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India’s securities markets are regulated by the Securities and Exchange Board of India (SEBI), which protects investors’ interests through detailed guidelines. For this purpose, SEBI has issued the “SEBI (Mutual Funds) Regulations, 1996” (last amended on March 04, 2025).
This document sets rules that asset management companies must follow when launching and managing mutual fund schemes. These regulations cover several critical areas, such as:
By understanding these provisions, you, as an investor, can know how mutual funds operate and the various rules that offer you protection. Interested? In this article, let’s check out some important SEBI rules and regulations you must know.
Table of Content
SEBI Regulations - Allotment of Units and Refund of Money
As per Rule 35 of mutual fund regulations by SEBI contained in SEBI (Mutual Funds) Regulations, 1996, the offer document must state the following:
| A) Minimum subscription | B) Oversubscription |
| The minimum amount the scheme aims to collect. | If the scheme gets oversubscribed, how much extra amount will it retain. |
Now, if oversubscription is kept, all applicants applying for up to 5,000 units must get full allotment (subject to the stated oversubscription limit).
When Refunds are Required
Money must be refunded if:
or
In these cases, refunds must be made within 5 working days from the closing date of the subscription period (following SEBI’s prescribed method).
Penalty for Delay
If the refund is not made within 5 working days, the AMC must pay 15% annual interest to investors, starting from the expiry of five working days from the date of closure of the subscription list.
SEBI Regulations – Capital Protection Oriented Schemes
As per Rule 38A of SEBI (Mutual Funds) Regulations, 1996, a capital protection-oriented scheme can be launched only if:
SEBI Regulations – Winding Up of a Mutual Fund Scheme
As per Rule 39 of SEBI rules and regulations, a “close-ended scheme” must end (be wound up) when its fixed duration expires and all units are redeemed. The only exception is if it is rolled over (extended) as allowed under Regulation 33(4).
In another case, “any scheme” can be wound up if:
If a scheme is to be wound up under these conditions, trustees must give notice within one day, explaining the reasons. This notice must also be sent to SEBI and be published in two widely circulated national newspapers (one in English, one in a local language where the fund is registered).
Under Chapter V of the SEBI (Mutual Funds) Regulations, 1996, SEBI has set out detailed rules governing the schemes of mutual funds. The provisions cover:
These regulations were last amended on February 7, 2023. For your reference, below are the latest rules you can consider:
1. Procedure to Launch a Mutual Fund Scheme
2. Disclosures in the Offer Document
3. Nomination Rules
4. Advertisement Rules
5. Listing of Mutual Fund Units
6. Offering Period Limit
Conclusion
SEBI is India’s financial markets watchdog and regulates mutual funds to protect investor interests. The SEBI (Mutual Funds) Regulations, 1996 (last amended as of March 04, 2025), is one such key document that contains various rules, such as:
As an investor, knowing these rules allows you to understand how AMCs operate and how SEBI safeguards your mutual fund investments.
Disclaimers:
*Mutual Fund Investments are subject to market risks, please read all scheme related documents carefully.
