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 source said on Friday.

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," he added.

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 such as mutual funds, insurance companies, and pension funds.