SEBI’s Proposed Relaxations Set Stage for AMC Expansion and Innovation

India’s mutual fund industry could soon see a wave of business expansion as the Securities and Exchange Board of India (SEBI) proposes major relaxations for asset management companies (AMCs). The new draft guidelines, open for public comment until July 28, 2025, aim to modernize Regulation 24(b) of the SEBI (Mutual Funds) Regulations, potentially unlocking new opportunities and global reach for fund houses.

 

Key Highlights

 

•⁠  ⁠SEBI is considering allowing AMCs to manage and advise pooled non-broad-based funds—investment vehicles with concentrated holdings, which previously required a separate portfolio management service (PMS) license. This move would enable AMCs to expand beyond traditional mutual funds, including acting as Points of Presence (POP) for pension schemes and as global distributors for their funds.

 

•⁠  ⁠The proposal would let AMCs and their subsidiaries offer ancillary services such as distribution and marketing, and serve as global distributors for funds managed or advised by them, subject to regulatory compliance in India and abroad.

 

•⁠  ⁠AMCs could now serve pooled funds with fewer than 20 investors, a significant change from the current broad-basing requirement. This would level the playing field with other financial intermediaries and open new business avenues, especially in international markets.

 

•⁠  ⁠SEBI has built in several safeguards to address potential conflicts of interest, including:

 

Caps on differential fees for non-broad-based funds

 

Prohibition of performance-linked fees

 

Segregation of key investment personnel unless portfolios are identical

 

Strict disclosure requirements and oversight by unit holder protection committees

 

Prohibitions on the transfer of securities between mutual fund schemes and pooled non-broad-based funds

 

•⁠  ⁠AMCs must ensure that resources dedicated to new mandates are proportionate to fees earned and that mutual fund investors do not bear additional costs.

 

•⁠  ⁠SEBI’s consultation paper is seen as a progressive step to foster innovation, global expansion, and a more competitive asset management industry, while maintaining robust investor protections.

 

Sources: Fortune India, Business Standard, Economic Times, Financial Express, SEBI Consultation Paper