SEBI new rules for mutual funds

Investment in mutual funds is quite popular, and many of us use it as a regular saving mechanism through SIP. However, are a few new Securities and Exchange Board of India (SEBI) rules that came into effect during this calendar year that you, as an investor, should know.

The 20% rule

In a bid to align the interests of the fund managers and the unit-holders, the new SEBI circular has directed top mutual fund officials to have 20% of their salary from the schemes that they manage. This could eliminate risky decisions by the fund managers, now that they have their own money invested in the scheme. In case the fund manager manages more than one scheme, the manager’s investment would be in proportion to the size of the schemes. Passively managed funds like exchange-traded funds, index, overnight etc. are excluded from this requirement.


SEBI will be using its riskometer tool every month to assess the risk profile of mutual funds. The mutual funds, on their part, will update the riskometer readings on the mutual funds online website and the AMFI website ten days before the end of the month. The new riskometer will have six risk categories, including a new one named “very high”.

Labeling norms for dividends

Under SEBI’s new norms, the mutual funds will have to rename their labeling options as per the newly suggested labeling options. These changes are summarized below,

  • Dividend payout or the credit of dividend to accounts will be called ‘Payout of Income Distribution cum capital withdrawal option’.
  • Dividend reinvestment or the reinvestment of dividend in the same plan will be called ‘Reinvestment of Income Distribution cum capital withdrawal option’.
  • Dividend transfer plan or the transfer of dividend to another scheme will be called ‘Transfer of Income Distribution cum capital withdrawal option’.

Asset allocation rules for multi-cap

Two changes in the asset allocation rules of multi-cap funds are,

  • The minimum investment of multi-cap fund assets in equity and equity-related investments has been raised from 65% to 75%.
  • A minimum of 25% equity investment of multi-cap funds has to be made in large-cap, small-cap and mid-cap each.There was no such specification in the past.

NAV calculation

From 1 January 2021, NAV was allowed on all investments below Rs. 2 lakhs that comply with the NAV cut-off timings, as seen in mutual funds online statements.

Inter-scheme transfers

Inter-scheme transfers have to be made at market prices and in compliance with the investment goals of the receiving scheme. The new rule in this regard requires that inter-scheme transfer in close-ended funds has to be made within a maximum of three days of the allotment of the units to the investor.

If you are using popular apps to track your SIPand other investments, you may have noticed these developments on your mutual funds online investments and find out more about how these changes impact your investments with Tata Capital Moneyfy app.