Sebi might soon allow PE players to snap up, set up their own AMCs

 At present, PE firms are not banned from acting as an MF sponsor, however, the prerequisites make it difficult for them to acquire or run a fund house

Private equity (PE) players may soon get more leeway to snap up asset management companies (AMCs) or set up their own. Market regulator Securities and Exchange Board of India (Sebi) is likely to further ease mutual fund (MF) ownership rules, said people in the know. The issue will be taken up at its board meeting scheduled for Tuesday. The board is also likely to ease the framework governing superior voting rights (SR shares), in a bid to give more flexibility to the founders of new-age companies to raise capital before going public. Sebi could also operationalize the framework to allow the setting up of gold spot and social stock exchanges.

At present, PE firms are not banned from acting as MF sponsors. However, the prerequisites make it difficult for them to acquire or run a fund house.

Under current regulations, a sponsor is required to meet the ‘fit and proper criteria’ under which an entity needs to have a soundtrack record and general reputation of fairness and integrity in all its business transactions. To meet the ‘soundtrack record’ criteria, a sponsor is required to have operated a financial services business for a period of not less than five years and have a positive net worth in the preceding five years. A sponsor is also required to hold at least a 40 per cent stake in the AMC.

Industry players say many of the current requirements act as a deterrent for PEs to take up the sponsorship of MFs.

Sources said the regulator intends to ease several of these rules in order to boost innovation and expand the reach of MF products. The move could also intensify competition in the Rs 36-trillion MF industry.