Capital market regulator SEBI has tightened the prudential norms set for mutual funds in terms of portfolio construction and clarified that MFs have to follow the same timelines to fix all types of passive breaches in portfolios, even if the breaches happen due to reasons beyond the control of fund managers.
SEBI has provided timelines for rebalancing portfolios of MF schemes in the event of deviation from the mandated asset allocation mentioned in the Scheme Information Document due to passive breaches (occurrence of instances not arising out of omission and commission of AMCs).
Subsequently, it prescribed various limits inter alia, including issuer limits, group limits and sector limits. While active breaches of those limits are treated as clear violations of concerned SEBI regulations and suitable actions are taken, passive breaches of these limits do occur due to various reasons such as corporate action, substantial rise/ fall in the price of an underlying scrip, maturity of any underlying security, large redemptions, etc., which may not be out of omission and commission of AMCs, said SEBI.
The regulator on Thursday said, the regulation applicable to all types of both active and passive breaches in MF schemes will be treated as the same.