{"id":41592,"date":"2025-10-27T01:35:51","date_gmt":"2025-10-26T20:05:51","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=41592"},"modified":"2025-10-29T11:23:08","modified_gmt":"2025-10-29T05:53:08","slug":"sebis-proposal-on-new-asset-class","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/sebis-proposal-on-new-asset-class\/","title":{"rendered":"SEBI\u2019s Proposal on New Asset Class"},"content":{"rendered":"<h2>What\u2019s in today\u2019s article?<\/h2>\n<ul>\n<li>Why in the News?<\/li>\n<li>About Securities and Exchange Board of India (SEBI)<\/li>\n<li>Why Was SEBI Formed?<\/li>\n<li>Powers of SEBI<\/li>\n<li>News Summary<\/li>\n<li>Conclusion<\/li>\n<\/ul>\n<h2>Why in the News?<\/h2>\n<ul>\n<li>The Securities and Exchange Board of India (SEBI) has proposed a new asset class aimed at bridging the gap between mutual funds and portfolio management services (PMS).<\/li>\n<li>This aims to cater to investors with investible funds ranging from Rs 10 lakh to Rs 50 lakh.<\/li>\n<\/ul>\n<h2>About Securities and Exchange Board of India (SEBI)<\/h2>\n<ul>\n<li>The SEBI is a statutory regulatory body established by the Government of India in 1992. It was given statutory powers through the <strong>SEBI Act, 1992<\/strong>.<\/li>\n<li><strong>Objective<\/strong>: To regulate the securities market in India and protect the interests of investors in securities.<\/li>\n<\/ul>\n<h2>Why Was SEBI Formed?<\/h2>\n<ul>\n<li>SEBI was established to <strong>keep a check on unfair and malpractices and protect the investors from such malpractices<\/strong>.<\/li>\n<li>The organization was created to meet the requirements of the following three groups:\n<ul>\n<li><strong>Issuers<\/strong>: SEBI works toward providing a marketplace to the investors where they can efficiently and fairly raise their funds.<\/li>\n<li><strong>Intermediaries<\/strong>: SEBI works towards providing a professional and competitive market to the intermediaries<\/li>\n<li><strong>Investors<\/strong>: SEBI protects and supplies accurate information to investors.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Powers of SEBI<\/h2>\n<ul>\n<li><strong>Quasi-judicial powers:<\/strong>\n<ul>\n<li>In case of frauds and unethical practices pertaining to the securities market, <strong>SEBI has the power to pass judgments<\/strong>.<\/li>\n<li>The said power facilitates to maintain transparency, accountability and fairness in the securities market.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Quasi-executive powers:<\/strong>\n<ul>\n<li>SEBI has the power to examine the Book of Accounts and other vital documents to identify or gather evidence against violations.<\/li>\n<li>If it finds one violating the regulations, the <strong>regulatory body has the power to impose rules, pass judgements and take legal actions against violators<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Quasi-legislative powers:<\/strong>\n<ul>\n<li>To protect the interest of investors, the <strong>authoritative body has been entrusted with the power to formulate suitable rules and regulations<\/strong>.<\/li>\n<li>Such rules tend to encompass the listing obligations, insider trading regulations and essential disclosure requirements.<\/li>\n<li>The body formulates such rules and regulation to get rid of malpractices that are prevalent in the securities market.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>News Summary<\/h2>\n<ul>\n<li>The Securities and Exchange Board of India (SEBI) has proposed a new asset class designed to bridge the gap between mutual funds and portfolio management services (PMS).<\/li>\n<li>This new asset class targets investors with a higher risk appetite, offering potentially higher returns.<\/li>\n<li><strong>Need for the New Asset Class:<\/strong>\n<ul>\n<li>SEBI identified a gap in the current investment spectrum.<\/li>\n<li>Mutual funds cater to retail investors with varying risk appetites, while PMS and alternative investment funds (AIFs) serve sophisticated, high-net-worth investors.<\/li>\n<li>The new asset class aims to provide an intermediate investment option that combines higher returns with higher risk.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Investment Strategies:<\/strong>\n<ul>\n<li>The proposed asset class will include SEBI-approved strategies such as Long-Short Equity Funds and Inverse ETFs\/Funds:<\/li>\n<li><strong>Long-Short Equity Funds<\/strong>: Involve taking both long and short positions in equity and equity-related instruments.