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Master Circular for Mutual Funds
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....een the master circular and the applicable circulars, the contents of the relevant circular shall prevail. 3. Master Circular is a compilation of all the existing/applicable circulars issued by Investment Management Department of SEBI to Mutual Funds. Efforts have been made to incorporate certain applicable provisions of existing circulars (as on date ) issued by other Departments/Divisions of SEBI relevant to Mutual Funds. INDEX ABBREVIATIONS ....................................... 5 CHAPTER 1 .......................................... 7 OFFER DOCUMENT FOR SCHEMES ......................... 7 CHAPTER 2 ......................................... 22 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN................................. 22 CHAPTER 3 ......................................... 33 NEW PRODUCTS ...................................... 33 CHAPTER 4 ......................................... 42 RISK MANAGEMENT SYSTEM ............................ 42 CHAPTER 5 ......................................... 47 DISCLOSURES & REPORTING NORMS ...................... 47 CHAPTER 6 ......................................... 64 GOVERNANCE NORMS .........................
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....Your Client KYC Monthly Cumulative Report MCR Monthly Average Assets Under Management MAAUM Multilateral Memorandum of Understanding MMOU National Stock Exchange NSE Net Asset Value NAV New Fund Offer NFO Non Performing Assets NPA(s) Permanent Account Number PAN Prevention of Money Laundering Act PMLA Qualified Foreign Investor QFI Regulation Reg. Rajiv Gandhi Equity Savings Scheme RGESS SEBI (Mutual Funds) Regulations 1996 Regulations Securities and Exchange Board of India the Board Scheme Information Document SID Offer Statement of Additional Information SAI Document Systematic Investment Plan SIP Systematic Transfer Plan STP Systematic Withdrawal Plan SWP Trustee(s) Board of Trustee(s)/ Trustee Company Uniform Client Code UCC Unit Confirmation Receipt UCR CHAPTER 1 OFFER DOCUMENT FOR SCHEMES 1.1 Filing of Offer Document with the Board SEBI Circular No. SEBI/IMD/CIR No.5/ 126096/08 dated May 23,2008 and SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009 1.1.1 The Offer Document shall have two parts i.e. Scheme Information Document (SID) and Statement of Additional Information (SAI). SID s....
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....PDF format alongwith printed copy of the same SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009, upload the SAI on its website and on AMFI website. 1.1.3.3 Filing of Final SID a. Final SID (after incorporating comments of the Board) must reach the Board before it is issued for circulation. Soft copy of the final SID in PDF format along with a printed copy should be filed with Board seven SEBI Circular No - SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016 working days prior to the launch of the scheme. AMC shall also submit an undertaking to the Board while filing the soft copy that information contained in the soft copy of SID to be uploaded on SEBI website is current and relevant and matches exactly with the contents of the hard copy and that the AMC is fully responsible for the contents of the soft copy of SID. The soft copy of SID should also be uploaded on AMFI website two working days prior to launch of the scheme SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009. Failure to submit the printed SID to the Board before it is issued for circulation shall invite penalties under the Mutual Funds Regulations SEBI Circular No. IIMARP....
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....und is situated. 1.2.1.3 A copy of all changes made to the scheme shall be filed with Board within 7 days of the change. A soft copy of updated SID shall be filed with Board in PDF Format along with printed copy of the same. AMC shall also submit an undertaking to the Board while filing the soft copy that information contained in the soft copy of SID to be uploaded on SEBI website is current and relevant and matches exactly with the contents of the hard copy and that the AMC is fully responsible for the contents of the soft copy of the SID SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009. 1.2.2 Updation of SAI 1.2.2.1 A printed copy of SAI shall be made available to the investor(s) on request. SAI shall be updated within 3 months from end of financial year and filed with SEBI. 1.2.2.2 Any material changes in the SAI shall be made on an ongoing basis by way of updation on the Mutual Fund and AMFI website. SEBI shall be intimated of the changes made in the SAI within 7 days. The effective date for such changes shall be mentioned in the updated SAI. 1.2.2.3 A soft copy of updated SAI shall be filed with SEBI in PDF format along with printed copy of the ....
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....rms of Regulation 29 (4). KIM shall be printed at least in 7 point font size with proper spacing for easy readability. 1.6.2 Format of KIM 1.6.2.1 Mutual Funds shall prepare KIM in the prescribed formatFor format of KIM please refer to the section on Formats. The contents of KIM shall follow the same sequence as prescribed in the format. 1.6.3 Frequency of updation 1.6.3.1 KIM shall be updated at least once a year and shall be filed with SEBI. 1.6.3.2 In case of changes in the SID other than changes in fundamental attribute in terms of Reg 18 (15A), the addendum circulated to all the distributors/brokers/investor Service Centre (ISC) shall be attached to KIM till the KIM is updated. 1.6.3.3 In case any information in SID is amended more than once, the latest applicable addendum shall be a part of KIM (For example, in case of changes in load structure the addendum carrying the latest applicable load structure shall be attached to all KIM and SID already in stock till it is updated). 1.7 Easy Availability of Offer Document 1.7.1 Trustees and AMCs shall ensure that the SID of the schemes and SAI are readily available with all the distributors/ISCs and confirm the same to S....
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.... or after July 01, 2010 1.9.1 In case of open ended and close ended schemes (except ELSS schemes), the NFO should be open for 15 days. 1.9.2 The NFO period in case of ELSS schemes shall continue to be governed by guidelines issued by Government of India. 1.9.3 The maximum period for which initial offering of Mutual Fund scheme eligible under RGESS shall be open for subscription shall be thirty days SEBI Circular No. CIR/IMD/DF/02/2013 dated February 6, 2013. 1.9.4 Mutual Funds/AMCs are allowed to deploy the NFO proceeds in CBLO SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016. will be applicable for NFOs launched on or after April 1, 2016 before the closure of NFO period. However, AMCs shall not charge any investment management and advisory fees on funds deployed in CBLOs during the NFO period. The appreciation received from investment in CBLO shall be passed on to investors. Further, in case the minimum subscription amount is not garnered by the scheme during the NFO period, the interest earned upon investment of NFO proceeds in CBLO shall be returned to investors, in proportion of their investments, along-with the refund of the subscription amount. 1.9.5 ....
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....folio of a scheme due to a poor investment decision, shall not be allowed. 1.10.3.1.2 Market Failures, exchange closures - when markets are affected by unexpected events which impact the functioning of exchanges or the regular course of transactions. Such unexpected events could also be related to political,economic, military, monetary or other emergencies. 1.10.3.1.3 Operational Issues - when exceptional circumstances are caused by force majeure, unpredictable operational problems and technical failures (e.g. a black out). Such cases can only be considered if they are reasonably unpredictable and occur in spite of appropriate diligence of third parties, adequate and effective disaster recovery procedures and systems. 1.10.3.2 Restrictions on redemption may be imposed for a specified period of time not exceeding 10 working days in any 90 days period. 1.10.3.3 Any imposition of restriction would require specific approval of Board of AMCs and Trustees and the same should be informed to SEBI immediately. 1.10.3.4 When restriction on redemption is imposed, the following procedure shall be applied: 1.10.3.4.1 No redemption requests upto INR 2 lakh shall be subject to such re....
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.... 2.1.1.1 Since the scheme(s) would reopen for fresh subscriptions, disclosures contained in the SID shall be revised and updated. A copy of the draft SID shall be filed with the Board as required under Regulation 28(1) of the Mutual Funds Regulations along with filing fees prescribed under Regulation 28(2) of the Mutual Funds Regulations. Instructions issued by the Board SEBI Circular No. SEBI/IMD/Cir No 5/126096/08 dated May 23, 2008 for filing of the SID shall also be followed. 2.1.1.2 A draft of the communication to be sent to unit holders shall be submitted to the Board which shall include the following: a. Latest portfolio of the scheme(s) in the prescribed format Refer to format of half yearly portfolio disclosure under section on formats. b. Details of the financial performance of the scheme(s) since inception in the format prescribed in SID Please refer to format of SID under section on Formats. along with comparisons with appropriate benchmark(s) For examples of Benchmarks, refer to chapter on SID. c. The addendum to the SID detailing the modifications (if any) made to the scheme(s). 2.1.1.3 The letter to unit holders and revised SID (if any) shall be issued only a....
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....e investment objective, asset allocation and the main features of the new consolidated scheme. 4. Basis of allocation of new units by way of a numerical illustration 5. Percentage of total NPAs and percentage of total illiquid assets to net assets of each individual scheme(s) as well the consolidated scheme. 6. Tax impact of the consolidation on the unit holders. 7. Any other disclosure as specified by the Trustees. 8. Any other disclosure as directed by the Board. 2.2.2.3 Updation of SID shall be as per the requirements for change in fundamental attribute of the scheme Please refer to SID chapter for further details. 2.2.2.4 Maintenance of Records: a. AMC(s) shall maintain records of dispatch of the letters to the unit holders and the responses received from them. A report giving information on total number of unit holders in the schemes and their net assets, number of unit holders who opted to exit and net assets held by them and number of unit holders and net assets in the consolidated scheme shall be filed with the Board within 21 days from the date of closure of the exit option SEBI Circular No- SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009. 2.....
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....ns based on the amount of investment (i.e. retail, institutional, super-institutional, etc) shall accept fresh subscriptions only under one plan. 2.4.3 Other plans will continue till the existing investors remain invested in the plan. 2.5 Direct Plan SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 2.5.1 Mutual funds/AMCs shall provide a separate plan for direct investments, i.e., investments not routed through a distributor, in existing as well as new schemes. 2.5.2 Such separate plan shall have a lower expense ratio excluding distribution expenses, commission, etc., and no commission shall be paid from such plans. The plan shall also have a separate NAV. PART IV - CATEGORIZATION AND RATIONALIZATION OF MUTUAL FUND SCHEMES SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 06, 2017 It is desirable that different schemes launched by a Mutual Fund are clearly distinct in terms of asset allocation, investment strategy etc. Further, there is a need to bring in uniformity in the characteristics of similar type of schemes launched by different Mutual Funds. This would ensure that an investor of Mutual Funds is able to evaluate the different options availabl....
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....f the stock on all such stock exchanges, will be computed; ii. In case a stock is listed on only one of the recognized stock exchanges, the full market capitalization of that stock on such an exchange will be considered. iii. This list would be uploaded on the AMFI website and the same would be updated every six months based on the data as on the end of June and December of each year. The data shall be available on the AMFI website within 5 calendar days from the end of the 6 months period. iv. While preparing the single consolidated list of stocks, average full market capitalization of the previous six month of the stocks shall be considered SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/126 dated December 04, 2017. 2.7.3 Subsequent to any updation in the list, Mutual Funds would have to rebalance their portfolios (if required) in line with updated list, within a period of one month. 2.8 Process to be followed for categorization and rationalization of schemes: 2.8.1 Only one scheme per category would be permitted, except: i. Index Funds/ ETFs replicating/ tracking different indices; ii. Fund of Funds having different underlying schemes; and iii. Sectoral/ thematic fun....
