Mutual funds seek Sebi nod for global expansion, wider business play

Industry wants flexibility to expand globally, enter allied segments like wealth mgmt, advisory

 

The mutual fund (MF) industry has urged the Securities and Exchange Board of India (Sebi) to tone down restrictive clauses in regulations governing asset management companies (AMCs), seeking greater operational flexibility to expand globally and into allied businesses.

 

Top MF houses have submitted their suggestions as part of Sebi’s review of Regulation 24(b) of the Mutual Fund Regulations, which restricts AMCs from pursuing several non-core business activities. While Sebi floated a consultation paper in July proposing limited relaxations, fund houses have now sought broader amendments. 

Key relaxations sought by MFs include easing restrictions on AMC mergers and acquisitions, permitting wealth and custom portfolio management for high-net-worth clients, allowing cross-distribution of products from other AMCs, and enabling the launch of a wider bouquet of value-added services. 

 

“AMCs have evolved from managing only mutual fund schemes to also handling specialised investment funds (SIFs), alternative investment funds (AIFs), and advisory mandates for global asset managers. We can’t be confined to being mere product manufacturers. The framework must encourage innovation and expansion in the asset management business. Some of the suggestions go beyond Regulation 24(b), and call for a comprehensive review of the MF regulations,” said an industry executive. 

In its July paper, Sebi had proposed allowing AMCs to manage certain non-broad-based pooled funds — such as family offices and offshore investment vehicles — without a separate portfolio management services (PMS) licence, subject to strict oversight. The regulator also proposed letting AMCs act as global distributors for funds managed or advised by themselves or their subsidiaries. At present, AMCs can manage only broad-based funds.

 

“There have been multiple suggestions from the industry. These will require extensive internal and external deliberations before any final draft is issued. Discussions with Sebi are still ongoing,” said a person familiar with the matter.

 

Emailed queries sent to Sebi remained unanswered.

 

Industry representatives have also pitched for reforms to streamline regulatory segregation between MFs, AIFs, and advisory services, arguing that the current framework is outdated for diversified asset management structures.

 

“Globally, there aren’t as many restrictions — whether it’s managing insurance or pension money, providing advisory services, or running allied businesses. The Indian framework needs a relook to allow AMCs to fully leverage technological and operational capabilities,” said another industry insider.

 

Sebi’s consultation also suggested permitting AMCs and their subsidiaries to engage in ancillary activities such as fund distribution and marketing.

 

“There are global fund houses scaling up operations in India. If Indian AMCs are to compete globally, the current restrictions must be rationalised to create a level-playing field. That’s the intent behind several of the recommendations submitted to Sebi,” said another senior official.

 

The domestic MF industry has witnessed rapid expansion over the past decade, with the number of AMCs rising to more than 45 and total assets under management (AUM) topping ₹75 trillion as of September.

 

Seeking a broader canvas

 

— MFs have urged Sebi to ease restrictive clauses beyond an earlier proposal

 

— Move follows feedback to Sebi’s July consultation paper proposing relaxations under Regulation 24(b)

 

— Suggestions include allowing AMC mergers, cross-distribution of products, and managing family offices

 

— Fund houses are seeking broader reforms

 

— Asking for flexibility to expand globally, enter wealth management, and advisory space

 

— Industry players argue current framework limits innovation, global competitiveness