CIRCULAR
SEBI/HO/IMD/IMD-PoD-2/P/CIR/2024/098 July 08, 2024
To
All Mutual Funds (MFs)/
All Asset Management Companies (AMCs)/
All Trustee Companies/ Board of Trustees of Mutual funds/
Association of Mutual Funds in India (AMFI)
Madam/ Sir,
Subject: Ease of doing business - Streamlining of prudential norm for passive
schemes regarding exposure to securities of group companies of the sponsor
of Mutual Funds
1. A working group was constituted by SEBI to review the present regulatory
framework under SEBI (Mutual Fund) Regulations, 1996 (“MF Regulations”) and
recommend measures to promote ease of doing business for Mutual Funds.
2. Pursuant to public consultation on the recommendations of the working group and
deliberations in the Mutual Funds Advisory Committee (MFAC), it was decided to
streamline the extant prudential norm applicable to investments by passively
managed Mutual Fund schemes in the group companies of their sponsors.
Accordingly, the MF Regulations have been amended vide notification No.
SEBI/LAD-NRO/GN/2024/188 dated July 02, 2024.
3. Pursuant to the said amendment, clause 9 of Seventh Schedule of the MF
Regulations, inter alia mandates that no Mutual Fund scheme shall make any
investment in the listed securities of group companies of the sponsor which is in
excess of 25 per cent of the net assets of the scheme, except for investments by
equity oriented exchange traded funds (ETFs) and Index Funds and subject to
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such conditions as may be specified by SEBI. Accordingly, it has been decided as
under:
3.1. Equity oriented ETFs and Index Funds, based on widely tracked and non-
bespoke indices, can make investments in accordance with the weightage of
the constituents of the underlying index. However, such investments shall be
subject to an overall cap of 35% of net asset value of the scheme, in the group
companies of the sponsor.
3.2. Widely tracked and non-bespoke indices shall be indices that are tracked by
passive funds or act as primary benchmark for actively managed funds with
collective Assets under Management (AUM) of INR 20,000 Cr. and above.
3.3. The list of indices based on the criteria specified at paragraph 3.2 above, shall
be determined on half yearly basis as per the above specified AUM threshold
as on March 31st and September 30th respectively. The list of such indices shall
be updated by AMFI and published on its website by April 15th and October
15th respectively every year, after seeking SEBI’s approval.
3.4. Based on the criteria specified at paragraph 3.2 above, the list of indices as on
June 30, 2024 is provided at Annexure A.
3.5. Passive schemes based on underlying indices, other than those indices
mentioned at Annexure A of this circular, shall be rebalanced within 30
business days from the date of issuance of this circular.
3.6. In case the portfolios of such schemes are not rebalanced within the period of
30 business days, justification in writing, including details of efforts taken to
rebalance the portfolio shall be placed before the Investment Committee of the
AMC. The Investment Committee, if so desires, can extend the timeline for
rebalancing up to 60 business days from the date of completion of mandated
rebalancing period.
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3.7. In case the portfolios of schemes are not rebalanced within the aforementioned
mandated plus extended timelines, AMCs shall not be permitted to launch any
new scheme till the time the portfolio is rebalanced and not levy exit load, if
any, on the exiting investors of such scheme(s).
4. This circular is issued in exercise of the powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act, 1992, read with Regulation 44 (1),
clause 9(c) of Seventh Schedule and Regulation 77 of the MF Regulations to
protect the interest of investors in securities and to promote the development of,
and to regulate the securities market.
5. This circular is available at www.sebi.gov.in under the link “Legal ->Circulars”.
Yours faithfully,
Lakshaya Chawla
Deputy General Manager
+91-22-26449369
lakshayac@sebi.gov.in
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Annexure A
List of widely tracked and non-bespoke indices
(based on AUM as on June 30, 2024)
S.No. Equity Index Name
1 Nifty 500
2 Nifty 50
3 Nifty Midcap 150
4 BSE 500
5 Nifty Large Midcap 250
6 Nifty Smallcap 250
7 Nifty 100
8 BSE SENSEX
9 BSE 100
10 NIFTY 500 Multicap 50:25:25
11 BSE 250 Small Cap
12 Nifty CPSE
13 Nifty infrastructure Index
14 Nifty Financial Services
15 BSE Midcap 150
16 Nifty Bank
17 Nifty India Manufacturing
18 Nifty Next 50
19 Nifty India Consumption
20 BSE Bharat 22
21 BSE Healthcare
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