SEBI revises norms for collective investment schemes, eases security transmission

Securities and Exchange Board of India (SEBI) has decided to enhance the net worth criteria and track record requirements for entities managing collective investment schemes, to put a stricter regulatory framework in place for such investments.

The regulator has also approved changes to listing obligations and disclosure requirement regulations for simplification of procedure for transmission of securities.

The regulator also gave the nod to amend regulations to enable SEBI-registered custodians to provide custodial services, in respect of silver or silver-related instruments held by silver ETFs of mutual funds.

These decisions were taken at a board meeting of SEBI on Tuesday.

Amid instances of investors getting defrauded by fraudulent money pooling schemes, the regulator would also restrict a Collective Investment Management Company (CIMC) and its associate’s shareholding in a scheme at 10 per cent or representation on the board of another CIMC to avoid conflict of interest.

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Besides, the mandatory investment of CIMC and its designated employees in the Collective Investment Schemes (CIS) have to align their interests with that of the CIS.

SEBI said that the net worth criteria would be enhanced and a requirement of having a track record in a relevant field as an eligibility requirement for registration for a CIMC would be put in place.

“Among others, there would be a mandatory requirement of a minimum number of investors, maximum holding of a single investor and minimum subscription amount at CIS level,” SEBI said.

The regulator said there would be a rationalisation of fees and expenses to be charged to the scheme as well as a reduction of timelines for the offer period of the scheme, allotment of units and refund of money to investors.

“The changes have been proposed to strengthen the regulatory framework for CIS in line with Mutual Fund regulations to remove regulatory arbitrage,” SEBI said in the release.

To simplify the procedure for transmission of securities, the existing threshold limit for simplified documents would be revised to ₹5 lakh from ₹2 lakh currently for securities held in physical mode per listed issuer.

Also, the threshold in this regard for securities held in the dematerialised mode for each beneficiary account would be raised to ₹15 lakh from the present level of ₹5 lakh.

“Legal Heirship Certificate or its equivalent certificate issued by competent government authority will be an acceptable document for transmission of securities,” the regulator said.

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According to SEBI, the objective is to ensure that uniform processes are followed by the Registrars to an Issue and Share Transfer Agents (RTAs) / listed companies, which would further ease the transmission process for investors.

The board of SEBI also approved the budget for the regulator for the financial year 2022-23.

(With inputs from Agencies)