Key Regulatory Frameworks and Guidelines for Mutual Funds in India

The mutual fund industry in India has grown significantly over the years, making it a popular investment vehicle for retail and institutional investors. The regulatory environment has played a crucial role in fostering trust and transparency in the industry.

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The mutual fund industry in India has grown significantly over the years, making it a popular investment vehicle for retail and institutional investors. The regulatory environment has played a crucial role in fostering trust and transparency in the industry. In India, mutual funds are governed by the Securities and Exchange Board of India (SEBI), which has established several frameworks and guidelines to ensure investor protection, market integrity, and sustainable growth. This article explores three key regulatory frameworks and guidelines governing mutual funds in India: the Mutual Funds Regulations of 1996, Enhanced Disclosure Norms, and Risk Management Frameworks.

1. Mutual Funds Regulations, 1996

The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 is the cornerstone regulatory framework for mutual funds in India. These regulations laid the foundation for mutual fund operations and continue to evolve to keep pace with market dynamics and investor needs. Key features of the regulations include:

Registration and Structure: Mutual funds are required to register with SEBI and can only be set up as a trust under the Indian Trusts Act, 1882. The trustees are responsible for protecting investors' interests, while the Asset Management Company (AMC) handles day-to-day operations.

Investment Restrictions: To ensure a diversified and secure portfolio, mutual funds must adhere to specific investment restrictions. For example, no scheme can invest more than 10% of its net asset value (NAV) in equity shares or equity-related instruments of a single company. Moreover, funds cannot invest in unlisted securities or engage in speculative transactions.