Sebi Mandates New Rebalancing Rules for Mutual Funds
Sebi extends portfolio rebalancing timelines for all mutual fund schemes experiencing passive breaches, emphasizing regulatory compliance and investor protection. Previously limited to asset allocation breaches, this affects actively managed funds, excluding Index Funds and ETFs, requiring rebalancing within 30 business days despite unintentional deviations influenced by market dynamics.
- Country:
- India
The Securities and Exchange Board of India (Sebi), the market regulator, announced on Thursday a significant change in the timelines for portfolio rebalancing in mutual fund schemes. This update will now apply to passive breaches across all actively managed schemes, moving beyond its previous focus on asset allocation alone.
Passive breaches, which refer to unintentional deviations from the prescribed asset allocation, often occur due to factors outside the control of Asset Management Companies (AMCs), such as market dynamics and corporate actions. To address these, Sebi mandates that all mutual fund schemes, barring Index Funds and Exchange Traded Funds (ETFs), undertake rebalancing within 30 business days.
This move, recommended by the Mutual Funds Advisory Committee (MFAC), aims to ensure consistent regulatory compliance and enhance investor protection. By mandating timely rebalancing, Sebi addresses the risk profile of schemes affected by passive breaches, though unintentional, caused by external dynamics.
(With inputs from agencies.)
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