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....15 dated December 31, 2015, in line with GDS of Banks. Investment in GDS and GMS by Gold ETFs of mutual funds will be subject to following conditions: a. The cumulative Investment by Gold ETF in GDS and GMS will not exceed 20% of total AUM of such schemes. b. Before investing in GDS of Banks and GMS , mutual funds shall put in place a written policy with regard to investment in GDS and GMS with due approval from the Board of the Asset Management Company and the Trustees. The policy should have provision to make it necessary for the mutual funds to obtain prior approval of their trustees for each investment proposal in GDS and GMS. The policy shall be reviewed by mutual funds, at least once a year. c. Certificates issued in respect of investments made by Gold ETFs in GDS of Banks and GMS can be held by the mutual funds in dematerialized or physical form SEBI Circular No. CIR/IMD/DF/16/2013 dated October 18, 2013. 3.2.1.4 Existing investments by Gold ETFs of Mutual Funds under the GDS will be allowed to run till maturity unless these are withdrawn prematurely. 3.2.2 Valuation: 3.2.2.1 Gold shall be valued based on the methodology provided in Clause 3A of, Schedule Eight of t....
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....e indicated in the SID and KIM shall be rated by a Credit Rating Agency registered with the Board from the view point of assessing the degree of certainty for achieving the objective of capital protection and the rating shall be reviewed on a quarterly basis. 3.3.3 The Trustees shall continuously monitor the portfolio structure of the scheme and report the same in the Half Yearly Trustee Reports For format of Half Yearly Trustee Report please refer section on Formats to the Board. The AMC(s) shall also report on the same in its bimonthly (CTR(s) For format of bimonthly CTR please refer section on Formats to the Board. 3.3.4 It shall also be ensured that the debt component of the portfolio structure has the highest investment grade rating. 3.4 Real Estate Mutual Funds SEBI Circular No - SEBI/IMD/CIR No.4/124477/08 May 2,2008: 3.4.1 A real estate mutual fund schemeRegulation 49 A(a)(i) of SEBI (Mutual Fund) Regulations, 1996 can invest in real estate assets in the cities mentioned in: 3.4.1.1 List of Million Plus Urban Agglomerations/Cities; or 3.4.1.2 List of Million Plus Cities 3.4.2 Such list appears in Census Statistics of India (2001) at www.censusindia.gov.in. A printout....
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....date of transaction. d. For transactions undertaken by investors through their RGESS designated demat account, Depositories may seek necessary transactional details from stock exchanges viz. Actual Trade value, Trading date, Settlement number, etc, for the purpose of enforcing lock-in and for generating reports mandated vide MoF notification on RGESS. On receipt of such request from depositories, stock exchanges shall provide the details to depositories on an immediate basis. It shall also be ensured that a uniform file structure is used by stock exchanges and depositories for such intimation of transaction details. e. With regard to the securities held in the RGESS designated account, treatment of the corporate actions shall be given in the prescribed format Please refer to section on Formats for requisite formats. 3.5.5 Mutual Funds / AMCs shall communicate list of RGESS eligible MF schemes / ETFs to the stock exchanges. 3.5.6 Mutual Funds / AMCs are directed to create wide publicity of the scheme among the investors, including displaying details on their website. 3.6 Infrastructure Debt Schemes SEBI Circular No. CIR/IMD/DF/7/2013 dated April 23, 2013 3.6.1 Placement Memo....
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....to ensure minimum standards of due diligence and Risk Management Systems for all the Mutual Funds in various operational areas (for e.g. Fund Management, Operations, Customer Service, Marketing and Distribution, Disaster Recovery and Business Contingency, etc.) and is enclosed herewith as Annexure 2. 4.2 The Risk Management practices covered in the Operating Manual are under three categories as detailed below: 4.2.1 Existing Industry Practices: 4.2.1.1 Under each head of risk, the Manual covers the exemplary practices followed by some / most of Mutual Funds in India. However, the extent and degree of observance of these practices differs among the Mutual Funds. Mutual Funds shall accordingly develop their systems and follow these practices. 4.2.2 Practices to be followed on Mandatory Basis: 4.2.2.1 Mutual Funds shall follow the practices which have been indicated as mandatory in the operating manual. These are Risk Management function that shall be assigned to Compliance Officer or Internal Risk Management Committee or to an external agency a. Disaster Recovery and Business Contingency plans, and b. Insurance cover against certain risks. 4.2.3 Best Practices to be follo....
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....AMCs should have stress testing policy in place which mandates them to conduct stress test on all Liquid Fund and MMMF Schemes. 4.4.2.2 The stress test should be carried out internally at least on a monthly basis, and if the market conditions require so, AMC should conduct more frequent stress test. 4.4.2.3 The concerned schemes shall be tested on the following risk parameters, among others deemed necessary by the AMC: a) Interest rate risk; b) Credit risk; c) Liquidity & Redemption risk. 4.4.2.4 While conducting stress test, it will be required to evaluate impact of the various risk parameters on the scheme and its Net Asset Value (NAV). The parameters used and the methodology adopted for conducting stress test on such type of scheme, should be detailed in the stress testing policy, which is required to be approved by the Board of AMC. 4.4.2.5 Further, in the event of stress test revealing any vulnerability or early warning signal, it would be required to bring it to the notice of the Trustees and take corrective action as deemed necessary, to reinforce their robustness. Each AMC should also be required to have documented guidelines, to deal with the adverse situatio....
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....ment of scheme portfolio. Such advertisement shall be published in the all India edition of at least two daily newspapers, one each in English and Hindi. d) Mutual Funds/ AMCs shall provide a physical copy of the statement of its scheme portfolio, without charging any cost, on specific request received from a unitholder. 5.1.2. The format for monthly portfolio disclosure Please refer to section on Formats for requisite Formats shall be same as that of half yearly portfolio disclosures. The format SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000, SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001, SEBI Circular No. MFD/CIR/14/18337/2002 dated September 19, 2002, SEBI Circular No. IMD/CIR 8/132968/2008 dated July 24, 2008 for disclosure for monthly and half yearly portfolio is placed at format section. 5.1.3. Mutual funds/AMCs may disclose additional information (such as ratios, etc.) subject to compliance with the Advertisement Code. 5.1.4. The format for disclosure for monthly and half yearly portfolio is placed at format section. 5.2 Disclosure of derivatives in Half Yearly Portfolios SEBI Circular Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010 5.2.1 ....
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....spect to receiving the annual report or abridged summary thereof in physical copy, Mutual Funds/ AMCs shall conduct one more round of similar exercise for those unitholders who have not responded to the 'opt-in' communication as stated at paragraph 5.4.3 above, after a period of not less than 30 days from the date of issuance of the first communication. Further, a period of 15 days from the date of issuances of the second communication may be given to unitholders to exercise their option of 'opt-in' or 'opt-out'. 5.4.5 Mutual Funds/ AMCs shall publish an advertisement every year disclosing the hosting of the scheme wise annual report on their respective website and on the website of AMFI and the modes such as SMS, telephone, email or written request (letter), etc. through which unitholders can submit a request for a physical or electronic copy of the scheme wise annual report or abridged summary thereof. Such advertisement shall be published in the all India edition of at least two daily newspapers, one each in English and Hindi. 5.4.6 Mutual Funds/ AMCs shall provide a physical copy of the abridged summary of the Annual Report, without charging any cost, on specific request rece....
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....hly AAUM from investors type (retail, corporate, etc.) in different scheme type (equity, debt, ETF, etc.). f. Monthly AAUM garnered through sponsor group/ non-sponsor group distributors. g. State-wise/Union Territory-wise contribution to MAAUM. 5.6.3 In order to have a holistic picture, Mutual Fund wise and consolidated data on the above parameters shall also be disclosed on AMFI website. The above shall be disclosed as per the format For formats, please refer to chapter on Formats. 5.6.4 AMCs shall disclose the above on their website (in spreadsheet format) and forward to AMFI within 7 working days from the end of the month. AMFI in turn shall disclose the consolidated data in this regard on its website (in spreadsheet format). 5.7 Commission disclosure SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011 5.7.1 Mutual Funds / AMCs shall disclose on their respective websites the total commission and expenses paid to distributors who satisfy one or more of the following conditions with respect to non-institutional (retail and HNI) investors:- 5.7.1.1 Multiple point of presence (More than 20 locations) 5.7.1.2 AUM raised over Rs. 100 crore across industry in the non ....
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....oviding simple example). 5.8.3 Separate SID / KIM for each MF scheme managed by AMC shall also be made available on MFs / AMCs website. 5.8.4 Each MF is required to have a dashboard on their website providing performance and key disclosures pertaining to each scheme managed by AMC. The information should include scheme's AUM, investment objective, expense ratios, portfolio details, scheme's past performance, among others. Such information shall be provided in a comparable, downloadable (spreadsheet) and machine readable format. 5.9 Annual report of the AMC MFD/CIR/9/120/2000 dated November 24, 2000 5.9.1 Annual report containing accounts of the asset management companies should be displayed on the website of the mutual funds. It should also be mentioned in the annual report of the mutual fund schemes that the unitholders, if they so desire, may request for a copy of the annual report of the asset management company. 5.10 Submission of bio data of key personnel IIMARP/CIR /08/845/97 dated May 7,1997,IIMARP/MF/CIR/05/788/97 date April 28,1997 5.10.1 AMCs are required to submit the bio data of all key personnel to Trustees and the Board. For this purpose, 'key personnel' would b....
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....Include the report in their annual reports, as part of the Report of the Trustees. 5.13 Brokerage and commission paid to associates SEBI Circular No. SEBI/IMD/CIR No 18/198647/2010 dated March 15, 2010 5.13.1 Regulations Regulation 25 (8) of SEBI (Mutual Funds) Regulations, 1996 govern payment of brokerage or commission if any, to the sponsor or any of its associates, employees or their relatives. 5.13.2 Disclosures on brokerage and commission paid to associates/related parties/group companies of sponsor/Asset Management Company in the unaudited half yearly financial results, the abridged scheme wise annual report and the SAI, shall be made in the format as prescribed Please refer to the section on Formats. 5.14 Mutual Funds/ AMCs shall make continuous efforts to update email ID and mobile number of all unitholders. The said contact details shall be used for sending e-mails and SMS as envisaged in the circular. SEBI/HO/IMD/DF2/CIR/P/2018/92 dated June 05, 2018 PART II - REPORTS 5.15 Monthly Cumulative Report (MCR) SEBI circular MFD/CIR/07/206/2001 dated July 19, 2001, SEBI circular No IMD/Cir No.15/87045/2007 dated February 22, 2007, SEBI circular SEBI/IMD/CIR No 3/124444/08 ....
