SEBI Circular on - Timelines for rebalancing of portfolios of mutual fund schemes in cases of all passive breaches

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Date of Issue: 26-6-2025             

Issuer: SEBI

Timelines for rebalancing of portfolios of mutual fund schemes in cases of all passive breaches

Highlights of SEBI Circular dated June-26-2025

1. Background:

• SEBI, under Paragraph 2.9 of the Master Circular for Mutual Funds, outlines timelines for portfolio rebalancing in case of passive breaches — deviations from the mandated asset allocation not caused by the AMC’s (Asset Management Company’s) direct actions.

2. Existing Regulations:

• The SEBI (Mutual Funds) Regulations, 1996 and related circulars define various prudential limits (e.g., issuer, group, and sector limits).
• Active breaches (due to AMC’s actions) are regulatory violations.
• However, passive breaches may occur due to factors like corporate actions, price volatility, maturity of securities, or large redemptions — and are not considered AMC’s fault.

3. Clarification:

• SEBI clarifies that the timelines and procedures under Paragraph 2.9 of the Master Circular will apply to all types of passive breaches, not just those related to asset allocation.
• This applies to actively managed mutual fund schemes.

4. Legal Authority:

• The circular is issued under Section 11(1) of the SEBI Act, 1992 and Regulation 77 of the MF Regulations, to protect investor interests and ensure orderly development of the securities market.

In case of any clarification or assistance required in the implementation of this circular, you may contact       

Kaushik Jethwa - kau...@secmark.in / 9870210171

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