Introduction of a Mutual Funds Lite (MF Lite) framework for passively managed schemes of Mutual Funds
Summary
SEBI introduces the Mutual Funds Lite (MF Lite) framework to provide a relaxed regulatory regime for passively managed schemes. The framework aims to promote ease of entry, reduce compliance costs, and encourage new players in the mutual fund industry. Eligibility criteria for sponsors and specific conditions for pooled investment vehicles acting as sponsors are detailed in this section. This section outlines net worth thresholds and deployment requirements for MF Lite AMCs, specifically triggering obligations when AUM exceeds INR 1 Lakh Cr. It details conditions for AMC acquisitions, including funding sources and encumbrance restrictions on sponsor stakes. Additionally, it establishes norms for shareholding transfers, trustee roles, and board responsibilities within the MF Lite framework. This section outlines the specific responsibilities assigned to the Board of AMCs and trustees for MF Lite schemes, including core duties and approval powers. It establishes regulatory relaxations regarding investment management agreements, broker transaction exclusions, and simplified scheme registration processes. Additionally, it details eased compliance requirements such as simplified disclos
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a relaxed regime with light-touch provisions “the MF Lite Framework” is being introduced only for passive Mutual Fund schemes, with an intent to promote ease of entry, encourage new players, reduce compliance requirements, increase penetration, facilitate investment diversification, increase market liquidity and foster innovation.
SEBI (Mutual Funds) Regulations, 1996 (“MF Regulations”) was amended vide notification No. SEBI/LAD-NRO/GN/2024/221 dated December 16, 2024.
“MF Lite” as a mutual fund that is having only such index funds, exchange traded funds, fund of funds or other mutual fund schemes as may be specified by the Board from time to time.
Passive funds based on only domestic equity passive indices... with collective AUM of INR 5,000 Cr. and above as on December 31 of each Financial Year.
All G-Sec/ T-bills/ SDL based domestic target maturity debt passive funds and domestic constant duration passive funds... with collective AUM, which exceeds a threshold of INR 5,000 Cr. and above as on December 31 of each Financial Year.
All Gold ETFs, Silver ETFs and FoFs based on only Gold or Silver ETFs.
Overseas ETFs and FoFs having single underlying overseas passive fund, wherein the underlying overseas benchmarks are as permitted under clause 4 of this circular.
All FoFs investing only in single domestic/ overseas index, wherein the reference benchmarks of underlying passive funds are as permitted under clause 3... and clause 4...
All FoFs investing in more than one index shall not be covered under the MF Lite framework under the phase 1 of implementation.
The indices, on which overseas passive schemes can be launched, shall be standardized across industry and broad based in nature.
Overseas ETFs/Index funds and FoFs investing in overseas ETF/index funds shall comply with the diversification requirement of minimum 10 securities in an equity index portfolio.
Passive funds based on only those overseas equity passive indices, whose quantitative threshold/ AUM exceeds a minimum threshold of $ 20 billion as on December 31 of each Financial Year shall be covered under phase 1 of implementation of MF Lite.
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Source: SecMarx — Introduction of a Mutual Funds Lite (MF Lite) framework for passively managed schemes of Mutual Funds. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.