Sebi Board set to approve new asset class and mutual fund lite regulations

The Securities and Exchange Board of India (Sebi) is scheduled to hold a crucial board meeting on September 30, where it is expected to consider several significant proposals, including the introduction of a new asset class and mutual fund lite regulations.

One notable agenda item is a proposed financial product that would combine elements of rights issues and preferential allotments of shares. This meeting is particularly important as it marks the first board session since allegations of 'conflict of interest' were leveled against Sebi Chairperson Madhabi Puri Buch and her husband, Dhaval Buch, following reports from Hindenburg Research and Congress. Both Buchs have firmly denied any wrongdoing.

Among the key discussions, Sebi board members will address concerns raised by officers regarding unprofessional work culture and issues related to house rent allowances (HRA).

Earlier in July, Sebi unveiled plans to create a 'New Asset Class' designed for investment products that sit between mutual funds and portfolio management services (PMS). This new category, structured under mutual funds, is expected to have a minimum investment threshold of Rs 10 lakh.

Additionally, Sebi has proposed the introduction of Mutual Fund (MF) Lite regulations aimed at passively managed schemes. This framework is intended to ease compliance burdens, enhance market penetration, promote investment diversification, and encourage innovation in the sector.

The board is also likely to introduce stricter regulations to combat speculative trading in Futures & Options (F&O) markets. In July, Sebi proposed several measures to address speculative practices in index derivatives, including limits on multiple option contract expirations and increased monitoring of position limits.

Last month, Chairperson Buch noted that Sebi had received nearly 6,000 responses to its consultation paper focused on strengthening the index derivatives framework.