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....e submitted by the AMC to the Board once in every two months so as to reach within 21 days of completion of the two months period. As a compliance of SEBI Regulations is a continuous process, AMCs are advised to incorporate the modifications/additions under the relevant sections of the format,based on amendments to the Regulations/guidelines issued in the future from time to time. 5.18 Annual Statistical Report (ASR) IIMARP/CIR /08/845/97 DATED May 7,1997, MFD/CIR/02/110/02 dated April 26,2002, SEBI Cir No- IMD/CIR No 6/72245/06 dated July 20,2006, 5.18.1 AMC should submit the annual statistical report to SEBI in the prescribed format by 30th of April each year For format of ASR refer the section on Formats Quarterly Movement of Net Assets- SEBI CIR - IIMARP/MF/CIR/05/788/97 dated April 28, 1997 required mutual funds to submit the statement for quarterly movement of net assets. However, SEBI circular MFD/CIR/12/16588/02 dated August 28,2002 stated that such Statement of movement of net assets /portfolios are no more to be submitted. 5.19 Daily Transaction Report SEBI Circular No.MFD/CIR/07/384/99 dated December 17, 1999 and MFD/CIR/08/23026/99 dated December 23, 1999 5.19.1 A....
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....nd/or circulars issued by the Board and shall specifically comment on their compliance. 5.21 Filing of Annual Information Return by Mutual FundsSEBI cir no IMD/CIR No.8/73580/06 dated August 4,2006 It may be noted that Annual Information Returns (AIRs) constitute an important source of information to Income Tax Department and, as such, it is imperative that the data furnished to them is complete and accurate in all respects. It is therefore advised that to re-check the accuracy of the data furnished by your office for the Financial Year 2004-05 and ensure that all the columns are correctly filled-in and submit a 'Supplementary Information Report', if need be, to the Income Tax Department. The AIRs for the financial year 2005-2006 are required to be filed before August 31, 2006. 5.21.1 Mutual Funds are required to submit the Annual Information Return under section 285 BA in the Income-tax Act. As per this requirement, Trustees of Mutual Funds or such other person managing the affairs of the Mutual Funds (as may be duly authorized by the trustees in this behalf) have to report specified financial transactions in electronic media to Income Tax Department giving PAN of the transact....
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....c in value Regulation 18(11) of SEBI (MF) Regulations, 1996 and SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000. 6.2.2 Review of transactions 6.2.2.1 Trustees shall review all transactions of the Mutual Fund with the associates as defined below on a regular basis and ensure that Regulations are complied with Regulations 18(6) and 18(7) of SEBI (Mutual Funds), Regulations, 1996 and SEBI Circular No. MFD/CIR No.010/024/2000 dated January 17, 2000. 6.3 Role of Independent Director on the Board of the AMC and Independent Trustees SEBI Circular No. MFD/CIR/11/354/2001 dated December 20, 2001, SEBI Circular No. MFD/CIR/13/16799/2002 dated August 29, 2002, SEBI Circular No. MFD/CIR/17/21105/2002 dated October 28, 2002. 6.3.1 An Independent Trustee shall not be associated in any manner with the Sponsor(s) Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996. The independent directors on the Board of the AMC shall not be associate of, or associated in any manner with, the sponsor or any of its subsidiaries or the trustees Regulation 21(d) of the SEBI (Mutual Funds) Regulations, 1996. 6.3.2 An 'associate' shall be defined as: 6.3.2.1 Relatives As defined under Sec....
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....25 dated November 30, 2017. 6.4.1 Regulation 16 (5) and Regulation 21 (1) (d) of SEBI (Mutual Funds) Regulations, 1996 mandate appointment of independent trustees of MFs("independent trustees") and independent directors of AMCs("independent directors") respectively. With respect to tenure of independent trustees and independent directors, it has been decided that: 6.4.1.1 An independent trustee and independent director shall hold office for a maximum of 2 terms with each term not exceeding a period of 5 consecutive years. 6.4.1.2 No independent trustee or independent director shall hold office for more than two consecutive terms, however such individuals shall be eligible for re-appointment after a cooling-off period of 3 years. During the cooling-off period, such individuals should not be associated with the concerned MF, AMC & its subsidiaries and / or sponsor of AMC in any manner whatsoever. 6.4.1.3 Existing independent trustees and independent directors shall hold office for a maximum of 10 years (including all preceding years for which such individual has held office). In this respect, the following may be noted: a. Individuals who have held office for less than 9 years ....
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..... MFD/CIR No.4/216/2001 dated May 8, 2001, SEBI Circular No. SEBI/IMD/CIR No.7/13391/03 dated July 11, 2003. The guidelines enumerated below specify the minimum requirements that have to be followed. The AMC(s) and Trustees are free to set more stringent norms for investment and/or trading in securities by their employees. The Board of the AMC and Trustees shall ensure compliance with these Guidelines on a continuous basis and shall report any violations and remedial action taken by them in the periodical reports submitted to the Board Regulation 25(9) & 23(b) of SEBI (MF) Regulations, 1996. 6.6.1 Guidelines for Investment and/or Trading in Securities by Employees of AMC(s) and Trustees: 6.6.1.1 Applicability a. These Guidelines shall be applicable to all employees of AMC(s) and Trustees and shall form a part of the Code of Conduct for employees adopted by the AMC(s) and/or Trustees. New employees shall be bound by these Guidelines from the date of joining the AMC(s) and/or Trustees. b. These Guidelines shall cover transactions for sale or purchase of securities made SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/124 dated November 17, 2016. : i. In the name of employees, ei....
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....oney market instruments, money market mutual fund schemes, liquid schemes and schemes floated by other Mutual Funds/ AMCs. 6.6.2.2 No employee shall pass on information to anybody inducing him to buy/sell securities which are being bought and/or sold by the Mutual Fund of which the AMC is the investment manager. 6.6.2.3 Prior approval of personal investment transactions: a. All access persons except Compliance Officer shall apply in the form prescribed by the AMC(s) and/or Trustees to the Compliance Officer for prior approval of transactions for sale or purchase of securities other than those expressly stated to be exempt under these guidelines. The Compliance Officer shall apply to the Head of the AMC(s). The decision of the Compliance Officer shall be final and binding on the employee. b. In these Guidelines, in the case of the Compliance Officer's own transactions for purchase or sale of securities or disclosure or any other related matter, the term "Compliance Officer" wherever it appears, shall be read as "Head of the AMC." c. The Compliance Officer may coordinate with the Fund Management Department of the Mutual Fund, wherever necessary, to clear requests of investmen....
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....ade by a company that belongs to the same industrial group as the company in which the employee already has an investment, provided that such a preferential offer is made to all shareholders and/or debenture holders of such companies. Details of such applications made shall be intimated to the Compliance Officer. c. The employees of the AMC(s) and/or Trustees including access person may apply for any rights offer of any company in which they are already shareholders. Applications for additional rights (over and above the normal rights entitlement) shares may be made by the employees including access person without getting the clearance from the Compliance Officer. An employee including access person may also sell and/or renounce his rights entitlement without getting the clearance from the Compliance Officer. However, if an access person wishes to purchase the "Rights renunciations" he shall get the clearance of the Compliance Officer for the same. Such purchases shall be done only at market prices. Details of any applications made in any rights issue, whether in the normal course, or through purchase of rights renunciations, shall be intimated to the Compliance Officer. 6.6.3.2....
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....ecurities either before or after the employee's transaction(s). d. The Compliance Officer shall maintain a record of all requests for pre clearance regarding the purchase or sale of a security, including the date of the request, the name of the access person, the details of the proposed transaction and whether the request was approved or denied and waivers given, if any, and its reasons. e. No employee shall purchase any security (including derivatives) on a "Carry Forward" basis or indulge in "Short Sale" of any security (including derivatives) i.e. employees who effect any purchase transaction(s) shall ensure that they take delivery of the securities purchased, before selling them. f. Any transaction of Front Running by any employee directly or indirectly is strictly prohibited. For this purpose, "Front Running" means any transaction of purchase and/or sale of a security carried by any employee whether for self or for any other person, knowing fully well that the AMC also intends to purchase and/or sell the same security for its Mutual Fund operations. To ascertain that the employee had no prior knowledge of the Mutual Fund's intended transactions, the Compliance Office....
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....ot been communicated to the investors. 6.6.5 Periodic Disclosures 6.6.5.1 All access persons shall submit, in the form prescribed by the Mutual Fund of which the AMC is the investment manager, details of their personal transactions of purchase or sale of securities to the Compliance Officer. The details to be submitted are as follows: a. Details of transactions effected for purchase and/or sale of securities including transactions in rights entitlements through the secondary market within 7 calendar days from the date of transaction; b. Details of allotment received against application for public and rights issues within 7 calendar days from the date of receipt of the allotment advice; c. A statement of holding in securities as on March 31 within 30 calendar days from the end of every financial year ending March 31. 6.6.5.2 All employees other than access persons shall submit, in the form prescribed by the Mutual Fund, to the Compliance Officer: a. Details of each of their transactions for purchase or sale of securities including allotment in public and rights issues within 7 calendar days. b. A statement of holding in securities as on March 31 within 30 calendar days ....
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....the NFO of the Scheme, whichever is earlier, the Scheme complies with these two conditions. 6.9.1.3 In case the Scheme / Plan(s) does not have a minimum of 20 investors in the stipulated period, the provisions of Regulation Regulation 39(2)(c) of the SEBI (MF) Regulations, 1996 would become applicable automatically without any reference from SEBI and accordingly the Scheme / Plan(s) shall be wound up and the units would be redeemed at applicable NAV. 6.9.1.4 If there is a breach of the 25% limit by any investor over the quarter, a rebalancing period of one month would be allowed and thereafter the investor who is in breach of the rule shall be given 15 days notice to redeem his exposure over the 25 % limit. Failure on the part of the said investor to redeem his exposure over the 25 % limit within the aforesaid 15 days would lead to automatic redemption by the Mutual Fund on the applicable Net Asset Value on the 15th day of the notice period. 6.9.1.5 The two conditions mentioned above shall also be complied within each subsequent calendar quarter thereafter, on an average basis, as specified by SEBI. 6.9.1.6 The Fund shall adhere to the requirements prescribed by SEBI from t....
