Sebi Allows Mutual Funds for IAs, RAs Deposit Compliance

Speedy summary

• Sebi has permitted investment advisers (IAs) and research analysts (RAs) to use liquid mutual funds and overnight mutual funds toward their mandatory deposit compliance requirements.
• This offers an alternative to scheduled bank deposits, which were the prescribed mode earlier.
• Overnight mutual funds invest in debt instruments with a maturity of one day.
• Deposits, whether in mutual fund units or banks, must be marked as a lien in favor of IAASB or RAASB, the respective supervisory bodies for IAs and RAs.
• The decision was made after industry representations and feedback during public consultations; Sebi’s board approved the proposal in its June 2025 meeting.
• Regulatory amendments were finalized on August 6-7 via notifications from Sebi. Entities must comply with revised norms by September 30.
• BSE has been tasked with implementing necessary systems to operationalize this framework.

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indian Opinion analysis

Sebi’s decision to expand deposit compliance options for investment advisers and research analysts reflects a versatility aimed at addressing industry concerns. By permitting liquid or overnight mutual funds alongside customary bank deposits, this move caters to entities seeking diversified avenues that may offer better liquidity or returns compared to static bank deposits. The addition aligns regulatory practices with modern investment tools without compromising oversight since all such assets are required to be marked as liens under supervisory bodies (IAASB/RAASB).

The implications could potentially bolster market participation within regulated frameworks while signaling Sebi’s openness towards adaptive policy responses based on stakeholder feedback. Mandating implementation by September provides sufficient time for transition while ensuring adherence remains brisk yet orderly-balancing innovation with systemic integrity.