SEBI/HO/IMD/IMD -PoD -2/P/CIR/2024/098 — THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

CIRCULAR SEBI/HO/IMD/IMD -PoD -2/P/CIR/2024/098 To All Mutual Funds (MFs)/ All Asset Management Companies (AMCs)/ All Trustee Companies/ Board of Trustees of Mutual funds/ Association of Mutual Funds in India (AMFI) Madam/ Sir, Subject: Ease of doing business Streamlining of prudential norm for passive schemes regarding exposure to securities of group companies of the sponsor of Mutual Funds A working group was constituted by SEBI to review the present regulatory framework under SEBI (Mutual Fund) Regulations, 1996 ("MF Regulations") and recommend measures to promote ease of doing business for Mutual Funds. Pursuant to public consultation on the recommendations of the working group and deliberations in the Mutual Funds Advisory Committee (MFAC), it was decided to streamline the extant prudential norm applicable to investments by passively managed Mutual Fund schemes in the group companies of their sponsors. Accordingly, the MF Regulations have been amended vide notification No. SEBI/LAD -NRO/GN/2024/188 dated July 02, 2024 . Pursuant to the said amendment, clause 9 of Seventh Schedule of the MF Regulations , inter alia mandates that no Mutual Fund scheme shall make any investment in the listed securities of group companies of the sponsor which is in excess of 25 per cent of the net assets of the scheme , except for investments by equity oriented exchange traded funds (ETFs) and Index Funds and subject to July 08 , 2024 such conditions as may be specified by SEBI . Accordingly, it has been decided as under: 3.1.Equity oriented ETFs and Index Funds, based on widely tracked and nonbespoke indices, can make investments in accordance with the weightage of the constituents of the underlying index. However, such investments shall be subject to an overall cap of 35% of net asse