SIFs are a new category that lets mutual funds launch advanced strategies through open-ended, close-ended or interval schemes. To participate, each investor must keep at least ₹10 lakh invested at all times.
According to SEBI’s latest circular, if an investor’s total holding in a SIF slips below ₹10 lakh — due to redemptions, sales, transfers on stock exchanges, or off-market deals — it will count as an ‘active breach.’
When this happens, SEBI has directed Asset Management Companies (AMCs) to immediately freeze all units held by that investor across all investment strategies under the concerned SIF.
This freeze means the investor cannot make further withdrawals or transfers.
Investors will then get a 30-day notice to top up their investments and restore the value above the ₹10 lakh mark. If they do so within this window, the freeze lifts and no further action is needed.
However, if the investor fails to rebalance within 30 days, the AMC will automatically redeem the frozen units at the applicable Net Asset Value (NAV) on the next business day after the notice period ends.
SEBI has asked AMCs, registrars, depositories, stock exchanges, and clearing corporations to put systems in place immediately to monitor these thresholds daily.
The regulator has introduced the SIF framework to deepen India’s mutual fund space with more flexible strategies for sophisticated investors. By setting and enforcing a clear minimum, SEBI aims to protect the structure of these funds and ensure only serious investors participate.
The new rules take effect immediately.
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