To simplify the procedure for transmission of securities, the existing threshold limit for simplified documents would be revised to Rs 5 lakh from Rs 2 lakh currently for securities held in physical mode per listed issuer.

Also, the threshold in this regard for securities held in the dematerialised mode for each beneficiary account would be raised to Rs 15 lakh from the present level of Rs 5 lakh.

"Legal Heirship Certificate or its equivalent certificate issued by competent government authority will be an acceptable document for transmission of securities," the regulator said.

According to Sebi, the objective is to ensure that uniform processes are followed by the Registrars to an Issue and Share Transfer Agents (RTAs) / listed companies, which would further ease the transmission process for investors.

The board of Sebi also approved the budget for the regulator for the financial year 2022-23.