SEBI makes Direct MF plans mandatory on AMC platforms from Nov 1 to boost investor returns

Mumbai (The Uttam Hindu) : Direct plans will be available for mutual fund schemes on the digital platforms of asset management companies (AMCs) from November 1, according to Securities and Exchange Board of India (SEBI) Chairman Tuhin Kant Pandey.

Additionally, AMCs must disclose the higher expense ratio to customers who opt for regular plans. SEBI's goal is to increase returns for mutual fund investors. Director plans typically have lower expense ratios than regular plans, resulting in higher returns for investors.

Speaking at NDTV Profit Ignite: Diwali Edition in the country's financial capital, Pandey said the regulatory mainboard will revisit the framework for initial public offerings (IPOs) and follow-on public offerings (FPOs). It is also reviewing the SME IPO framework and the "Innovators Growth Platform" – especially for new-generation companies – to give growing businesses better access to public capital.

“Public capital also brings with it public responsibility,” Pandey said, adding that SEBI has proposed stricter oversight of how the funds raised from the issue are used, and is also reviewing the framework for debenture trustees.

Pandey said the regulator is developing a framework under which third-party monitoring agencies will check whether the funds raised through initial public offerings (IPOs) are being used for the purposes stated in the offer documents.

His comments come after SEBI released a consultation paper earlier this month aimed at strengthening oversight of funds raised through IPOs. The proposal suggests making it mandatory for all public issues, except for offers-for-sale (OFS), to have a monitoring agency, regardless of the issue size. If a company fails to cooperate with a monitoring agency, stock exchanges can impose a fine of up to ₹50,000 per case. Depositories can freeze promoters' demat accounts if the company consistently fails to comply.

Companies that are reported for non-cooperation cannot terminate their agreement with the agency or appoint another agency until they correct their mistake. These proposals are currently in the consultation phase and have not yet been implemented as regulations. Currently, if the size of the 'fresh issue' in an IPO exceeds ₹100 crore, the funds raised must be monitored by a SEBI-registered credit rating agency.