SEBI prohibits mutual funds from participating in pre-IPO placements; to allow investment in anchor rounds

The markets regulator SEBI has prohibited mutual funds from investing in pre-IPO (initial public offering) share placements but has allowed them to invest in anchor rounds, a PTI report stated, citing a source, on Friday, November 21.

This step is aimed at boosting liquidity and enhancing transparency in the valuation of companies coming out with their initial share sale.

"We have asked mutual fund schemes not to invest in pre-IPO placement of shares but invest in anchor rounds," PTI quoted the source as saying.

Earlier this month, SEBI amended rules to revamp the share-allocation framework for anchor investors in maiden public offerings, a move aimed at broadening participation by domestic institutional investors, including mutual funds, insurance companies, and pension funds.

Under this, the regulator increased total reservation in the anchor portion to 40% from 33% earlier. This comprises 33% for mutual funds and the remaining 7% for insurers and pension funds.

If the 7% reserved for insurers and pension funds remains unsubscribed, it will be reallocated to mutual funds.

Additionally, the source said that SEBI would soon replace the mandatory abridged prospectus in IPOs with a standardized "offer document summary" to make disclosures more investor-friendly.

The regulator believes that even the abridged prospectuses for IPOs are too voluminous, which deters retail investors from reviewing them.

With regard to derivative trading, the source said that "irrational exuberance" among a class of people, or retail investors, is causing them to lose money.

SEBI Chairman provides clarification on digital gold

Meanwhile, SEBI chairman Tuhin Kanta Pandey on Friday clarified that the markets regulator is not looking to regulate 'digital gold' or 'e-gold' products as these do not fall under its purview.

Speaking on the sidelines of the National Conclave on REITs and InvITs-2025, Pandey said that regulated gold-related investments can be made through exchange-traded funds (ETFs) offered by mutual funds or through other tradable gold securities.

The clarification came days after the digital gold industry urged the Securities and Exchange Board of India (SEBI) to bring digital gold platforms under formal regulation.

Earlier this month, SEBI had warned investors against investing in digital or e-gold products, saying such instruments fall outside its regulatory framework and involve significant risks.

The cautionary statement came after SEBI observed that some online platforms have been promoting ‘digital gold’ or ‘e-gold’ products as an easy alternative to investing in physical gold.