Description

New comprehensive regulations governing mutual funds in India, replacing previous framework, effective from April 1, 2026.

Summary

SEBI has notified the Securities and Exchange Board of India (Mutual Funds) Regulations, 2026, exercising powers under Section 30 read with clause (g) of sub-section (2) of Section 11 of the SEBI Act, 1992. These new regulations will come into force from April 1, 2026, and will govern the mutual fund industry in India.

Key Points

  • New regulations titled “Securities and Exchange Board of India (Mutual Funds) Regulations, 2026”
  • Published in the Official Gazette on January 14, 2026
  • Effective date: April 1, 2026
  • Issued under notification number SEBI/LAD-NRO/GN/2026/294
  • Comprehensive framework covering definitions, governance, and operational requirements
  • Introduces updated definitions for key terms including accredited investors, associates, asset management companies, broad-based funds, brokers, and closed-ended schemes

Regulatory Changes

Chapter I - Preliminary Provisions:

  1. Short Title and Commencement - Regulations to be called SEBI (Mutual Funds) Regulations, 2026, effective April 1, 2026

  2. Definitions - Updated and comprehensive definitions including:

    • Accredited Investor: As defined in SEBI (Alternative Investment Funds) Regulations, 2012
    • Advertisement: Includes any information issued by or on behalf of mutual fund or AMC that influences investor decisions
    • Associate: Detailed definition covering persons having direct/indirect control over AMC, trustee, or sponsor; includes companies with common directors/officers; special provisions for pooled investment vehicles and private equity funds acting as sponsors
    • Asset Management Company (AMC): Company incorporated under Companies Act 1956 or 2013, approved by SEBI under Regulation 18
    • Broad-Based Fund: Fund with minimum 20 investors, with no single investor holding more than 25% of corpus
    • Broker: Stock broker as defined in SEBI (Stock Brokers) Regulations, 2026
    • Closed-Ended Scheme: Mutual fund scheme with limited maturity period

  3. Associate Definition Exclusions: Special carve-out for sponsored entities investing on behalf of insurance policy beneficiaries or other schemes specified by SEBI

Compliance Requirements

For Asset Management Companies:

  • Must obtain SEBI approval under Regulation 18
  • Must be incorporated under Companies Act 1956 or Companies Act 2013
  • Subject to associate relationship disclosures and restrictions

For Mutual Funds:

  • Compliance with new definitional framework for scheme categorization
  • Advertisement and disclosure requirements as per new definitions
  • Associate transaction reporting and conflict of interest management

For Sponsors and Trustees:

  • Enhanced definition of associate relationships requiring appropriate governance and conflict management
  • Compliance with control and influence disclosure requirements

Important Dates

  • Publication Date: January 14, 2026 (Pausha 24, 1947 in Indian calendar)
  • Effective Date: April 1, 2026
  • Transition Period: Entities have approximately 2.5 months to prepare for compliance

Impact Assessment

Industry-Wide Impact:

  • Complete regulatory overhaul of mutual fund framework
  • All existing mutual funds, AMCs, trustees, and sponsors must align operations with new regulations
  • Updated definitions may require restructuring of existing arrangements and relationships

Operational Impact:

  • AMCs need to review and update associate relationship disclosures
  • Advertisement and marketing materials require review for compliance with new definition
  • Broad-based fund criteria may affect existing fund structures
  • Enhanced governance requirements for pooled investment vehicles acting as sponsors

Market Impact:

  • Provides updated regulatory clarity for mutual fund operations
  • Strengthens investor protection framework
  • Aligns mutual fund regulations with contemporary market practices
  • May impact existing control structures and associate relationships requiring disclosure or restructuring

Compliance Burden:

  • Significant compliance effort required before April 1, 2026 deadline
  • Documentation, operational processes, and reporting systems need updates
  • Training and awareness programs required for industry participants

Impact Justification

Comprehensive new regulatory framework for entire mutual fund industry, replacing existing regulations and introducing updated definitions, governance requirements, and compliance standards effective April 1, 2026.