SEBI’s Head, Madhabi Puri Buch, has expressed concern about the market’s ongoing risk that could blow up anytime soon, especially in the Nifty SmallCap 250 index.
Buch suggests that mutual funds could create a standard policy to protect investors from the risks associated with market bubbles. Each mutual fund already has trustees looking out for investor interests, and Buch suggests collaborating to develop such a policy.
SEBI is open to either individual funds creating their own policies or the industry as a whole creating a common one.
SEBI New Rule
SEBI will introduce a New Rule a mandatory disclosure format for small and mid-cap mutual funds by March 15. This disclosure informs investors about how long it will take to sell their investments in unfavorable market conditions. This disclosure informs investors about how long it will take to sell their investments in unfavorable market conditions.
Stress testing helps mutual funds prepare for adversity when the market for their investments is not very liquid. The goal of the format is to ensure the safety of investors and avoid a situation where one investor’s decision won’t trigger another’s withdrawals.
SEBI Goal
SEBI wants small- and mid-cap companies to be more public so they can provide detailed risk disclosure to potential investors. This is because small-cap companies do not operate the same way as the central market, and investors should understand what they are putting their money into before entering.
SEBI is expanding the Qualified Stock Broker (QSB) framework to bring more brokers under stricter rules. SEBI made this move to increase investors’ trust in the small-cap market. Parameters such as trading volumes, compliance scores, and grievance redressal will be considered to classify brokers under this framework.
