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SEBI has proposed doing away with the requirement of making nomination compulsory in joint MF folios. in a consultation paper, SEBI said, “The working group has recommended that the requirement of Nomination may be made optional in case of jointly held folios.”
Currently, all joint holders are required to appoint nominees in their folios.
Sharing the rationale, SEBI said since the surviving holder in a joint MF folios takes precedence over nominee during the transmission of units, the risk of unclaimed units is low.
SEBI proposed these changes to ensure ease of doing business. Earlier, SEBI constituted a Working Group (WG) to recommend measures to simplify & ease compliances under various SEBI regulations. Here are some of the key proposals based on WG’s recommendations:
1) Relaxation in appointment of two fund managers in FoFs
The WG found that appointment of two fund managers in FoFs investing overseas leads to additional cost to the AMCs. Additionally, transactions done by fund managers in overseas market are limited, so a separate fund manager may not be required solely for overseas investment. Further, AMCs already hire research analysts at each security/ sector level.
Based on these observations, SEBI proposed that AMCs can appoint one fund manager to manage such schemes.
2) No exposure limit on equity ETFs/index funds sectoral exposure
SEBI has proposed to exclude ETFs and index funds tracking equity indices from any exposure limit.
Currently, mutual fund schemes are not allowed to invest more than 25% of NAV in group companies of their sponsor. However, for certain sectoral indices, the exposure to single issuer may be more than 25%.
SEBI said, “The WG has highlighted that while MF schemes (both active and passive) are not allowed to invest more than 25% of NAV in group companies of their sponsor, exposure to a single stock/issuer in case of sectoral/thematic passive equity schemes is permitted up to 35% weight in the index. Considering that for certain sectoral indices, the exposure to single issuer may be more than 25% and as passive funds are required to replicate respective underlying index, the existing sponsor group exposure limit at 25% may be relaxed for equity oriented ETFs/ Index Funds based on widely tracked and non-bespoke Indices.”
“Equity oriented ETFs and index funds, based on widely tracked and non-bespoke Indices, may be excluded from the requirement of investment limit of 25% in group companies of sponsors so that investments may be made in accordance with the weightage of the constituents of the underlying index avoiding any unintended tracking error,” said SEBI.
