The Securities and Exchange Board of India (Sebi) has unveiled a new framework to categorize stock market benchmarks as 'significant indices.' Under this rule, a benchmark will be deemed significant if mutual fund schemes tracking it maintain a daily average cumulative assets under management (AUM) exceeding Rs 20,000 crore for each of the preceding six months, according to a PTI report.
Objective of the New Framework
This move is designed to bolster transparency, governance, and accountability within the index ecosystem. Sebi stated in a circular that a benchmark or index, including an index of indices based on listed securities, will be considered significant if the daily average cumulative AUM tracking it across mutual fund schemes surpasses Rs 20,000 crore for each of the past six months ending on June 30 and December 31 each year.
Review and Classification Criteria
The regulator emphasized that the threshold will be reviewed on a half-yearly basis. Once classified as significant, an index will retain that status unless its tracked AUM falls below the threshold for three consecutive years. This ensures that indices with sustained high tracking assets remain under stricter oversight.
Background and Regulatory Framework
The new framework follows the introduction of the Sebi (Index Providers) Regulations, 2024, which govern entities that administer such indices. Sebi also released an initial list of indices that qualify under these norms. Notable benchmarks include the BSE Sensex, Nifty 50, Nifty 500, and BSE 500, along with various sectoral, debt, and hybrid indices managed by NSE Indices Ltd, BSE Index Services Pvt Ltd, and CRISIL.
Registration Requirements
Under the new rules, index providers offering significant indices must apply for Sebi registration within six months. However, indices already notified or authorized as benchmarks by the Reserve Bank of India under relevant RBI provisions are exempt from this requirement. Existing index providers can continue operations during the transition phase if they file registration applications within the stipulated timeline.
Separate Legal Entity Requirement
Sebi also specified that entities already registered in another category with the regulator but engaged in index-related activities must create a separate legal entity within two years to undertake index provider operations. This aims to ensure clear segregation of responsibilities and enhance regulatory compliance.
Grievance Redressal Mechanisms
The regulator clarified that grievance redressal mechanisms under the new regulations will apply only to significant indices administered by Sebi-registered index providers. This provides a structured process for addressing investor complaints related to index tracking and management.
The framework marks a significant step in strengthening the oversight of index providers and ensuring that benchmarks used by mutual funds are managed with high standards of transparency and accountability.
