No premature exit in closed-ended schemes

Investors in closed-ended mutual funds will not be allowed to exit before the scheme matures. This was one of the key decisions taken by Securities and Exchange Board of India (Sebi) in its board meeting.

Investors in closed-ended mutual funds will not be allowed to exit before the scheme matures. This was one of the key decisions taken by Securities and Exchange Board of India (Sebi) in its board meeting, held on Thursday. The capital markets regulator also made it mandatory for fund houses to list all such schemes on stock exchanges.

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“There would be no early exit allowed to investors in closed-ended mutual fund schemes,” said CB Bhave, chairman, Sebi at a press conference after its board meeting. The no-exit rule will apply also to schemes already approved but not yet launched. Mutual funds would also have to ensure that funds of every scheme are invested in assets that mature before the expiry of the scheme.

The restrictions follow large withdrawals from fixed income funds in September as investors feared deterioration in the quality of investments.

Additionally, the regulator also said the process of receiving applications in initial public offers (IPOs) supported by blocked amounts in bank accounts would now be applicable to rights issues too. In this process, the issuer gets access to money only after the allotment is finalised.