In a significant move aimed at disciplining investor behaviour, the Securities and Exchange Board of India (Sebi) on Thursday decided that no early exit will be allowed in any close-ended schemes and asked fund houses to list them on stock exchanges.

“The schemes which have been approved earlier but not yet launched will also have to be amended accordingly,” Sebi chairman C B Bhave after its board meeting. The guidelines come in the wake of huge redemptions in fixed maturity plans (FMPs) of mutual fund houses in October. Though FMPs by the virtue of their structure are closed-ended as investors are expected to stay in the scheme till maturity what had been happening earlier was that large investors (mainly corporates) exited them when in need of cash. Fund houses had been pitching for a higher exit load instead of a complete closure of exit options.

The regulator said that close-ended schemes needed to be listed on the bourses. It also mandated that for such schemes the underlying assets would not have a maturity beyond the date on which the scheme expires. “The October incident has thrown up a lot of issues and this is just one of those. We are also looking into the underlying assets of liquid funds,” said Bhave.

“The new steps will augur well for the mutual fund industry which underwent massive turbulence in the form of huge redemptions in the month of October,” said a mutual fund source. The MF industry witnessed a fall of Rs 97,000 crore in assets in October.

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