The Hindu Business Line : SEBI stipulates minimum 20 investors for MF schemes

IN a bid to stop mutual funds operating like portfolio management schemes, the Securities and Exchange Board of India (SEBI) has stipulated a minimum of 20 investors and a single investor not accounting for more than 25 per cent in each scheme of mutual funds.

However for the existing schemes, SEBI has given time till December 31, 2004 for complying with the revised regulations. But it has exempted the existing close-ended schemes, fixed maturity plans and exchange traded funds from it in the interest of the investors.

The decision follows instances wherein individuals or a few investors were holding substantial portion of units in the schemes and plans of mutual funds. These individuals were taking advantage of the tax breaks being offered to mutual fund schemes, while the tax breaks are not available if the same investors had invested the money in a portfolio management scheme.

In the case of non-fulfilment with either of the two conditions, that is minimum of 20 investors and no single investor owning more than 25 per cent of the corpus of the scheme/plan, a three-months' time period or the end of succeeding calendar quarter (whichever is earlier) from the close of the IPO will be available to balance and to ensure compliance with these two conditions. In case these conditions are not fulfilled, the fund has to wound up the scheme.

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SEBI stipulates minimum 20 investors for MF schemes