AMFI Advises Fund Houses to Protect Interests of Investors After SEBI Raises Concern Of Froth Building In Small And Midcap Segments

According to an update from AMFI, the industry body has asked mutual funds to put in place safeguards to protect the interests of all investors in mid- and small-cap funds. Amfi sent this letter after markets regulator Securities and Exchange Board of India (Sebi) raised concerns of "froth building up in small and midcap segments" amid continuing flows in mid- and small-cap funds.

"In the context of the froth building up in the small and midcap segments of the market and the continuing flows in the small and midcap schemes of mutual funds, Trustees, in consultation with Unit holder Protection Committees of the AMCs, shall ensure that a policy is put in place to protect the interest of all investors," the AMFI letter dated February 27 said.

AMFI has asked fund houses and managers to take appropriate and proactive measures to protect investors, including but not limited to moderating inflows and portfolio rebalancing, etc. Fund houses have also been asked to take steps to ensure that investors are protected from the first-mover advantage of redeeming investors. The policy needs to be approved by Trustees and disclosed on each AMCs' website within 21 days of the letter.

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