SEBI to make direct mutual fund plans default from November 1; reviews IPO and SME listing rules: Reports

The Securities and Exchange Board of India (SEBI) will make direct mutual fund plans the default option on asset management companies’ (AMCs) digital platforms starting November 1, and investors opting for regular plans will have to be informed about their higher expense ratios, SEBI Chairman Tuhin Kanta Pandey said at NDTV Profit Ignite’s Diwali event.

Pandey also announced that the regulator will review the frameworks governing main-board initial public offerings (IPOs), follow-on public offers (FPOs), small and medium enterprise (SME) IPOs and the Innovators Growth Platform, particularly to improve access to public capital for emerging companies.

SEBI outlines four priorities

Pandey said SEBI’s agenda centres on four areas: simpler regulations, deeper capital markets, stronger governance and investor protection, and greater use of technology in supervision.


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Under its regulatory simplification efforts, SEBI is reviewing listing and disclosure requirements, examining net settlement for mutual fund transactions and considering alignment of real estate investment trust (REIT) and infrastructure investment trust (InvIT) listing timelines with those for equities.

The regulator is also working with the Reserve Bank of India to harmonise SWIFT-based certification of know-your-customer documents for foreign portfolio investor (FPI) bank accounts. It is examining longer KYC review cycles for eligible FPIs and plans to shift environmental, social and governance (ESG) rating providers towards a principles-based regulatory framework.

To deepen markets and widen financing options, SEBI is consulting corporate bond issuers on existing challenges and exploring ways to expand regulated online bond platforms beyond major cities. The regulator has also proposed stronger monitoring of how companies use IPO proceeds and is reviewing the framework governing debenture trustees.

SEBI plans greater use of AI in market supervision

SEBI is expanding the use of artificial intelligence in its supervisory work. Its Radar tool, which currently checks mutual fund and distributor advertisements, will be extended to other intermediaries.

The regulator is developing an in-house system to analyse compliance reports submitted by portfolio managers and AMCs using AI. It is also testing a tool to monitor disclosures by debenture trustees, stock exchanges, depositories and credit rating agencies, with the aim of identifying early signs of corporate debt defaults.

SEBI is exploring a domestically governed AI model for the securities market and assessing its technical feasibility, governance requirements and data needs. Pandey stressed that institutions using AI must remain accountable for their decisions and for protecting investor data.

Investor awareness remains a concern

Citing SEBI’s investor survey, Pandey said 63% of households were aware of at least one securities market product, but only around 9.5% participated in the markets. Among investors, just 36% had moderate or high levels of market knowledge. He emphasised that easier access to financial products must be accompanied by an understanding of their costs, risks and features.

SEBI’s Project Jagruk investor-awareness campaign operates in English, Hindi and 11 regional languages. Since its launch on October 5, it had generated more than 25 crore impressions and over 18 crore social media views, Pandey said.

The regulator has also escalated more than 2.2 lakh instances of misleading online content to social media platforms for takedown. Its in-house AI tool, Sudarshan, accounted for more than 40% of these escalations.

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Faster fundraising and expanding markets

Pandey said companies can now list within three working days of an IPO closing. More than 140 alternative investment fund schemes had been processed in three months under SEBI’s GARUDA framework. Under this framework, regular AIF schemes can proceed 10 working days after their placement memorandum is filed through a registered merchant banker, unless SEBI advises otherwise.

Around 585 FPIs have used the Swagat-FI single-window route, accounting for roughly 15% of FPI assets under custody, he said.

Pandey put India’s equity market capitalisation at around Rs 470 lakh crore, outstanding corporate bonds at about Rs 61 lakh crore and mutual fund assets at approximately Rs 83 lakh crore. REITs and InvITs together manage more than Rs 10 lakh crore, while the country has over 15 crore unique securities market investors.

He said the focus should extend beyond market size to ensuring that capital markets finance the economy effectively while remaining accessible, efficient and resilient.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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