Regulation of Exchange Traded Gold Backed Mutual funds
Sebi's says that any kind instrument traded on the exchanges automatically falls in its jurisdiction irrespective of whether it is defined as a security under the Securities Contract Regulation Act.
Sebi argues that since the product is in the mutual fund sector, by definition it should be under it’s purview.
FMC says that since the underlying asset for such instrument is a commodity (gold), the regulation of the product lies with the commission. Although, gold is not a security under the Securities Contract Regulation Act.
The most important issue yet to be annouced is which depository which will store the gold in the physical form.