SEBI Introduces Faster IPO Listing Timelines and Allows PE Funds to Sponsor Mutual Fund Houses
The Securities and Exchange Board of India (SEBI) has approved a reduction in the listing timeframe for shares on exchanges after initial public offerings (IPOs), shortening it from six days to three. This forthcoming rule will ensure that shares are allocated to IPO investors within three days following the closure of the offering, as opposed to the current waiting period of six days. Additionally, investors who were not allotted shares can expect refunds within the same three-day timeframe.
Alongside this decision, SEBI’s board has also endorsed proposals for increased disclosures of foreign funds and certain adjustments to the regulations governing real estate investment trusts (REITs), among other regulatory changes.
In another move, SEBI has introduced new regulations enabling private equity funds to serve as sponsors for mutual fund houses. This step aims to leverage the expertise and guidance provided by private equity funds to foster growth within the mutual fund industry. Currently, entities holding a stake of 40% or more in a mutual fund are classified as sponsors and must meet specific eligibility criteria.
Under SEBI’s eligibility criteria for mutual fund sponsors, sponsors are required to adequately capitalize the asset management company (AMC), ensuring that the AMC maintains a positive liquid net worth of at least Rs 150 crore. Furthermore, the capital contributed to the AMC will be locked in for a duration of five years, and the sponsor’s minimum stake of 40% will also be subject to a five-year lock-in period, as stated in the notification issued on Monday.
Moreover, SEBI has augmented the role and accountability of trustees to safeguard the interests of unitholders and has strengthened the accountability of the AMC’s board. Subject to specific conditions, the notification states that private equity funds, pooled investment vehicles, and pooled investment funds are eligible to serve as sponsors for mutual funds. Furthermore, SEBI has clarified that “Self-Sponsored AMCs” can continue their mutual fund operations, provided they fulfill specific conditions. This provision grants the original sponsor the flexibility to voluntarily disassociate itself from the mutual fund without the requirement of introducing a new and eligible sponsor.
