Capital markets regulator Securities and Exchange Board of India (SEBI) has directed mutual funds to desist from investing in companies at the pre-IPO stage as it poses a major risk for retail investors, sources said.

The directive comes following clarifications sought by several mutual funds and the Association of Mutual Funds of India (AMFI). With the current direction, mutual funds can now invest either directly in IPOs or through the qualified institutional buyer and anchor investors portion.

Pre-IPO placement are usually made a few months before the opening of anchor investment and the public issue.

Listing Compliance

In a letter to the industry body AMFI, SEBI stated that Clause 11 of the Seventh Schedule of the SEBI (Mutual Funds) Regulations, 1996, mandates that all investments

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