Service fees for mutual funds revised under amendment regulations, introducing a tiered fee structure and related schedule changes.
The amendment substitutes a new clause in the Second Schedule establishing a tiered service fee structure payable by mutual funds linked to net assets as on 31st March and makes the revised structure effective from the financial year 2003-2004; it renumbers certain clauses in the Eighth Schedule, notes that separate enquiry-and-penalty procedure regulations have been notified and appends a footnote listing prior amendments to the principal Mutual Funds Regulations.

Straight Through Processing adoption requires market participants to implement ISO 15022 messaging and electronic contract notes for automated settlement.
Mandate requires market participants to implement Straight Through Processing by adopting the ISO 15022 messaging standard, electronising contract notes, and establishing connectivity among custodians, exchanges, depositories and intermediaries to enable end-to-end electronic trade processing, reduce manual intervention and operational risk, and support shorter settlement cycles.

Two-way fungibility of ADRs/GDRs requires custodians to submit monthly non-breach certificates and standardized reports.
Custodians must submit a monthly certificate under clause e) confirming non-breach of sectoral caps and a clause q) monthly report in prescribed format, in both hard and soft copy, by the 10th of each month; the report must record company-level ADR/GDR data including issuance, redemptions, reissues, outstanding instruments, inward remittances and unsold shares from conversions.

Turnover fee computation clarified: auditor certification or successive years averaging determines fees; PSU bonds defined, mutual funds excluded.
For years lacking authentic exchange turnover figures, audited total turnover in the prescribed format will be accepted; absent such certificate, the average total turnover of the immediate two succeeding financial years for which the exchange has full data will be used. Members using the averaging method are not eligible for concessional fee rates requiring certified break ups. Exchanges and auditors must use the revised certification formats and certify that turnover under PSU bonds/government securities conforms to the circular's PSU definition; mutual fund units are excluded from concessional treatment.

Risk management system: mutual funds must implement independent risk functions, contingency plans and insurance obligations.
Mutual funds must adopt an enterprise-wide Risk Management System covering fund management, operations, customer service, marketing and other business risks. Key mandatory elements include an independent risk management function, tested disaster recovery and business contingency plans enabling critical "Day 1" operations, and insurance against third party errors and omissions; custodians and R&T agents must have parallel arrangements. Boards of AMCs and trustees must oversee implementation, review progress, report to SEBI, and incorporate the system into internal audit for ongoing verification.

Registration eligibility for related registrars: separate certificates allowed if entities maintain independent boards, controls, personnel and arm's length operations.
Registration for registrars and share transfer agents within the same group may be granted provided each entity has separate legal incorporation, independent boards (no majority common directors), absolute arm's length operations, independent key personnel and infrastructure, and independent regulatory controls and supervisory mechanisms. Suspension or cancellation of one entity's registration can lead to action against other group entities. "Same group" is defined by common control (alone or with relatives), being under the same management, or where one entity controls another, with control as defined in the Regulations.

Two-way fungibility of ADRs/GDRs suspended for Overseas Corporate Bodies pending government review and restricted to other foreign investors.
Two-way fungibility of depository receipts is temporarily restricted so that Overseas Corporate Bodies (OCBs) cannot participate pending a full review; the scheme may operate only for foreign investors other than OCBs, and stock exchanges, depositories and custodians are to notify their constituents of this interim eligibility restriction.

Two way fungibility restricted: OCB participation suspended pending government review, scheme continues for other foreign investors.
Two way fungibility of ADRs/GDRs is temporarily restricted for Overseas Corporate Bodies (OCBs); the Reserve Bank of India and the Government have decided to keep OCB participation on hold pending a full review, while the scheme remains operable for foreign investors other than OCBs, and market intermediaries are asked to inform their members of this restriction.

Registration of affiliated underwriters permitted if independent governance and operations, but enforcement may extend to related entities.
Registration may be granted to two entities in the same group only if each is a separate legal entity with independent Boards (no majority common directors), arm's-length operations, independent key personnel and infrastructure, and independent regulatory controls; however, suspension or cancellation of one entity's registration may entail regulatory action against other registered group entities, and entities are in the same group where the same person (alone or with relatives) exercises control, they are under the same management as defined by company law, or one directly or indirectly controls the other.

Portfolio disclosure requirements impose additional footnote and industry classification obligations for mutual fund half yearly portfolios.
Mutual funds must include, in their statutory half yearly portfolio disclosures, a footnote stating the portfolio turnover ratio for equity oriented schemes and the average maturity period for debt oriented schemes, and must display the industry name alongside each security using the AMFI recommended industry classification; these measures supplement the format required by Regulation 59A and are issued under Regulation 77.

