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Security Exchange Board of India has notified circular for “Enhancement of Overseas Investment Limits for Mutual Funds” in the exercise of the power conferred under sub-section 1 of section 11 of SEBI Act, 1992, read with guidelines 77 of the SEBI (Mutual fund) regulation, 1996.
Key highlights
The circular stipulates the overseas investment limits per Mutual Fund. In this regard, focused on representations received from the mutual fund industry to increase the investment limits for each mutual fund, the limits are revised as follows:
Old Provision: In respect of investment limits to be disclosed in the scheme documents at the time of new fund offer (NFO)
Mutual funds offering new schemes that intend to invest in foreign/overseas securities or ETFs must ensure that the scheme documents disclose the expected amount they plan to invest in overseas securities/ETFs subject to maximum limits. The limits disclosed in the scheme documents are valid for 6 months from the closing date of NFO.
Old Provision: In respect of the investment limits on ongoing schemes
For all ongoing schemes that investors are allowed to invest in overseas securities/ETFs, investment mindset of 20% of the average AUM in overseas securities/ETFs of the previous 3 calendar months would be accessible to the mutual fund for that month to invest in overseas securities/ETFs subject to maximum limits.
New provision
Such limits would henceforth be soft limits to report only by mutual funds monthly in the format prescribed vide SEBI circular.
All other conditions specified in the circular, as mentioned earlier, shall remain unchanged. The circular aim is to protect investors’ interests in securities and promote and regulate the securities market. In respect of investment limits to be published in the scheme documents at the time of new fund offer (NFO) and the investment limits on ongoing schemes, SEBI said such limits would subsequently be soft limits for the purpose of reporting by mutual funds only on monthly basis in a prescribed format.
The mutual funds launching new schemes that intend to invest in overseas securitiesor ETFs must certify that the scheme documents disclose the intended amount they plan to invest in such instruments. The limits disclosed in the scheme documents are valid for six months from the date of closure of new fund offers (NFO).
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