Sebi's New Rules: Transforming Transparency in Mutual Funds

Sebi has amended mutual fund rules, requiring AMCs to deploy investor money from New Fund Offers within a set period. Starting April 2025, these changes aim to enhance mutual fund transparency and flexibility. If funds aren't timely deployed, investors can exit without a fee. Additional amendments mandate employee investments in mutual fund units.

Securities and Exchange Board of India (Sebi) has introduced significant changes to mutual fund regulations, compelling asset management companies (AMCs) to deploy investor funds from New Fund Offers (NFOs) within a designated timeframe.

These amendments, which will take effect from April 1, 2025, are designed to boost transparency and flexibility within the mutual fund industry. The new guidance offers investors the right to exit without incurring fees if funds aren't deployed within the specified timeline.

Sebi's revised framework deters AMCs from excessive fund collection during NFOs, while also requiring AMCs to invest a portion of employee compensation in mutual fund units, thereby aligning incentives across management levels.

(With inputs from agencies.)