Electronic filing requirement extended to additional listed companies for mandated EDIFAR uploads and compliance.
SEBI requires an expanded set of 500 listed companies, selected by market capitalization and turnover, to upload the specified statements and information identified in SEBI circular SMD/Policy/Cir-13/2002 to the EDIFAR web portal from the quarter ending September 2002; all prior EDIFAR filing provisions and procedures continue to apply.

Portfolio manager registrations allowed for distinct group entities if legal, board, operational, and supervisory independence exist.
SEBI will grant separate portfolio manager registrations to distinct entities in the same group if they are separate legal entities with independent Boards (no majority common directors), maintain arms length operations, have independent key personnel and infrastructure, and possess independent regulatory controls and supervisory mechanisms; however, suspension or cancellation of one group entity's registration may invite action under Regulation 35 against other registered group entities. "Same group" encompasses common control by a person (alone or with relatives), being under the same management as per the Companies Act, 1956, or direct/indirect control of one entity over another, with "control" as defined in the SEBI takeover regulation.

Registration independence for group entities: separate merchant banker certificates allowed if independence criteria are satisfied.
Circular permits separate merchant banker registration for group entities where each is a separate legal person, has independent Boards (no majority common directors), operates at arm's length, maintains distinct key personnel and infrastructure, and retains independent regulatory controls; it also provides that suspension or cancellation of one entity's registration may invite regulatory action against other registered group entities. 'Group' is defined by common control (alone or with relatives), same management per the Companies Act, or direct/indirect control, with 'control' as defined in the Takeovers Regulations.

Close-out pricing rule sets an average traded price reference and allows exchanges to set bank guarantee tenure.
Exchanges are authorized to determine the tenure of bank guarantees deposited by members for Base Minimum Capital and Additional Capital. For indefinitely suspended or delisted scrips, the close-out valuation uses the average traded price over a prior period as the reference price and applies a fixed close-out mark up to that reference for settlement.

Committee formation for monitoring compliance: exchanges must create subcommittee to review and approve SEBI inspection compliance reports periodically.
A subcommittee of each exchange's governing board must be formed, composed of the Executive Director/Managing Director, two public representatives, one SEBI nominee and one broker representative, to review and approve actions taken on SEBI inspection reports; the subcommittee must meet regularly and its reports must be presented to the exchange board prior to sending compliance reports to SEBI.

Independent director independence: professional service providers and material pecuniary ties treated as associates, requiring reclassification and disclosure.
Persons providing professional services to, or having material pecuniary relationships with, a mutual fund, AMC, trustee company or sponsor shall be treated as associate directors and not independent. Trustees must assess materiality of pecuniary ties. Existing directors must be classified as independent or associate and SEBI informed if board composition fails to meet independent-director requirements, with proposed remedial steps. The director bio-data format must add queries on professional services and pecuniary relationships, include an independent-director declaration on absence of material pecuniary ties, and the cooling-off provision applies.

Time-bound arbitration: arbitral awards must be made within three months, with limited extensions and exceptional adjournments.
Stock exchanges must adopt a byelaw requiring arbitral tribunals to make awards within three months from the date they enter upon the reference, deemed the date of the first hearing. The three month period may be extended up to three times by the Managing Director or relevant authority, or on application by a party or the tribunal. Any further adjournments are permissible only in exceptional, bonafide circumstances with reasons recorded in writing. Exchanges are instructed to implement this requirement immediately.

New Scheme Report format updated: submit revised report including modified Clause V; quarterly movement reports discontinued.
SEBI withdraws the requirement to submit quarterly statements of movement in net assets and mandates submission of the revised New Scheme Report format, incorporating a modified Clause V. The revised template requires scheme identification, subscription and allotment particulars (including initial issue expenses and listing information), refund dispatch date if applicable, and a detailed unit holding pattern with category-wise holdings and largest unitholders' details.

Direct uploading of FII data by custodians requires registration, fee and scheduled electronic daily uploads.
Custodians must register and pay a one time fee of Rs. 25,000 to obtain electronic filing access; the registration records custodian and data loading officer details and requires a confidentiality declaration for credentials. Daily FII investment data are to be uploaded from custodian sites on working days between 10:00 A.M. and 4:00 P.M., with uploads permitted on SEBI holidays if the market/custodian is open. Technical instructions mandate Citrix access to SEBI's extranet, use of two files named in DTR/DTS date formats on removable media, entry of the reporting date, and procedures to view, correct and reload error records.

Confidentiality of client information: exchanges must enforce non disclosure by employees and members, with penalties for breaches.
Exchanges must reinforce employee and member obligations to maintain confidentiality of client information and prevent leakage of trade data, using ticker messages and circulars; confidentiality is required by the client broker agreement and clause (3) of Para B of Schedule II (Code of Conduct) of the stock broker regulations, and breaches may attract regulatory penalties.