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Summary: SEBI has shared a word of caution with mutual funds against investing in some risky segments. Some other crucial policy proposals for the mutual fund industry are also in the works. Find the details below.
SEBI Chairperson Tuhin Kanta Pandey cautioned mutual fund houses on investing in risky segments like micro caps and bespoke private debt deals, urging them to prioritise proper documentation of these investments to ensure transparency.
Pandey said that while diversification beyond blue-chip stocks is necessary, mutual funds, given their retail focus, must tread carefully in these risky bets. He was speaking at the 30th foundation day of the Association of Mutual Funds in India (AMFI).
Micro-cap stocks are high-risk bets that are notorious for offering limited public disclosure. In recent years, there have been many cases of fraudulent businesses coming from this segment.
The chairperson also said that SEBI will work on a comprehensive simplification of mutual fund regulations in coming months, aimed at reducing compliance burden on the industry while keeping investor protection intact.
On the industry’s growth prospects, Pandey noted that fewer than 5 per cent of Indians invest in mutual funds, signalling vast potential for expansion. He said SEBI is exploring incentives for distributors to bring in first-time investors from smaller cities (B-30) and for women investors.
Highlighting operational vulnerabilities like cases of fraudulent redemptions by impersonators, he also urged asset managers to strengthen monitoring, act swiftly against such attempts and share modus operandi across peers.
Also read: Why mutual funds prefer Financials despite market jitters
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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