Brief Introduction of Investment Management

SEBI vide circular dated February 9, 2022 prescribed framework for conversion of private unlisted InvIT into private listed InvIT.

In the case of mutual funds, the mechanism of swing pricing is intended to protect existing investors of a fund from the costs incurred when other investors buy or sell units in that fund. In cases of severe liquidity stress at the AMC level or severe dysfunction at the market level, the Swing Pricing Guidelines gets triggered, which offer a contingency plan in case everything else fails. SEBI, on September 29, 2021 issued the swing pricing framework for open-ended debt mutual fund schemes, except overnight funds, gilt funds, and gilt with 10-year maturity funds. However, based on the request received from AMFI, the date for implementation of the provisions of the aforesaid circular was postponed to May 1, 2022.

In order to enhance liquidity & depth for efficient price discovery and price risk management in commodity derivatives segment, various committees including those constituted by the Government of India have recommended participation of institutional investors in the commodity derivatives markets. Taking cognizance of the fact that participation by institutional investors and based on the recommendation of the Commodity Derivatives Advisory Committee (CDAC), SEBI allowed Category III Alternative Investment Funds, Mutual Funds and Portfolio Management Services to participate in ETCDs with certain conditions prescribed vide Circular dated June 21, 2017. The sub-group of CDAC recommended the opening of ETCDs to other institutional investors in a phased manner. In phase I, Category III Alternative Investment Fund (AIF), Portfolio Management Services (PMS), Mutual Funds, direct participation of foreign participants having exposure to commodities were allowed and in Phase II, Banks, Insurance/reinsurance companies, Foreign Portfolio Investors (FPIs), Pension Funds were permitted. While Category III AIFs were already permitted, the participation by Mutual funds and FPIs was permitted subsequently vide circular dated April 26, 2019 and September 29, 2022, respectively.

The Reserve Bank of India formed a committee under the chairmanship of Shri S S Nadkarni to enhance the process for transactions in public sector bonds (PSU Bonds) and mutual fund units. It was also required to recommend the modalities of an alternative system covering the booking of transactions and efficient methods of accounting and transfers. The recommendations involve establishing an organized market arrangement for fixed yielding securities and an electronic book entry clearing facility supported by a depository.

The Finance Act 2020 amended Section 9A of the Income Tax Act, 1961, enabling resident Indian fund managers, beyond individuals, to be constituents of Foreign Portfolio Investors (FPIs). This amendment, along with amendments to SEBI regulations, aims to encourage Indian fund managers to contribute seed capital to offshore investment funds, fostering new business opportunities.

In the context of earlier SEBI circulars ‘Product Labelling in Mutual Funds’ and based on the recommendations of the Mutual Fund Advisory Committee (MFAC), SEBI reviewed the guidelines for product labelling in mutual funds.

The Instant Access Facility (IAF) enables mutual fund investors to quickly access their invested funds in specific schemes. It ensures that redemption proceeds are credited to the investor's bank account on the same day the redemption request is made. This facility aims to provide investors with quick access to their investments (up to a certain limit) to address urgent financial needs.

Certain FPIs have been observed to hold a concentrated portion of their equity investments in single Indian companies or corporate groups, raising concerns about regulatory circumvention. Identifying beneficial owners of FPIs remains difficult due to fragmented ownership. New SEBI regulations mandate detailed disclosures on persons having any ownership, economic interest, or control in FPIs with significant Indian equity holdings to ensure market stability and transparency.

During instances of technical glitches in trading members ‘systems, if both the primary and DR sites are affected and regular business cannot be conducted, affected Trading Members' investors can exit or square off their outstanding positions using a common platform called Investor Risk Reduction Access (IRRA), jointly provided by all exchanges. IRRA has been jointly developed by all the stock exchanges: BSE (Bombay Stock Exchange), NSE (National Stock Exchange), NCDEX (National Commodity and Derivatives Exchange), MCX (Multi Commodity Exchange) and Metropolitan Stock Exchange of India (MSE)

In terms of SEBI (Mutual Funds) (Amendment) Regulations, 2017 dated February 15, 2017 and SEBI Circular dated February 28, 2017, mutual funds were allowed to invest in hybrid securities such as units of REITs and InvITs subject to investment restrictions. Any existing scheme intending to invest in units of REITs/InvITs would have to abide by the provisions of Regulation 18 (15A) of SEBI (Mutual Funds) Regulations, 1996. For investment in units of REITs/InvITs by an existing MF scheme, unit holders of the scheme were given a time period of at least 15 days for the purpose of exercising the exit option. In accordance with SEBI (Mutual Funds) (Amendment) Regulations, 2017 dated February 15, 2017 and SEBI Circular dated February 28, 2017, the Mutual Fund under all its schemes shall not own more than 10% of units issued by a single issuer of REIT and InvIT. At a single Mutual Fund Scheme level, it shall not own: i. more than 10% of its NAV in the units of REIT and InvIT; and ii. more than 5% of its NAV in the units of REIT and InvIT issued by a single issuer. Depending on the development of the market, the internal investment norms are required to be submitted to the Board of AMC for approval before making any investment in units of REITs/InvIT. For further details, please see the SEBI circular SEBI/HO/IMD/DF2/CIR/P/2017/17 dated February 28, 2017.

In a bid to win back the beleaguered Unit Trust of India (UTI), the government made its flagship US-64 scheme open ended so that it is not necessary for unit holders to redeem all units when they will fetch a price of Rs 12 per unit up to 5000 units.

The government decided that UTI would not sell its equity holdings to meet its redemption obligations arising out of assured return schemes. The decision was taken to send the right signal to investors.

Dalal Street which suffered a setback in kerb trading on Friday, March 30, 1990 evening, following the announcement that Mr. M J Pherwani has proceeded on leave and Dr. S.A Dave, chairman of the Securities and Exchange Board of India (SEBI) had taken over as chairman od UTI, exhibited , steady conditions in kerb deals on Saturday.