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Indian regulator categorises funds
Chris Hamblin
6 October 2017
The regulator, in a recently released circular, thinks it desirable for different schemes launched by a mutual fund to be distinct from one another in terms of asset allocation, investment strategy etc. It also wants to bring in uniformity in the characteristics of similar types of schemes launched by different mutual funds. To accomplish this uniformity between mutual funds and to standardise the scheme categories and characteristics of each category, it has decided to categorise the mutual fund schemes broadly in the following groups. In the case of solution-oriented schemes, there will be a specified period of lock-in. This period is not to apply to any existing investment by an investor or a registered Systematic Investment Plan (SIP) in the existing schemes when they are being realigned with the provisions of the circular. SEBI now defines large cap, mid cap and small cap as follows. There is a process to be followed for the categorisation and rationalisation of schemes. Only one scheme per category is to be permitted, except: SEBI is to require mutual funds to analyse each of their existing schemes with reference to its list of categories and submit their proposals to it after obtaining due approval from their trustees as early as possible but not later than 2 months after the date of the circular. After SEBI has made its observations about each proposals, the mutual fund in question will be obliged to make the necessary changes in all respects within a maximum period of three months.