Sebi tightens norms on collective investment schemes, eases securities transmission process

The Securities and Exchange Board of India (Sebi) has tightened the norms pertaining to collective investment schemes (CIS) bringing them on a par with the mutual fund (MF) regulations and removed “regulatory arbitrage”.

The changes in the CIS regulations follow a consultation paper floated by Sebi in January to review the current CIS norms.

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The Sebi board that met for the first time after its new chief Madhabi Puri Buch took over last month also made amendments to the Listing Obligations and Disclosure Requirements (LODR) regulations to ease the securities transmission process for investors.

Apart from this, the board has approved amendments to the Sebi Custodian Regulations, 1996, to enable registered custodians to provide custodial services in respect of silver exchange-traded funds (ETFs) launched by domestic mutual funds.

According to a Sebi statement, The regulator has increased the net-worth criteria and enhanced the track record requirement of promoters for running a collective investment management company (CIMC).

Sebi has also restricted a CIMC and its group shareholders to 10 per cent shareholding or representation on the board of another CIMC to avoid conflict of interest. It also said that a CIMC and its designated employees should have a mandatory investment in the CIS to align their interests with that of the CIS. The regulator fixed a minimum number of investors and subscription amount at the CIS level. It also rationalised the fee and expenses to be charged to the scheme and reduced the timeline for the offer period of scheme and refund of money to investors.

Apart from this, the Sebi board also raised the existing threshold limit for simplified documents for securities held in physical mode to Rs 5 lakh per listed issuer from Rs 2 lakh. For securities held in dematerialised mode, it has been revised to Rs 15 lakh from Rs 5 lakh for each beneficiary account.

The regulator also said a legal heirship certificate or its equivalent issued by a competent government authority will be an acceptable document for transmission of securities.

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