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....bt Oriented Schemes SEBI Circular No. Cir/IMD/DF/15/2014 dated June 20, 2014 6.10.1 It has been observed that many debt oriented schemes are operating with a very low AUM. In the interest of investors, it is important that debt oriented schemes have an adequate corpus to ensure adherence to the investment objectives as stated in Scheme Information Document and compliance with investment restrictions specified under SEBI (Mutual Funds) Regulations, 1996. 6.10.2 In this regard, it has been decided that: a) The minimum subscription amount of debt oriented and balanced schemes at the time of new fund offer shall be at least 20 crore and that of other schemes shall be at least 10 crore. b) An average AUM of 20 crore on half yearly rolling basis shall be maintained for open ended debt oriented schemes. c) The existing open ended debt oriented schemes shall comply with point (b) stated above within one year from the date of issue of this circular. d) In case of breach of points (b) and (c) above, the AMC shall scale up the AUM of such scheme within a period of six months so as to comply with point (b) stated above, failing which the provisions of Regulation 39 (2) (c) of SEBI (M....
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....inception of the fund. The benchmark TRI values are available from June 30, 1999. The calculation of a composite benchmark performance return in CAGR terms would be as given below: The aforesaid is explained with an example: Example: Consolidated Benchmark CAGR (PRI and TRI) Date Benchmark PRI values Benchmark TRI values 02/08/1995 1007.57 30/06/1999 1187.70 1256.38 30/11/2017 10226.55 13966.58 CAGR 12.20% Thus, in the above example (for advertisements in the month of December, 2017 the last of the preceding month would be November 30, 2017), CAGR= [(1187.70/1007.57)*(13966.58/1256.38) ^ (1/22.3452)]-1 [1 year= 365x days] CAGR= 12.20% (iii) Mutual funds shall use the composite CAGR as explained above, subject to making the following disclosure: *As TRI data is not available since inception of the scheme, benchmark performance is calculated using composite CAGR of XYZ (name of the benchmark index) PRI values from date.. to date.. and TRI values since date.." 6.12.3 This circular is applicable to all schemes of Mutual Funds with effect from February 1, 2018. PART III -SYSTEMS AUDIT OF MUTUAL FUNDS SEBI Circular No SEBI/IMD/CIR No. 9/176988/2009 dated Se....
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....ral and interest of the unit-holders in particular. 6.22 AMCs shall be required to record and disclose specific rationale supporting their voting decision (for, against or abstain) with respect to each vote proposal SEBI Circular No. CIR/IMD/DF/05/2014 dated March 24, 2014. 6.23 AMCs shall additionally be required to publish summary of the votes cast across all its investee company and its break-up in terms of total number of votes cast in favor, against or abstained from. 6.24 AMCs shall be required to make disclosure of votes cast on their website (in spreadsheet format) on a quarterly basis, within 10 working days from the end of the quarter. Further, AMCs shall continue disclosing voting details in their annual report. The votes cast by the Mutual Funds may be given in the revised format For formats, please refer to chapter on Formats for disclosure of vote cast in respect of resolutions passed in general meetings of the investee companies and in the format For formats, please refer to chapter on Formats for presenting summary of votes cast. 6.25 Further, on an annual basis, AMCs shall be required to obtain certification on the voting reports being disclosed by them. Such c....
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.... Stock Exchange Ltd. (NSE) whenever a new scheme(s) or plan(s) (wherever the portfolio of the plans is different) is launched SEBI Circular No. SEBI/IMD/CIR No.01/1756/04 dated January 27, 2004. Such UCC should be obtained before commencing the trading on behalf of the scheme(s)/plan(s). At the time of entering an order, the UCC pertaining to the parent Mutual Fund shall be provided and the allocation to individual schemes shall be done in the post closing session. SEBI Circular No. MRD/DoP/SE/Cir-35/2004 dated October 26, 2004. The UCC can be shared with the unit holders to facilitate tax benefits linked to payment of Securities Transaction Tax (STT). 7.4 Trading in Exchange Traded Derivatives Contracts SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005; SEBI Circular No. DNPD/Cir-30/2006 dated January 20, 2006, SEBI Circular No. SEBI/DNPD/Cir-31/2006 dated September 22, 2006. 7.4.1 For trading in Exchange Traded Derivatives Contracts, following should be observed: 7.4.1.1 Mutual Fund schemes can participate in derivatives market as per the guidelines issued by SEBI in this regard from time to time. SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005. 7.4.1.....
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....ar No. SEBI/MFD/CIR No.03/158/03 dated June 10, 2003. 7.5.2 The following position limits SEBI Circular No. CIR/MRD/DRMNP/26/2014 dated September 15, 2014 in IRF shall be applicable for Mutual Fund level and scheme level: a. Mutual Funds shall have position limits as applicable to trading members presently. b. Schemes of Mutual Funds shall have position limits as applicable to clients presently. 7.6 Transactions of mutual funds in Government Securities in dematerialised form SEBI Circular No. MFD/CIR/05/432/2002 dated June 20, 2002 7.6.1 According to Regulation Regulation 44(1A) of SEBI (Mutual Funds) Regulations, 1996, the Mutual Funds having an aggregate of securities worth Rs. 10 crore or more are required to settle their transactions only through dematerialised securities. All Mutual Funds should enter into transactions relating to government securities only in dematerialised form. CHAPTER 8 NET ASSET VALUE Regulation 48(1) of SEBI (Mutual Funds) Regulations, 1996 8.1 Disclosure of Net Asset Value SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997, SEBI Circular No. MFD/CIR No.11/171/01 dated February 9, 2001, SEBI Circular No. MFD/CIR/13/087/2001 dated March....
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....Mutual Funds shall round off NAV up to four decimal places for index funds and all types of debt & liquid/money market schemes. 8.2.2 For all equity oriented and balanced fund schemes, Mutual Funds shall round off NAVs up to two decimal places. However, Mutual Funds can round off the NAVs up to more than two decimal places in case of equity oriented and balanced fund schemes also, if they so desire SEBI Circular No. MFD/CIR/11/16159/2002 dated August 22, 2002. Relevant disclosure in this regard shall be made in the SID/SAI SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002. 8.3 Uniform Cut off Timings for applicability of Net Asset Value of Mutual Fund scheme(s) and/ or plan(s) SEBI Circular No. SEBI/IMD/CIR No. 11/78450/06 dated October 11, 2006. 8.3.1 Mutual Funds should follow the Guidelines enumerated below with respect to uniform Cut -off Timings: 8.3.2 Definitions: 8.3.2.1 In these Guidelines, unless the context otherwise requires: a. 'Cut-off Timing', in relation to an investor making an application to a Mutual Fund for purchase or sale of units, shall mean, the outer limit of timing within a particular day which is relevant for determination of the NAV applica....
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....s are not available for utilization before the cut-off time without availing any credit facility, whether, intra-day or otherwise - the closing NAV of the day immediately preceding the day on which the funds are available for utilization. 8.3.5.2 For allotment of units in respect of purchase in liquid schemes, it shall be ensured that: a. Application is received before the applicable cut-off time. b. Funds for the entire amount of subscription/purchase as per the application are credited to the bank account of the respective liquid schemes before the cut-off time. c. The funds are available for utilization before the cut-off time without availing any credit facility whether intra-day or otherwise, by the respective liquid schemes. 8.3.5.3 For allotment of units in respect of switch-in to liquid schemes from other schemes, it shall be ensured that: a. Application for switch-in is received before the applicable cut-off time. b. Funds for the entire amount of subscription/purchase as per the switch-in request are credited to the bank account of the respective switch-in liquid schemes before the cut-off time. c. The funds are available for utilization before the cut-off t....
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....26, 2010: 8.3.6.3.1 Application is received before the applicable cut-off time (3 pm). 8.3.6.3.2 Funds for the entire amount of subscription/purchase as per the application are credited to the bank account of the respective schemes before the cut-off time (3 pm). 8.3.6.3.3 The funds are available for utilization before the cut-off time (3 pm) without availing any credit facility whether intra-day or otherwise, by the respective scheme. 8.3.6.4 For allotment of units in respect of switch-in to income/debt oriented mutual fund schemes/plans other than liquid schemes from other schemes, it shall be ensured that: 8.3.6.4.1 Application for switch-in is received before the applicable cut-off time. 8.3.6.4.2 Funds for the entire amount of subscription/purchase as per the switch-in request are credited to the bank account of the respective switch-in income/debt oriented mutual fund schemes/plans before the cut-off time. 8.3.6.4.3 The funds are available for utilization before the cut-off time without availing any credit facility whether intra-day or otherwise, by the respective switch-in income/debt oriented mutual fund schemes/plans. 8.3.6.5 The following Cut-off Timings shall be ....
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....s the assumption of any liability which is unlimited or which may result in encumbrance of the scheme property in any way. AMC's are advised to strictly adhere to the said provision. 8.4 Requirements with respect to time stamping machines [pursuant to Clause 8(3)] 8.4.1 For every machine, running serial number shall be stamped from the first number to the last number as per its capacity before repetition of the cycle. 8.4.2 Every application for purchase shall be stamped on the face and the corresponding payment instrument shall be stamped on the back indicating the date and time of receipt and running serial number. The application and the payment instrument shall contain the same serial number. 8.4.3 Every application for redemption shall be stamped on the face thereof and on the investor's acknowledgment copy (or twice on the application if no acknowledgment is issued) indicating the date and time of receipt and running serial number. 8.4.4 Different applications shall not be bunched together with the same serial number. 8.4.5 Blank papers shall not be time stamped. Genuine errors, if any, shall be recorded with reasons and the corresponding applications requests shall als....
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....001 and SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.1.1 Non Traded Securities SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.1.1.1 When a security (other than Government Securities) is not traded on any Stock Exchange for a period of thirty days prior to the valuation date, the scrip shall be treated as a non traded security. 9.1.2 Thinly Traded Securities 9.1.2.1 Thinly traded equity/ equity related securities: SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001. a. When trading in an equity and/or equity related security (such as convertible debentures, equity warrants etc.) in a month is both less than Rs. 5 lacs and the total volume is less than 50,000 shares, the security shall be considered as thinly traded security and valued accordingly. b. In order to determine whether a security is thinly traded or not, the volumes traded in all recognized Stock Exchanges in India may be taken into account. c. For example, if the volume of trade is 1,00,000 and value is Rs. 4,00,000, the shares do not qualify as thinly traded. Also if the volume traded is 40,000, but the value of trades is Rs. 6,00,000, the shares do not qualify as ....
