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Sebi looking to introduce ‘MF Lite’ regulations for passive funds
Capital markets regulator Sebi is engaged with the mutual fund industry to introduce 'MF Lite' regulations for passive funds, a move that will reduce the compliance burden and foster innovation.
A passive fund is an investment vehicle that tracks a market index or a specific market segment. These funds include passive index funds, Exchange Traded Funds (ETFs), and Fund of Funds investing in ETFs.
"Since the current MF regulatory framework was built around active fund management, Sebi is planning to introduce Mutual Fund Lite regulations for passive funds, wherein investment decisions are not discretionary, but tied to changes in the underlying benchmark index," the regulator said in its annual report for 2022-23, which was released on Monday.
These new regulations are expected to significantly reduce the compliance requirements of passive funds and foster innovation in the passive fund ecosystem, it added.
The regular mutual fund schemes, which raise money from the public, have to