SEBI, the capital markets regulator, recently introduced
changes aimed at promoting ease of doing business in the mutual fund sector.
These changes include making nomination optional for jointly-held mutual fund
accounts and allowing fund houses to appoint a single fund manager for
commodity and foreign investments, reducing operational costs.
Optional Nomination
for Joint Mutual Fund Accounts:
SEBI’s recent circular has made the nomination process
optional for jointly-held mutual fund accounts. This move is part of efforts to
simplify processes and promote ease of doing business. Experts view this change
positively as it allows the surviving member in joint accounts to become the nominee,
streamlining the transmission process and reducing complexities during such
situations.
Deadline and
Compliance:
Existing individual mutual fund holders have until June 30,
2024, to nominate or opt-out of nomination. Failure to comply with this
deadline will result in their accounts being frozen for withdrawals. This
deadline ensures that investors have sufficient time to make necessary arrangements
regarding nominations.
Benefits of Optional
Nomination:
The optional nomination for joint accounts brings flexibility
and convenience to investors. It eliminates the mandatory requirement and
provides more control to investors in managing their mutual fund holdings. This
change aligns with SEBI’s objective of enhancing investor experience and reducing
administrative burdens.
Relaxation in Fund
Manager Rules:
SEBI’s circular also addresses the appointment of dedicated
fund managers for commodity-based and overseas investment funds. For
commodity-based funds like Gold ETFs, Silver ETFs, and others participating in
commodities markets, appointing a dedicated fund manager is now optional. Similarly,
for overseas investments, fund houses can opt for a single fund manager for
both domestic and foreign/commodity funds.
Cost Reduction and
Operational Efficiency:
The option to have a single fund manager for various types
of funds is aimed at reducing operational costs for fund houses. By
streamlining fund management responsibilities, fund houses can achieve greater
operational efficiency and focus on optimizing returns for investors. This move
reflects SEBI’s efforts to encourage cost-effective practices in the mutual
fund industry.
SEBI’s recent regulatory changes in mutual fund nominations
and fund manager appointments are geared towards enhancing operational
efficiency and investor convenience. Investors now have the flexibility to
choose regarding nominations, while fund houses can optimize costs by
appointing a single fund manager for specific fund categories. These changes
align with SEBI’s vision of creating a conducive environment for mutual fund
investments while ensuring investor protection and market integrity.
Last modified: May 10, 2024