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....Revaluation Reserves) - Miscellaneous expenditure and Debit Balance in Profit and Loss Account] / Number of Paid up Shares. b. Average Capitalization rate (P/E ratio) for the industry based upon either BSE or NSE data (which shall be followed consistently and changes, if any, noted with proper justification thereof) shall be taken and discounted by 75 per cent i.e. only 25 per cent. Of the industry average P/E shall be taken as Capitalization rate (P/E ratio). Earnings per share (EPS) of the latest audited annual accounts shall be considered for this purpose. c. The value as per the Net Worth value per share and the capital earning value calculated as above shall be averaged and further discounted by 10 per cent. for illiquidity so as to arrive at the fair value per share. d. In case the EPS is negative, EPS value for that year shall be taken as zero for arriving at capitalised earning. e. In case where the latest Balance Sheet of the company is not available within nine months from the close of the year, unless the accounting year is changed, the shares of such companies shall be valued at zero. f. In case an individual security accounts for more than 5 per cent. of the ....
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....ncept of using spreads over the benchmark rate to arrive at the yields for pricing the non traded security. 3. The Yields for pricing the non traded debt security would be arrived at using the process as defined below. Step 1: A Risk Free Benchmark Yield is built using the government securities as the base. Government securities are used as the benchmarks as they are traded regularly; free of credit risk; and traded across different maturity spectrums every week. Step 2: A Matrix of spreads (based on the credit risk) are built for marking up the benchmark yields. The matrix is built based on traded corporate paper on the wholesale debt segment of an appropriate stock exchange and the primary market issuances. The matrix is restricted only to investment grade corporate paper. Step 3: The yields as calculated above are Marked-up/Marked-down for ill-liquidity risk Step 4: The Yields so arrived are used to price the portfolio. 9.3 Methodology: 9.3.1 Construction of Risk Free Benchmark SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.3.1.1 Using Government of India dated securities; the Benchmark shall be constructed as below: a. Government of India dated....
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....ch rating category; d. If the matrix cannot be populated using any or all of the above steps, then credit spreads from trades on appropriate stock exchange of the relevant rating category over the AAA trades will be used to populate the matrix; e. In each rating category, all outliers will be removed for smoothening the YTM matrix; f. Spreads will be obtained by deducting the YTM in each duration category from the respective YTM of the GOI securities; g. In the event of lack of trades in the secondary market and the primary market the gaps in the matrix would be filled by extrapolation. If the spreads cannot be extrapolated for the reason of practicality, the gaps in the matrix will be filled by carrying the spreads from the last matrix. h. Accordingly, all Mutual Funds shall provide transaction details of various types of debt securities like NCDs, Mibor linked floaters and CPs on daily basis in the prescribed format enclosed at Annexure 3 to the agency recommended by AMFI. Submission of data would help in daily matrix generation, would improve uniformity and accuracy of valuation in the Mutual Funds industry SEBI Circular No. MFD/CIR.No 23 / 066 /2003 dated March 7,2003....
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....to call option. In case there are multiple call options, the lowest value obtained by valuing to the various call dates and valuing to the maturity date is to be taken as the value of the instrument. 9.4.1.2 Securities with Put option a. The securities with put option shall be valued at the higher of the value as obtained by valuing the security to final maturity and valuing the security to put option. In case there are multiple put options, the highest value obtained by valuing to the various put dates and valuing to the maturity date is to be taken as the value of the instruments. 9.4.1.3 Securities with both Put and Call option on the same day a. The securities with both Put and Call option on the same day would be deemed to mature on the Put/Call day and would be valued accordingly. 9.5 Valuation of Government Securities 9.5.1 Government securities will be valued at prices for government securities released by an agency suggested by AMFI to ensure uniformity in calculation of NAVs SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.6 Illiquid SecuritiesSEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 1. Provided that in case any scheme has ....
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....e of the interest. For e.g. if the due date for interest is 30.06.2000, it will be classified as NPA from 01.10.2000. 9.7.3 Treatment of income accrued on the NPA and further accruals 9.7.3.1 After the expiry of the 1st quarter from the date the income has fallen due, there will be no further interest accrual on the asset i.e. if the due date for interest falls on 30.06.2000 and if the interest is not received, accrual will continue till 30.09.2000 after which there will be no further accrual of income. In short, taking the above example, from the beginning of the 2nd quarter there will be no further accrual on income. 9.7.3.2 On classification of the asset as NPA from a quarter past due date of interest, all interest accrued and recognized in the books of accounts of the Mutual Fund till the date shall be provided for. For e.g. if interest income falls due on 30.06.2000, accrual of interest will continue till 30.09.2000 even if the income as on 30.06.2000 has not been received. Further, no accrual will take place from 01.10.2000 onwards. Full provision will be made for interest accrued and outstanding as on 30.06.2000. 9.7.4 Provision for NPAs - Debt Securities 9.7.4.1 Bot....
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....onths from the date of classification of the 'asset' as an NPA, the 'asset' will be fully provided for. If any installment is fallen due, during the period of interest default, the amount of provision shall be the installment amount or above provision amount, whichever is higher. 9.7.5 Reclassification of assets 9.7.5.1 Upon reclassification of assets as 'performing assets': a. In case a company has fully cleared all the arrears of interest, the interest provisions can be written back in full. b. The asset will be reclassified as performing on clearance of all interest arrears and if the debt is regularly serviced over the next two quarters. c. In case the company has fully cleared all the arrears of interest, the interest not credited on accrual basis shall be credited at the time of receipt. d. The provision made for the principal amount can be written back in the following manner 1. 100% of the asset provided for in the books will be written back at the end of the 2nd quarter where the provision of principal was made due to the interest defaults only. 2. 50% of the asset provided for in the books will be written back at the end of the 2nd quarter and 25% after eve....
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....one due to default in interest and principal amount, the asset shall continue as NPA for a period of 4 quarters, even though the asset is continued to be serviced during these 4 quarters regularly. Thereafter, the asset can be classified as 'performing asset' and all the interest provided till such date shall be written back. c. If the reschedulement is done for a second/ third time or thereafter, the characteristics of NPA should be continued for eight quarters of regular servicing of the debt. The provision shall be written back only after the asset is reclassified as 'performing asset'. 9.7.9 Disclosure in the Half Yearly Portfolio Reports 9.7.9.1 Mutual Funds shall make scrip wise disclosures of NPAs on Half Yearly basis along with the Half Yearly Portfolio Disclosure in the format prescribed For formats of Half yearly disclosure, please refer to the section on Formats. 9.7.9.2 The total amount of provisions made against the NPAs shall be disclosed in addition to the total quantum of NPAs and their proportion to the assets of the Mutual Fund scheme. In the list of investments and asterisk mark shall be given against such investments which are recognized as NPAs. Where th....
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....d on audited accounts. b. If the latest Balance Sheet of the company is not available within nine months from the close of the year, unless the accounting year is changed, the shares of such companies shall be valued at zero. c. If the Net Worth of the company is negative, the share would be marked down to zero. d. In case the EPS is negative, EPS value for that year shall be taken as zero for arriving at capitalised earning. e. In case an individual security accounts for more than 5 per cent of the total assets of the scheme, an independent valuer shall be appointed for the valuation of the said security. To determine if a security accounts for more than 5 per cent of the total assets of the scheme, it shall be valued in accordance with the procedure as mentioned above on the date of valuation. 9.8.2 At the discretion of the AMCs and with the approval of the Trustees, unlisted equity shares may be valued at a price lower than the value derived using the aforesaid methodology. 9.8.3 Due Diligence 9.8.3.1 Mutual Funds shall not make Investment in unlisted equity shares at a price higher than the price obtained by using the aforesaid methodology. However, this restrictio....
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....ch 7, 2003. For disclosure of transaction details, please refer to the section on Formats would help in daily matrix generation and would improve uniformity and accuracy of valuation in the mutual funds industry. 9.10.2 The AMCs shall also disclose all details of debt and money market securities transacted (including inter scheme transfers) in its schemes portfolio on its website and the same shall be forwarded to AMFI for consolidation and dissemination as per format For format please refer to the section on formats. These disclosures shall be made settlement date wise on daily basis with a time lag of 30 days SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012. 9.11 Consistency 9.11.1 All AMC's shall ensure that similar securities held under its various schemes shall be valued consistently. CHAPTER 10 LOADS, FEES, CHARGES AND EXPENSES 10.1 Limits on fees and expenses charged to schemes SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997, SEBI Circular No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998, SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 10.1.1 Mutual Funds may charge certain expenses to a scheme, as specified under Regulations.....
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....his respect, Mutual Fund schemes including close ended schemes, wherein exit load is not levied / not applicable, the AMCs shall not be eligible to charge the above mentioned additional expenses for such schemes. Further, existing Mutual Fund schemes including close ended schemes, wherein exit load is not levied / not applicable, shall discontinue, with immediate effect, the levy of above mentioned additional expenses, if any. 10.1.5 Total Expense Ratio - Change and Disclosure SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/18 dated February 5, 2018 and SEBI/HO/IMD/DF2/CIR/P/2018/91 dated June 05, 2018. (a) AMCs shall prominently disclose on a daily basis, the TER (scheme-wise, date-wise) of all schemes under a separate head -"Total Expense Ratio of Mutual Fund Schemes" on their website and on the website of AMFI in downloadable spreadsheet format Please refer to section on Formats for requisite formats.. (b) Any change in the base TER (i.e. TER excluding additional expenses provided in Regulation 52(6A)(b), 52(6A)(c) of SEBI (Mutual Funds) Regulations, 1996 and Goods and Services Tax on investment and advisory fees) in comparison to previous base TER charged to any scheme/plan....
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....ftware or even non-research-related services, etc., to the AMC. It may be noted that such arrangements between AMCs and brokers should be limited to only benefits (like free research report, etc.) that are in the interest of investors and the same should be suitably disclosed SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016. 10.1.11 Investor Education and Awareness SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012: (a) Mutual Funds/AMCs shall annually set apart at least 2 basis points on daily net assets within the maximum limit of TER as per regulation 52 of the Regulations for investor education and awareness initiatives. Mutual Funds shall make complete disclosures in the half yearly trustee report to SEBI regarding the investor education and awareness initiatives undertaken. (b) SEBI Circular No. CIR/IMD/DF/23/2017 dated March 15, 2017Certain portion of the 2 basis points of daily net assets is being set aside by Mutual Funds/AMCs for investor education and awareness initiatives at industry level. (c) In this respect, for the purpose of increasing awareness of Mutual Funds as a financial product category it has been decided to permit celeb....
