25 December, 2019
Syllabus subtopic: Statutory, regulatory and various quasi-judicial bodies
Prelims and Mains focus: about the stewardship code and its significance; about mutual funds, AIFs, SEBI and its functions
News: The Securities and Exchange Board of India (Sebi) on Tuesday announced Stewardship Code for all mutual funds (MFs) and all categories of alternative investment funds (AIFs).
About the Stewardship Code
Sebi said every institutional investor should formulate a policy on how it intends to fulfill the aforesaid stewardship responsibilities and disclose it publicly and have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it.
Securities and Exchange Board of India (SEBI) was established in 1988, however, it got statutory mandate and powers under the SEBI Act, 1992. Its objective is to protect the interests of investors in securities and to promote the development and regulation of securities market.
Merger of FMC with SEBI
In 2015, the Forward Market Commission was merged with SEBI. With this, the regulation of commodity derivatives market has shifted to SEBI under Securities Contracts Regulation Act (SCRA) 1956. The Forward Contracts Regulation Act (FCRA), 1952 got repealed and FMA ceased to exist. With this merger, all three national and six regional commodity exchanges have come under the ambit of national capital market regulator SEBI. This merger has created SEBI has a unified regulator for commodities and capital markets in India.
Alternative Investment Funds (AIFs)
As per SEBI (AIF) Regulations, 2012, AIFs shall seek registration in one of the three categories:
Category I: Mainly invests in start- ups, SME’s or any other sector which Govt. considers economically and socially viable.
Category II: These include Alternative Investment Funds such as private equity funds or debt funds for which no specific incentives or concessions are given by the government or any other Regulator
Category III : Alternative Investment Funds such as hedge funds or funds which trade with a view to make short term returns or such other funds which are open ended and for which no specific incentives or concessions are given by the government or any other Regulator.
About Mutual Funds
A mutual fund collects money from investors and invests the money on their behalf. It charges a small fee for managing the money. Mutual funds are an ideal investment vehicle for regular investors who do not know much about investing. Investors can choose a mutual fund scheme based on their financial goal and start investing to achieve the goal.
Source: Indian Express
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