4th January 2005: The market regulator, Securities and Exchange Board of India (Sebi), has taken a firm stand on the single-investor norm. It has now specified that the rule, also called the “20-25 norm”, will not only be implemented at the scheme (portfolio) level but also at the plan level. However, as a relief to mutual fund (MF) players, Sebi has extended the deadline of its implementation to January 31. This effectively means that each MF scheme and plan that does not have a minimum of 20 investors or has a single investor holding more than 25% of its assets will either have to close down or merge with other schemes. The latest data furnished by the MF industry to Sebi shows there are 130 schemes and plans with Rs 15,048 crore assets under management (AUM).

A Sebi official said, “We have considered the case thoroughly and have come to the conclusion that the 20-25 norm will only be effective if it is implemented not only at the scheme level but also at the plan level. There is no scope of reconsideration on this issue as Sebi had issued the circular in this regard as early as December 12, 2003.” He said, the idea is to broadbase the industry and increases the retail reach. This will only happen if the 20-25 norm is implemented across the schemes and plans of each mutual fund. In fact, fund houses should make an effort of having a minimum number of 40 investors in each scheme and plan to go truly retail, he said.

The Association of Mutual Funds in India (Amfi) members had made several representations to Sebi and requested the regulator to implement the aforesaid norms only at the scheme level. Sebi had issued a letter to MF players in the previous week asking them to give details of the unit holders of the schemes and plans and their share of assets in percentage terms. Sebi had said that it would take the final decision with regard to implementation, if convinced that the retail investors of MFs would not be affected adversely. Meanwhile, most of the fund houses, especially the top league players like HDFC MF, Prudential ICICI AMC, Franklin (Templeton) India Pvt Ltd, have closed down certain plans in the last week of December, since those did not comply with the Sebi norms.