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....EBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009. (b) Mutual Fund Schemes to be launched including those for which observation letter have been issued under Regulation Regulation 29 of SEBI (Mutual Funds) Regulations, 1996 would be required to carry out the changes in SID and file the same with SEBI before the launch. 10.2 Restriction on paying brokerage or commission SEBI Circular No. MFD/CIR No.3/211/2001 dated April 30, 2001, SEBI Circular No. MFD/CIR No.5/153/2001 dated May 24, 2001. 10.2.1 In case of investments made by the Sponsor(s), no brokerage or commission shall be paid. 10.3 Restriction on charging Service Tax SEBI Circular No. MFD/CIR/04/430/2002 dated June 19, 2002, SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 10.3.1 AMC(s) can charge Service Tax, as per applicable Taxation Laws, to the scheme(s) within the limits prescribed under Regulations Reg. 52(6) of the SEBI (Mutual Funds) Regulations, 1996. 10.3.2 Mutual funds /AMCs may charge service tax on investment and advisory fees to the scheme in addition to the maximum limit of TER as prescribed in Regulation 52 Regulation 52 of SEBI (Mutual Funds) Regulations, 1996. 10.3.3 Service tax on othe....
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.... b. However, not more than one- third of load balance as on July 31, 2009 shall be used in any financial year. It is clarified though the unutilized balances can be carried forward, yet in no financial year the total spending can be more than one third of the load balances on July 31, 2009. The accretions after July 31, 2009 can be used by mutual funds for marketing and selling expenses including distributor's/agent's commissions without any restrictions mentioned in Para (b) above. (d) The exit load charged Regulation 51A of SEBI (Mutual Funds) Regulations, 1996., if any, after the commencement of SEBI (Mutual Funds) (Second Amendment) Regulations, 2012, shall be credited to the scheme. (e) The distributors should disclose all the commissions (in the form of trail commission or any other mode) payable to them for the different competing schemes of various Mutual Funds from amongst which the scheme is being recommended to the investor. 10.4.2 The above guidelines became applicable for: (a) Investments in mutual fund schemes (including additional purchases and switch-in to a scheme from other schemes) w.e.f August 1, 2009 (b) Redemptions from mutual fund schemes (in....
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....action charge shall be recovered in 3-4 installments. (j) There shall be no transaction charge on transactions other than purchases/ subscriptions relating to new inflows. 10.5.2 Mutual Funds shall institute systems to detect if a distributor is splitting investments in order to enhance the amount of transaction charges and take stringent action including recommendations to AMFI to take appropriate action. 10.5.3 Mutual Funds/AMCs shall carry out an exercise of de-duplication of folios across all Mutual Funds within a period of 6 months from August 22, 2011. 10.6 No Load on Bonus Units and Units allotted on Reinvestment of Dividend SEBI Circular No. SEBI/IMD/CIR No. 14/120784/08 dated March 18, 2008 10.6.1 AMC(s) shall not charge entry and/or exit load on bonus units and units allotted on reinvestment of dividend. Necessary disclosures in this regard shall be made in the SID filed with the Board SEBI Circular No. CIR/ IMD/DF/24/2012 dated November 19, 2012 10.7 Filing fees SEBI Cir No. SEBI / IMD / CIR No. 5 / 169030 / 2009 dated July 8, 2009 10.7.1 Revised filing fee Gazettee Notification No. LAD-NRO/GN/20014-15/03/1089 on SEBI (Payment of Fees) (Amendment) Regulations, 20....
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....on of the Trustees with respect to the dividend to be distributed, the AMC(s) shall issue a notice to the public communicating the decision including the record date. The record date shall be five calendar days from the issue of public notice. 11.2.1.4 Before the issue of such notice, no communication whatsoever indicating the probable date of dividend declaration shall be issued by any Mutual Fund or its distributors of its products. 11.2.1.5 Such notice shall be given in at least one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the head office of the Mutual Fund is situated. 11.2.1.6 The notice shall, in font size 10, bold, categorically state that pursuant to dividend distribution, NAV of the scheme would fall to the extent of payout and statutory levy (if applicable). 11.2.2 Liquid / Debt Schemes with frequent dividend distribution 11.2.2.1 The requirement of giving notice is not mandatory for scheme(s)/ plan(s)/ option(s) with dividend distribution frequency ranging from daily up to monthly distribution if requisite disclosures in this regard are made in the SID. 11.2.3 Listed Schemes/Pl....
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....r or industry specific scheme, the upper ceiling on investments may be in accordance with the weightage of the scrips in the representative sectoral index or sub index as disclosed in the SID or 10% of the NAV of the scheme, whichever is higher. 12.2 Investments by Liquid Schemes and plans SEBI Circular No - SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009 12.2.1 The 'liquid fund schemes and plans' shall make investment in /purchase debt and money market securities with maturity of upto 91 days only With effect from February 01, 2009 make investment in /purchase debt and money market securities with maturity of upto182 days only.. This shall also be applicable in case of inter scheme transfer of securities Transition provision: Inter-scheme transfers of securities having maturity upto 365 days and held in other schemes as on February 01, 2009 shall be permitted till October 31, 2009. With effect from November 1, 2009 the requirements stated at paragraph 12.2.1 above shall apply to such inter-se scheme transfers also. 12.2.1.1 Explanation: a. In case of securities where the principal is to be repaid in a single payout the maturity of the securities shall mean residual mat....
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....osure - a) Mutual Funds/ AMCs shall ensure that total exposure of debt schemes of mutual funds in a group (excluding investments in securities issued by Public Sector Units, Public Financial Institutions and Public Sector Banks) shall not exceed 20% of the net assets of the scheme. Such investment limit may be extended to 25% of the net assets of the scheme with the prior approval of the Board of Trustees. b) For this purpose, a group means a group as defined under regulation 2 (mm) of SEBI (Mutual Funds) Regulations, 1996 (Regulations) and shall include an entity, its subsidiaries, fellow subsidiaries, its holding company and its associates. 12.4.4 Trustee shall review exposure of a mutual fund, across all its schemes, towards individual issuers, group companies and sectors. Trustee should satisfy themselves on the levels of exposure and confirm the same to SEBI in the half-yearly trustee report starting from the half-year ending March 31, 2016. 12.4.5 The revised investment restrictions at issuer level, sector level and group level shall be applicable to all new schemes and fresh investments by existing schemes from the date of this circular (i.e. February 15, 2016). 12.4.....
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....al is obtained from the Trustees and the intention to lend securities is conveyed to the unit holders. 12.6 Approval for Investment in Unrated Debt Instruments SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 12.6.1 Mutual Funds may, for the purpose of operational flexibility, constitute committees to approve investment proposals in unrated instruments. However, detailed parameters for investment in unrated debt instruments have to be approved by the Board of the AMC and Trustees. Details of such investments shall be communicated by the AMCs to the Trustees in their periodical reports, along with clear indication as to how the parameters set for investments have been complied with. Prior approval of the Board of the AMC and Trustees shall be required in case investment is sought to be made in an unrated security falling outside the prescribed parameters. 12.7 Investments in Units of Venture Capital Funds SEBI Circular No. MFD/CIR/9/230/2001 dated August 14, 2001. 12.7.1 Mutual Fund schemes can invest in listed or unlisted securities or units of Venture Capital Funds within the prescribed investment limits as applicable. Clauses 10 and 11, Seventh Schedule of SEBI (....
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....nds of a particular scheme are not parked in short term deposit of a bank which has invested in that scheme. 12.10.1.6 In case of liquid and debt oriented schemes, AMC(s) shall not charge any investment management and advisory fees for parking of funds in short term deposits of scheduled commercial banks. 12.10.1.7 Half Yearly portfolio statements shall disclose all funds parked in short term deposit(s) under a separate heading. Details shall also include name of the bank, amount of funds parked, percentage of NAV. 12.10.1.8 Trustees shall, in the Half Yearly Trustee Reports certify that provisions of the Mutual Funds Regulations pertaining to parking of funds in short term deposits pending deployment are complied with at all points of time. The AMC(s) shall also certify the same in its CTR(s). 12.10.1.9 Investments made in short term deposits pending deployment of funds Clause 8, Schedule Seven, SEBI (Mutual Funds), Regulations, 1996. shall be recorded SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. and reported to the Trustees including the reasons for the investment especially comparisons with interest rates offered by other scheduled commercial banks. SEBI Circ....
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....ticipate in repo transactions only in AA SEBI Circular No. CIR/IMD/DF/23/2012 dated November 15, 2012 and above rated corporate debt securities. 12.12.1.4 In terms of Regulation 44 (2) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, mutual funds shall borrow through repo transactions only if the tenor of the transaction does not exceed a period of six months. 12.12.1.5 The Trustees and the Asset Management Companies shall frame guidelines about, inter alia, , the following in context of these transactions keeping in mind the interest of investors in their schemes: a. Category of counterparty b. Credit rating of counterparty c. Tenor of collateral d. Applicable haircuts 12.12.1.6 Mutual funds shall ensure compliance with the Seventh Schedule of the Mutual Funds Regulations about restrictions on investments, wherever applicable, with respect to repo transactions in corporate debt securities. 12.12.1.7 The details of repo transactions of the schemes in corporate debt securities, including details of counterparties, amount involved and percentage of NAV shall be disclosed to investors in the half yearly portfolio statements and to SEBI in....
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....urities b. Real Estate Investment Trusts listed on recognized Stock Exchanges overseas or c. Unlisted overseas securities, not exceeding 10% of their net assets 12.13.3 Other Conditions: Funds Regulations and guidelines issued from time to time, Mutual Funds shall adhere to the following specific guidelines while making overseas investments: 12.13.3.1 Appointment of a Dedicated Fund Manager: a. A dedicated fund manager shall be appointed for making the above overseas investments stipulated under clause 12.13.2.1 to 12.13.2.10. 12.13.3.2 Due Diligence: a. The Board of the AMC and Trustees shall exercise due diligence in making investment decisions and record the same. SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. They shall make a detailed analysis of risks and returns of overseas investment and how these investments would be in the interest of investors. Investment shall be made in liquid actively traded securities /instruments. b. The Board of the AMC and Trustees may prescribe detailed parameters for making such investments which may include identification of countries, country rating, country limits etc. They shall satisfy themselves that the AMC has exp....
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....he overseas investments for the first time, the AMC shall ensure that a written communication about the proposed investment is sent to each unit holder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the Mutual Fund is situated. The communication to unit holders shall also disclose the risk factors associated with such investments. 12.13.3.5 Detailed periodic reporting to Trustees by AMC(s) shall include: a. Performance of overseas investments b. Amount invested in various schemes and any breach of the exposure limit laid down in the SID. 12.13.3.6 Review of Performance: a. The Board of the AMC and Trustees shall review the performance of schemes making overseas investments with appropriate benchmark(s) as disclosed in the SID. 12.13.3.7 Reporting to the Board: a. The Trustees shall offer their comments on the compliance of these guidelines in the Half Yearly Reports filed with the Board. 12.13.3.8 Prudential Investment Norms: a. Investment restrictions specified in Schedule Seven of the Mutual Funds Regulations are applicable to overse....
