Market regulator Sebi mulls tweaks to mutual fund NFO filing process

Move to address concerns around AMCs losing first-mover advantage due to public disclosure

The Securities and Exchange Board of India (Sebi) is proposing key tweaks to the regulatory filing procedure for new fund offers (NFOs). Currently, an asset management company (AMC) must upload the draft scheme information document (SID) ahead of the NFO launch. The SID contains all essential details of the new fund.

 

The existing system has raised concerns that it allows competitors to replicate investment ideas. In a consultation paper issued on Wednesday, Sebi proposed that AMCs submit the initial draft of the SIDs only to Sebi. The SIDs will be made publicly available just five working days before the scheme's launch.

 

 

These proposals aim to balance public transparency with protecting innovative ideas in the Rs 67-trillion domestic mutual fund industry.

 

“It has been observed that once a draft SID proposing a new product is uploaded on the Sebi website, other AMCs tend to follow suit. At times, this results in a situation where the NFO of an AMC that followed suit precedes the NFO of the AMC that conceived the idea, causing the latter to lose its first-mover advantage,” Sebi stated, inviting industry feedback until November 20.

 

Amid the buoyant equity market sentiment, fund houses have launched numerous equity NFOs in recent months, with activity particularly picking up over the past five months. Mutual funds launched 28 active equity schemes from May to August, collectively raising Rs 58,612 crore.

 

Over the past year, Sebi has also accelerated the process of clearing NFO applications. In most cases, the regulator has issued observation letters within 21 days of filing the NFO. Previously, Sebi took one to two months to grant approvals.

 

Experts say the shorter approval cycle has helped them time their product launches more effectively.