Sebi revamps mutual fund registration process, sets out eligibility norms

Sebi on Monday revamped the registration process for mutual funds, introducing a consolidated application framework in a bid to streamline preliminary and final approvals while requiring prospective sponsors to make detailed disclosures on their financial strength, ownership, governance and regulatory track record.

The framework comes under the Sebi (Mutual Funds) Regulations, 2026, which were notified in July.

"In view of the recent overhaul of the Sebi (Mutual Funds) Regulations, 2026, and Sebi Intermediaries Regulations, it has been decided to revise and consolidate the existing forms into a single application form for registration of Mutual Funds," the regulator said in its circular.

At present, applications for registration of a mutual fund are processed in two stages in-principle approval to the sponsor or applicant for setting up a mutual fund, and final registration of the mutual fund.

An application for in-principle approval needs to be submitted in Form A. Further, the application for final registration of a mutual fund is required to be accompanied by Forms C and D.

Under the revised framework, the Securities and Exchange Board of India (Sebi) has prescribed a consolidated application form covering both stages of the registration process, with detailed disclosures and supporting documents to be furnished by the sponsor and the proposed asset management company (AMC).

The new Form A requires extensive information on the sponsor's financial history, ownership structure, capital strength, management, business activities and regulatory track record.

Moreover, sponsors will have to disclose their shareholding pattern and ultimate beneficial owners, capital structure, latest net worth and audited financial statements for the preceding five financial years.

Under the new Form A, applicants seeking registration will have to provide information on the sponsor's shareholding pattern and ultimate beneficial owners, capital structure, net worth, financial performance and audited financial statements for the preceding five financial years.

The sponsor will also have to disclose its business activities and experience in financial services, details of regulated activities undertaken by its associates and subsidiaries, and the composition and experience of its board and key management personnel.

The application framework provides two eligibility routes for sponsors.

Under Route 1, a sponsor needs to carry on business in financial services for at least five years and have a positive net worth in each of the preceding five years.

The sponsor is required to have a positive liquid net worth exceeding its proposed capital contribution to the asset management company (AMC), report net profit from financial services in each of the preceding five years, and have an average net annual profit of at least Rs 10 crore from financial services during the period.

Route 2 provides an alternative pathway for sponsors that may not meet the profitability and experience requirements under Route 1.

Under this route, the proposed AMC will have to have a net worth of at least Rs 150 crore at the time of registration, which will be infused by the sponsor.

The sponsor will also have to appoint experienced senior management, with the combined experience of the CEO, COO, chief risk officer, chief compliance officer and chief investment officer required to be at least 30 years, with each having at least three years of relevant experience.

The initial shareholding corresponding to capital contributed to the AMC to the extent of Rs 150 crore will have to be locked in for five years.

Sebi has also proposed extensive regulatory and background checks as part of the registration process.

Applicants will have to provide verification and undertakings covering databases and lists including CIBIL, the United Nations Security Council Consolidated Sanctions List, the International Organization of Securities Commissions database and Sebi's prosecution list.

Fit-and-proper declarations will be required for the applicant, directors or managing partners, key management personnel, promoters or controlling persons, and ultimate beneficial owners.

The sponsor will also have to disclose regulatory actions taken against it or its associates in India or abroad during the preceding five years, along with details of fines levied by regulatory bodies during the last five financial years and litigation during the preceding three years.

The framework places significant emphasis on investor protection and internal governance. Applicants will have to provide details of customer onboarding and grievance-redressal mechanisms, complaint resolution timelines, compliance processes, conflict of interest policies and systems for monitoring insider and employee trading.

For private equity funds and pooled investment vehicles seeking to act as sponsors, additional information has been prescribed, including evidence of at least five years of experience as a fund or investment manager and experience of investing in the financial sector, with committed and drawn-down capital of at least Rs 5,000 crore.

The second stage of the process focuses on the AMC. Applicants will have to provide details of the proposed AMC's office, compliance officer, main objects, capital structure, shareholding, net worth, board and key management personnel.

A detailed business plan will also be required, along with information on infrastructure, investor services, IT systems, cybersecurity, system audit, business continuity and disaster recovery arrangements.

The AMC will further have to submit its compliance framework, conflict-of-interest policy and insider trading and employee trading policies.