<\/li>\n<li><strong>Inverse ETFs\/Funds<\/strong>: Aim to generate returns that are negatively correlated with the underlying index.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Global Availability:<\/strong>\n<ul>\n<li>Globally, these strategies are already available.<\/li>\n<li>For instance, the US, regulated by the SEC, offers long-short equity funds with hedge fund-like strategies and the liquidity of mutual funds.<\/li>\n<li>Similarly, Australia has various inverse ETF products that allow investors to hedge against market downturns or speculate on market declines.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Investment Threshold:<\/strong>\n<ul>\n<li>The minimum investment requirement for this new asset class is Rs 10 lakh per investor.<\/li>\n<li>This threshold is set to discourage retail investors while attracting those with an investible surplus ranging from Rs 10 lakh to Rs 50 lakh.<\/li>\n<li>Investors can use options like Systematic Investment Plans (SIP), Systematic Withdrawal Plans (SWP), and Systematic Transfer Plans (STP) for investing in this new asset class.<\/li>\n<li>The total invested amount should not drop below Rs 10 lakh due to withdrawals or systematic transactions.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Eligibility for Launch:<\/strong>\n<ul>\n<li>Mutual funds with an average AUM exceeding Rs 10,000 crore over three years or those managed by experienced CIOs and fund managers are eligible to launch this new asset class.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Proposed Relaxations<\/strong>\n<ul>\n<li><strong>Debt Securities<\/strong>: Limited to 10 percent of NAV, extendable to 12 percent with approval, and up to 20 percent with further approval.<\/li>\n<li><strong>Credit Risk-Based Limits<\/strong>: Ranges from 10 percent for AAA-rated securities to 6 percent for A and below, each extendable by 2 to 5 percent with approval.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>Conclusion<\/h2>\n<ul>\n<li>SEBI&#8217;s proposed new asset class seeks to provide a regulated, flexible investment option for investors, addressing the gaps between mutual funds and PMS.<\/li>\n<li>By attracting sophisticated investors and curbing unauthorized investments, this initiative aims to enhance investment options and manage risks effectively.<\/li>\n<\/ul>\n<p>Public comments on the proposal are invited by August 6, 2024.<\/p>\n<hr \/>\n<h3>Q1. What is the difference between Debt and Equity?<\/h3>\n<p>&#8220;Debt&#8221; involves borrowing money to be repaid, plus interest, while &#8220;equity&#8221; involves raising money by selling interests in the company. Essentially you will have to decide whether you want to pay back a loan or give shareholders stock in your company.<\/p>\n<h3>Q2. What is the basic difference between FPI and FDI?<\/h3>\n<p>Foreign Direct Investment (FDI) involves foreign investors directly investing in another nation&#8217;s productive assets. Conversely, Foreign Portfolio Investment (FPI) entails investing in financial assets, like stocks and bonds, of entities situated in a different country.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.business-standard.com\/markets\/news\/sebi-proposal-on-new-asset-class-for-high-risk-takers-promising-experts-124071700427_1.html\" target=\"_blank\" rel=\"nofollow noopener\">&#8216;Sebi proposal on new asset class for high risk takers looks promising&#8217;<\/a> | <a href=\"https:\/\/www.moneycontrol.com\/news\/business\/markets\/explainer-sebi-new-asset-class-mutual-fund-pms-12770894.html\" target=\"_blank\" rel=\"nofollow noopener\">Money Control<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>SEBI is a statutory regulatory body established by the Government of India in 1992.<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-41592","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-upsc-mains-current-affairs","7":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/41592","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=41592"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/41592\/revisions"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=41592"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=41592"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=41592"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}