Executive Summary:
This SEBI circular, effective July 29, 2025, outlines the mechanism for monitoring compliance with the minimum investment threshold for Specialized Investment Funds (SIFs). It addresses industry feedback regarding the monitoring process, specifying actions to be taken in case of breaches. AMCs, RTAs, and Depositories must implement necessary systems for compliance.
Key Points / Main Content:
Minimum Investment Threshold Monitoring:
* Asset Management Companies (AMCs) must monitor compliance with the Minimum Investment Threshold daily, ensuring no active breaches occur.
* An investor's total investment value must not fall below the Minimum Investment Threshold due to redemptions initiated by the investor.
Breach of Minimum Investment Threshold:
* If an investor's investment falls below INR 10 lakh due to their transactions (redemption, transfer, sale, etc.), it is considered an Active Breach.
* In case of an Active Breach:
* All units of the investor across all investment strategies of the SIF will be frozen for debit.
* The investor will receive a 30-calendar-day notice to rebalance investments to comply with the Minimum Investment Threshold.
* Following the notice:
* If the investor rebalances within 30 days, the units will be unfrozen.
* If the investor fails to rebalance within 30 days, the frozen units will be automatically redeemed by the AMC at the next business day's NAV.
Implementation:
* AMCs, RTAs, and Depositories are required to implement the provisions of this circular.
Impact Analysis:
Asset Management Companies (AMCs):
* Impact: AMCs are responsible for monitoring compliance, freezing/unfreezing units, issuing notices, and redeeming units in case of breaches.
* Action Required: Implement systems for daily monitoring of Minimum Investment Threshold, establish procedures for freezing and redeeming units, and develop a notification process for investors.
Registrar and Share Transfer Agents (RTAs):
* Impact: RTAs need to support AMCs in identifying and tracking investor holdings and facilitate the freezing/unfreezing of units.
* Action Required: Modify systems to enable the identification of breaches and support the freezing/unfreezing of units as directed by AMCs.
Depositories:
* Impact: Depositories play a role in ensuring units are appropriately frozen and redeemed as per AMC instructions.
* Action Required: Implement necessary system modifications to support the freezing/unfreezing of units as directed by AMCs.
Investors in Specialized Investment Funds (SIFs):
* Impact: Investors are subject to having their units frozen and potentially redeemed if their investment falls below the minimum threshold.
* Action Required: Investors should monitor their investment values and be prepared to rebalance their portfolios if they receive a notice of breach.
Key Entities Referenced
Securities and Exchange Board of India: Regulatory body for the securities market in India; issuer of the circular.
Mutual Funds: Addressees of the circular, regulated entities.
Asset Management Companies: Addressees of the circular, regulated entities.
Registrar and Share Transfer Agents: Addressees of the circular, regulated entities.
Specialized Investment Funds: Investment funds subject to the monitoring requirements outlined in the circular.
Minimum Investment Threshold: The minimum investment amount required for investors in Specialized Investment Funds, breach of which triggers actions described in the circular.
Association of Mutual Funds in India: Industry body related to mutual funds
Securities and Exchange Board of India Act, 1992: Law under which the circular is issued
CIRCULAR
SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/107 July 29, 2025
To,
All Mutual Funds
All Asset Management Companies (AMCs)
All Registrar and Share Transfer Agents (RTAs)
All Trustee Companies/ Board of Trustees of Mutual Funds
All Recognized Stock Exchanges
All Recognized Clearing Corporations
All Depositories
Association of Mutual Funds in India (AMFI)
Madam/ Sir,
Subject: Monitoring of Minimum Investment Threshold under Specialized
Investment Funds (SIF)
1. SEBI vide circular dated February 27, 2025 (‘SIF Circular’), and circulars dated April
09, 2025 and April 11, 2025 specified regulatory framework for Specialized Investment
Funds (‘SIFs’).
2. Para 4.1.4.1 of Annexure A of the SIF Circular specifies the following:
“The Asset Management Company shall monitor compliance with the Minimum
Investment Threshold on a daily basis and ensure that there are no active breaches.
The AMC shall ensure that the investor’s total investment value does not fall below the
Minimum Investment Threshold due to redemption transactions initiated by the
investor.”
3. Based on the feedback received from the industry participants, the mechanism for
monitoring compliance with Minimum Investment Threshold shall be as under -
Page 1 of 33.1. In case of any active breach of the Minimum Investment Threshold by an investor,
including through transactions on stock exchanges or off-market transfers:
3.1.1. all units of such investor held across investment strategies of the concerned
SIF shall be frozen for debit, and
3.1.2. a notice of 30 calendar days shall be given to such investor to rebalance the
investments in order to comply with the Minimum Investment Threshold.
3.2. Pursuant to the notice under para 3.1.2 to the investor:
3.2.1. in case investor rebalances his/her investments in SIF within the notice
period of 30 calendar days, the units of SIF of such investor shall be
unfreezed, and no further action shall be taken with regard to compliance
with Minimum Investment Threshold.
3.2.2. in case the investor fails to rebalance the investments within the aforesaid
30 calendar day period, the frozen units shall be automatically redeemed by
the AMC, at the applicable Net Asset Value of the next immediate business
day after the 30th calendar day of the notice period.
3.3. For the purpose of SIF, the ‘Active Breach’ shall mean fall in the aggregate value
of an investor’s total investment across all investment strategies of SIF, below the
Minimum Investment Threshold of INR 10 lakh, on account of any transactions
(i.e. redemption, transfer, sale etc.) initiated by the investor.
4. The AMCs, RTAs and Depositories shall take necessary steps and put in place
necessary systems for the implementation of this circular.
5. The provisions of this circular shall come into force with effect from the date of this
circular.
6. This circular is issued in exercise of the powers conferred by Section 11(1) of the
Securities and Exchange Board of India Act, 1992 read with Chapter VI-C of the SEBI
Page 2 of 3(Mutual Funds) Regulations 1996 to protect the interest of investors in securities and
to promote the development of, and to regulate the securities market.
7. This circular is available at www.sebi.gov.in under the link “Legal ->Circulars”.
Yours faithfully,
Peter Mardi
Deputy General Manager
Investment Management Department
+91-22-26449233
peterm@sebi.gov.in
Page 3 of 3