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.... Funds) Regulations, 1996. c. For investment in units of REITs / InvITs by an existing Mutual Fund scheme, unit holders of the scheme shall be given a time period of at least 15 days for the purpose of exercising the exit option. 12.16 Investment Restrictions SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000. 12.16.1 All investment restrictions as contained in the Regulations Seventh Schedule of SEBI (Mutual Funds) Regulations, 1996. shall be applicable at the time of making investment. 12.17 Recording of Investment Decisions SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. 12.17.1 AMC(s) shall exercise due diligence and care in all investment decisions as would be exercised by other persons engaged in the same business. Regulation 25(2) of the SEBI (Mutual Funds) Regulations, 1996. Further AMC(s) shall maintain records in support of each investment decision which will indicate data, facts and opinion leading to that decision. While broad parameters for investments can be prescribed by the Board of Directors of the AMC, the basis for taking individual scrip wise investment decision in equity and debt securities shall be recorded. A detailed research report an....
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....quantity of the existing position against which hedge has been taken. 12.18.1.6 Mutual Funds may enter into plain vanilla interest rate swaps for hedging purposes. The counter party in such transactions has to be an entity recognized as a market maker by RBI. Further, the value of the notional principal in such cases must not exceed the value of respective existing assets being hedged by the scheme. Exposure to a single counterparty in such transactions should not exceed 10% of the net assets of the scheme. 12.18.1.7 Exposure due to derivative positions taken for hedging purposes in excess of the underlying position against which the hedging position has been taken, shall be treated under the limits mentioned in point 12.18.1.1. 12.18.1.8 Hedging of Interest Rate Risk a. SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/109 dated September 27, 2017 To reduce interest rate risk in a debt portfolio, mutual funds may hedge the portfolio or part of the portfolio (including one or more securities) on weighted average modified duration basis by using Interest Rate Futures (IRFs).The maximum extent of short position that may be taken in IRFs to hedge interest rate risk of the portfolio or....
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.... Explanation: In case of long term bond fund, after hedging the portfolio based on the modified duration of the portfolio, the net modified duration should not be less than the minimum modified duration of the portfolio as required to consider the fund as a long term bond fund. e. The interest rate hedging of the portfolio should be in the interest of the investors. f. Mutual Fund schemes may imperfectly hedge their portfolio or part of their portfolio using IRFs, subject to the following conditions: i. Prior to commencement of imperfect hedging, existing schemes shall comply with the provisions of Regulation 18 (15A) of SEBI (Mutual Funds) Regulations, 1996 and all unit holders shall be given a time-period of at least 30 days to exercise the option to exit at prevailing NAV without charging of exit load. The risks associated with imperfect hedging shall be disclosed and explained by suitable numerical examples in the offer documents and also needs to be communicated to the investors through public notice or any other form of correspondence. ii. In case of new schemes, the risks associated with imperfect hedging shall be disclosed and explained by suitable numerical exam....
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....tion: In case of securities with put and call options the residual time for exercising the put option of the securities shall not be beyond the opening of the immediately following transaction period. 12.20 CDS - mutual funds as users (protection buyers) SEBI Circular No. CIR/IMD/DF/23/2012 dated November 15, 2012. 12.20.1 Mutual funds have been permitted to participate in CDS market, as per the guidelines issued by RBI from time to time , subject to the following conditions: a. Mutual funds shall participate in CDS transactions only as users (protection buyer). Thus, mutual funds are permitted to buy credit protection only to hedge their credit risk on corporate bonds they hold. They shall not be allowed to sell protection and hence not permitted to enter into short positions in the CDS contracts. However, they shall be permitted to exit their bought CDS positions, subject to para (d) below. b. Mutual funds can participate as users in CDS for the eligible securities as reference obligations, constituting from within the portfolio of only Fixed Maturity Plans (FMP) schemes having tenor exceeding one year. c. Mutual funds shall buy CDS only from a market maker approved by t....
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....epository participant (DP). 13.1.2 Indirect route- Holding MF units via Unit Confirmation Receipt (UCR). 13.2 The investment through the above mentioned routes shall be subject to the following conditions: 13.2.1 Qualified Foreign Investor (QFI) shall mean a person resident in a country that is compliant with Financial Action Task Force (FATF) standards and that is a signatory to International Organization of Securities Commission's (IOSCO's) Multilateral Memorandum of Understanding, Provided that such person is not resident in India, Provided further that such person is not registered with SEBI as Foreign Institutional Investor or Sub-account. Explanation- For the purposes of this clause: (1) the term "Person" shall carry the same meaning under Section 2(31) of the Income Tax Act, 1961 (2) the phrase "resident in India" shall carry the same meaning as in the Income Tax Act, 1961 (3) "resident" in a country, other than India, shall mean resident as per the direct tax laws of that country. 13.2.2 MF shall ensure that only QFIs who comply with para 13.2.1 are allowed to invest under these routes. 13.2.3 MF shall ensure that QFIs meet the KYC requirements as per t....
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....shall allot units based on the NAV of the day on which funds are realized in the MF's scheme bank account in India and in case of redemption, units shall be 181 Master Circular for Mutual Funds redeemed on the day on which transaction slip/instruction is received and time stamped by MF, as per the applicable cut off time. The Scheme information documents of the MF shall clearly mention the applicable cut off time for QFIs and the other requirements / applicable guidelines for QFIs. 13.2.11 MF shall ensure that Systematic Investments/ transfer/ withdrawals and switches are not available to the QFIs. QFIs can only subscribe or redeem. 13.2.12 MF/ DP shall ensure that units/ UCRs held by QFIs are free from all encumbrances i.e. pledge or lien cannot be created for such units. 13.2.13 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 13.2.14 MF shall ensure that all the investor related documents/ records of the QFIs are available with them. 13.2.15 MF shall ensure compliance with laws (rules and regulations) of the jurisdictions where the QFIs are based and also ensure that the interest of exi....
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....sued in this regard from time to time on an ongoing basis. 13.3.6 The qualified DP shall open a separate single rupee pool bank account with a designated AD Category -I bank, exclusively for the purpose of investments by QFIs in India. 13.3.7 Process Flow Subscription a. The QFIs shall place a purchase/ subscription order mentioning the name of the scheme/MF with its DP and remit foreign inward remittances through normal banking channel in any permitted currency (freely convertible) directly to the single rupee pool bank account of the DP maintained with a designated AD category - I bank. b. DP in turn shall forward the purchase order to the concerned MF and remits the money to the MF's scheme account on the same day as the receipt of funds from QFIs. In case of receipt of money after business hours, DP shall remit the funds to MF scheme account by next business day. c. If for any reasons, the DP is not able to remit the money to the MF scheme account within the stipulated timeframe as mentioned in para-b, the DP shall immediately return the money to the designated overseas bank account of the QFIs. d. MF shall process the order and credit units into the demat account of....
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....nsferor scheme) are retained, the performance of the scheme whose features are retained needs to be disclosed. d. When Scheme A (Transferor Scheme) gets merged with Scheme B (Transferee Scheme) and a new scheme, Scheme C emerges after such consolidation or merger of schemes, the past performance need not be provided. 13.3.8.2 In addition to disclosing the performance of the scheme as mentioned above, past performance of such scheme(s) whose features are not retained post-merger may also be made available on request with adequate disclaimer. 13.3.8.3 This Circular shall be applicable with effect from May 01, 2018. 13.4 Other conditions for Indirect route (Unit Confirmation Receipts) 13.4.1 There shall be four parties involved - QFIs, UCR issuer (based overseas), SEBI registered Custodian (based in India) and MF. 13.4.2 QFIs can subscribe / redeem only through the UCR Issuer. 13.4.3 MF shall appoint one or more UCR issuing agent overseas and one SEBI registered custodian in India. 13.4.4 UCR issuer appointed by MF shall act as agent of the MF. 13.4.5 MF can appoint entities fulfilling the following conditions as UCR issuer: a. The entity is able to demonstrate that it has....
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....sue units to the custodian and custodian in turn confirm to the UCR Issuer to issue UCR to the QFIs. c. In case of redemption, UCR issuer shall confirm receipt of redemption request to the MF and Custodian. Upon receipt of instruction, MF shall process the same and shall transfer the redemption proceeds to the MF overseas bank account for making payment to the designated overseas bank account of the QFIs. d. In case of dividend payout, the MF shall transfer the dividend amounts to the MF overseas bank account for making payment to the designated overseas bank account of the QFIs. In case MF receives money in India from UCR issuer. e. UCR issuer shall forward the purchase order to MF and Custodian, and remit the funds into MF scheme account (in rupee terms). Upon receipt of funds; the MF shall issue units to the custodian and custodian shall in turn confirm to the UCR Issuer to issue UCR to the QFIs. f. In case of redemption, UCR issuer shall confirm receipt of redemption request to the MF & Custodian. Upon receipt of instruction, MF shall process and remit redemption proceeds to the UCR issuer which in turn shall remit redemption proceeds to the designated bank account of....
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....e of advertisement. 14.3.1.4 It should be specifically mentioned whether performance so disclosed, is of regular or direct plan of the Mutual Fund scheme along-with a footnote mentioning that different plans have a different expense structure. 14.3.1.5 If a Mutual Fund scheme has not been managed by the same fund manager for the full period of the information being published in the advertisement, the same should be disclosed in a footnote 14.3.2 When a scheme has been in existence for more than 1 year but less than 3 years or 5 years, the same shall be mentioned as a footnote in the performance advertisement of the Mutual Fund scheme 14.3.3 Where the scheme has been in existence for less than one year, past performance shall not be provided SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011. 14.3.4 In case of Money Market schemes or cash and liquid schemes SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012, wherein investors have very short investment horizon, the performance can be advertised by simple annualisation of yields if a performance figure is available for at least 7 days, 15 days and 30 days provided it does not reflect an unrealistic or misleading....
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....nce of other schemes managed by the concerned fund manager is provided. 14.4 Indicative portfolios and yields in mutual funds schemes SEBI Circular No. IMD/CIR No. 14/1510/2009 dated January 19, 2009 14.4.1 Mutual Funds shall not offer any indicative portfolio and indicative yield. No communication regarding the same in any manner whatsoever shall be issued by any Mutual Fund or distributors of its products. The compliance of the same shall be monitored by the AMC and Trustees and reported in their respective reports to SEBI. 14.4.2 Indicative portfolio or yield in close ended debt oriented mutual fund schemes SEBI Circular No. CIR/IMD/DF/12/2011 dated August 01,2011 Mutual Funds (MFs) / AMCs may make following additional disclosures in the SID/SAI and KIM without indicating the portfolio or yield, directly or indirectly: 14.4.2.1 MFs/AMCs shall disclose their credit evaluation policy for the investments in debt securities. 14.4.2.2 MFs/AMCs shall also disclose the list of sectors they would not be investing. 14.4.2.3 MFs shall disclose the type of instruments which the schemes propose to invest viz. CPs, CDs, Treasury bills etc 14.4.2.4 MFs shall disclose the floors and ce....
