SEBI Revamps Mutual Fund Scheme Framework

The Securities and Exchange Board of India (SEBI) has restructured the mutual fund scheme framework, introducing Life Cycle Funds and discarding the Solution Oriented Schemes category. This aims to ensure true-to-label positioning, enhance transparency, and align schemes with evolving opportunities across asset classes by establishing clear definitions and boundaries.

The Securities and Exchange Board of India (SEBI) has unveiled a new framework for mutual fund classification, incorporating Life Cycle Funds and abolishing the Solution Oriented Schemes category. The initiative seeks to bring uniformity, prevent misleading claims, and adjust regulatory structures to match the shifting mutual fund landscape.

SEBI's framework organizes schemes into five main categories: equity, debt, hybrid, life cycle, and other schemes such as Fund of Fund Schemes and Passive Schemes like Index Funds and ETFs. The regulator mandates consistent scheme naming to ensure 'true-to-label' accuracy and restricts the use of names emphasizing only returns.

Industry experts, like Nikunj Saraf of Choice Wealth, endorse the move as a simplification effort for retail investors, offering clear definitions and enhancing transparency. Existing Solution Oriented Schemes will merge with similar ones, and foreign securities are no longer classified separately. The framework sets a six-month timeline for compliance from issuance date.