New Default Plans for Mutual Funds Aim to Boost Investor Returns Starting November
Starting November, direct plans for mutual funds will be default options, enhancing returns for investors, as announced by SEBI Chairman Tuhin Kanta Pandey.
Mumbai, October 29 (Daily Kiran) : Starting November 1, direct plans for mutual funds will become the default option on digital platforms operated by asset management companies (AMCs). This change was announced by Tuhin Kanta Pandey, Chairman of the Securities and Exchange Board of India (SEBI), during a recent event in Mumbai.
Pandey emphasized that AMCs must inform clients about the higher expense ratios associated with regular plans. This move aims to enhance returns for mutual fund investors, as direct plans typically offer lower expense ratios compared to regular plans.
At the NDTV Profit Ignite: Diwali Edition event, Pandey also mentioned that SEBI is reviewing the frameworks for Initial Public Offerings (IPOs) and Follow-on Public Offers (FPOs). Additionally, the regulator is assessing the SME IPO framework and the “Innovators Growth Platform,” particularly for new-generation companies, to improve access to public capital for developing businesses.
“Public capital brings with it public responsibility,” Pandey remarked. He further explained that SEBI is proposing stricter oversight on how funds raised through these offerings are utilized. A new framework is being developed that will involve third-party monitoring agencies to ensure that the funds collected via IPOs are used for the purposes outlined in the offer documents.
This announcement follows SEBI’s release of a consultation paper earlier this month aimed at strengthening the monitoring of funds raised through IPOs. The proposal suggests making it mandatory for all public issues, except for “offer-for-sale” (OFS), to have a monitoring agency, regardless of the issue size.
Companies that fail to cooperate with a monitoring agency could face fines of ₹50,000 for each instance, and repeated non-compliance could lead to the freezing of their promoters’ demat accounts by depositories.
Companies reported for non-cooperation cannot terminate their agreement with the agency or appoint a new one until they rectify their violations. These proposals are currently in the consultation phase and have not yet been enacted as regulations.
Currently, if the size of a “fresh issue” in an IPO exceeds ₹100 crore, the monitoring of the funds raised must be conducted by a credit rating agency registered with SEBI.