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.... Funds specifically for deployment of the unclaimed amounts. 15.2.2 AMCs shall not be permitted to charge any exit load in this plan and TER (Total Expense Ratio) of such plan shall be capped at 50 bps. 15.2.3 Further, for the Unclaimed redemption and dividend amounts deployed by Mutual Funds in Call Money Market or Money Market instruments, the investment management and advisory fee charged by the AMC for managing unclaimed amounts shall not exceed 50 basis points. 15.2.4 Investors who claim the unclaimed amounts during a period of three years from the due date shall be paid initial unclaimed amount along-with the income earned on its deployment. Investors, who claim these amounts after 3 years, shall be paid initial unclaimed amount along-with the income earned on its deployment till the end of the third year. After the third year, the income earned on such unclaimed amounts shall be used for the purpose of investor education. 15.2.5 The AMC shall make a continuous effort to remind the investors through letters to take their unclaimed amounts. 15.2.6 Further, to ensure Mutual Funds play a pro-active role in tracing the rightful owner of the unclaimed amounts: a. Mutual Fun....
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....ave taken place during that month. 15.3.2.2 Pursuant to the Interim Budget announcement in 2014 to create one record for all financial assets of every individual, it has been further decided that AMCs/ RTAs shall share the requisite information with the Depositories on monthly basis to enable generation of CAS SEBI Circular No CIR/MRD/ DP/ 31/2014 dated November 12, 2014. 15.3.2.3 The depositories and the Asset Management Companies (AMCs)/ MF-RTAs shall put in place systems to facilitate generation and dispatch of single Consolidated Account Statements (CAS) for investors having MF investments and holding demat accounts. AMCs/ RTAs shall share the requisite information with the Depositories on monthly basis to enable generation of CAS. 15.3.2.4 Consolidation of account statement shall be done on the basis of PAN. In case of multiple holding, it shall be PAN of the first holder and pattern of holding. Based on the PANs provided by the AMCs/MF-RTAs, the Depositories shall match their PAN database to determine the common PANs and allocate the PANs among themselves for the purpose of sending CAS. For PANs which are common between depositories and AMCs, the Depositories shall send....
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....015 with respect to the transactions carried out during the month of February 2015. 15.3.2.11 If an investor does not wish to receive CAS, an option shall be given to the investor to indicate negative consent. Depositories shall accordingly inform investors in their statements from the month of January 2015 about the facility of CAS and give them information on how to opt out of the facility if they do not wish to avail it. 15.3.2.12 Where such an option is exercised, the concerned depository shall inform the AMC/MF-RTA accordingly and the data with respect to the said investor shall not be shared by the AMC/MF-RTA with the depository. 15.3.2.13 If there is any transaction in any of the demat accounts of the investor or in any of his mutual fund folios, then CAS shall be sent to that investor on monthly basis. In case there is no transaction in any of the mutual fund folios and demat accounts then CAS with holding details shall be sent to the investor on half yearly basis. However, in case of demat accounts with nil balance and no transactions in securities and in mutual fund folios, the requirement to send physical statement shall be applicable as specified in SEBI circular ....
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....rly CAS may be referred. 15.3.3 Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) or Systematic Withdrawal Plan (SWP) SEBI Circular No. IMD/CIR/12/80083/2006 dated November 20, 2006 a. Mutual Funds may dispatch the Statement of Accounts to the unit holders under SIP or STP or SWP, once every quarter ending March, June, September and December within 10 working days of the end of the respective quarter. The first Statement of Accounts shall however be issued within 10 working days of the initial transaction. b. Mutual funds shall also provide Statement of Accounts to unit holders within 5 working days, without any charges, if specific requests are received from the investors. Further, if so mandated, a soft copy of the Statement of Accounts shall be e-mailed to the unit holders on a monthly basis. 15.3.4 Dormant Accountholders a. Mutual Funds shall also provide Statement of Accounts to those unit holders who have not transacted during the last six months prior to the date of generation of the Statement of Accounts. In such cases, the Statement of Accounts may be issued along with the scheme's Portfolio Statement or Annual Report and should reflect the last clo....
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....eques/ demand drafts are used as a mode of payment. 15.7.2 The banks which are in SEBI's list shall extend the same facility in case of NFOs of mutual fund schemes to all eligible investors in Mutual Fund units. 15.7.3 Mutual Funds shall ensure that adequate arrangements are made by Registrar and Transfer Agents for the implementation of ASBA. Mutual Funds/AMCs shall make all relevant disclosures in this regard in the SAI. 15.7.4 SEBI circulars SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008, SEBI/CFD/DIL/2008/25/09dated September 25, 2008, SEBI/CFD/DIL/MB/IS/5/2009/05/08 dated August 5, 2009 and SEBI/CFD/DIL/ASBA/1/2009/30/12 dated December 30, 2009 and CIR/CFD/DIL/7/2010 dated July 13, 2010 related to ASBA shall be followed to the extent applicable. 15.7.5 The Mutual Funds/AMCs have to compulsorily provide ASBA facility to the investors for all NFOs launched on or after October 1, 2010. 15.8 Instant Access Facility and use of e-wallet for investment in Mutual Funds SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/39 dated May 08, 2017 15.8.1 Instant Access Facility (IAF) 1. IAF facilitates credit of redemption proceeds in the bank account of the inves....
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.... Trustees and keep in place adequate safeguards in the system to implement this facility. ii. IAF shall also be considered while carrying out stress testing of the schemes. 15.8.2 Use of e-wallet for investment in MFs 15.8.2.1 With an objective to promote digitalization, MFs/AMCs can accept investment by an investor through e-wallets (Prepaid Payment Instruments (PPIs)) subject to the following: a. MFs/ AMCs shall ensure that extant regulations such as cut-off timings, time stamping, etc., are complied with for investment in MFs using e-wallets. b. MFs/ AMCs shall enter into an agreement / arrangement with issuers of PPIs for facilitating payment from e-wallets to MF schemes. c. Redemption proceeds should be made only to the bank account of the investor/ unit holder as required under SEBI Circular MFD/CIR/15/19133/2002 dated September 30, 2002. d. MFs/ AMCs shall ensure that total subscription through e-wallets for an investor is restricted to INR 50,000/-per MF per financial year. Further, in partial modification to the Circular CIR/IMD/DF/10/2014 dated May 22, 2014, the limit of INR 50,000/-would be an umbrella limit for investments by an investor through both e-walle....
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....d for their certification programme conducted for agents and distributors. 15.11.5 Board may be kept informed about the steps taken by the AMCs in this regard from time to time. 15.12 Financial Inclusion: 15.12.1 In context of Mutual Funds, financial inclusion implies that the concept of Mutual Fund products is understood by all and are accessible to anyone who wishes to make an investment in them. Also, investors should be capable of figuring out which Mutual Fund scheme is appropriate for their financial objectives. Towards this, it has been decided that: a. Mutual Funds shall mandatorily also make available printed literature on mutual funds in regional languages for investor awareness and education. b. Mutual Funds to introduce Investor awareness campaign in regional languages both in print and electronic media CHAPTER 16 CERTIFICATION AND REGISTRATION OF INTERMEDIARIES SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001, SEBI Circular No. MFD/CIR/20/23230/2002 dated November 28, 2002, SEBI Circular No. SEBI/MFD/CIR No.01/6693/03 dated April 3, 2003, SEBI Circular No. SEBI/IMD/CIR No.2/254/04 dated February 4, 2004, SEBI Circular No. MFD/CIR/06/210/2002 dat....
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....ocess, Mutual Funds/AMCs shall undertake a due diligence process to satisfy 'fit and proper' criteria that incorporate, amongst others, the following factors: a. Business model, experience and proficiency in the business. b. Record of regulatory / statutory levies, fines and penalties, legal suits, customer compensations made; causes for these and resultant corrective actions taken. c. Review of associates and subsidiaries on above factors. d. Organizational controls to ensure that the following processes are delinked from sales and relationship management processes and personnel: 1. Customer risk / investment objective evaluation. 2. MF scheme evaluation and defining its appropriateness to various customer risk categories. 16.4.1.4 In this respect, customer relationship and transactions shall be categorized as: a. Advisory - where a distributor represents to offer advice while distributing the product, it will be subject to the principle of 'appropriateness' of products to that customer category. Appropriateness is defined as selling only that product categorization that is identified as best suited for investors within a defined upper ceiling of risk appetite. No e....
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....ations and Guidelines pertaining to Mutual Funds especially guidelines on advertisements and/ or sales literature and/or Code of Conduct shall be reported in the periodic meetings of the Board of the AMC and the Trustee(s) and shall also be reported to the Board by the AMC(s) in their CTR(s) and by the Trustees in their Half Yearly Reports. 16.5.2 AMFI has prescribed a Code of Conduct for Mutual Fund intermediaries enclosed herewith as Annexure 1 Refer Annexure and Reports for details on Code of Conduct. All intermediaries shall follow the Code of Conduct strictly and not indulge in any practice contravening it directly or indirectly. 16.5.3 Non compliance with the Code of Conduct shall be reported by the Mutual Funds to the Board and AMFI. Further, no Mutual Fund shall deal with intermediaries contravening the prescribed Code of Conduct. 16.6 Empanelment of Intermediaries by Mutual Funds 16.6.1 Empanelment of intermediaries by Mutual Funds, payment of commissions, brokerage and/or sub-brokerage etc. shall be in accordance with parameters and guidelines specified by the Board and AMFI from time to time. Mutual Funds shall monitor the compliance of these guidelines and Code of C....
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....time after December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, prior to the expiry of the validity of the certification. 16.7.5 The requirement of obtaining registration from AMFI after obtaining certification, as per the Circular dated November 28, 2002, would continue. 16.8 New cadre of distributors SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 16.8.1 A new cadre of distributors, such as postal agents, retired government and semi-government officials (class III and above or equivalent) with a service of at least 10 years, retired teachers with a service of at least 10 years, retired bank officers with a service of at least 10 years, and other similar persons (such as Bank correspondents) as may be notified by AMFI/AMC from time to time, shall be allowed to sell units of simple and performing mutual fund schemes. 16.8.2 Simple and performing mutual fund schemes shall comprise of diversified equity schemes, fixed maturity plans (FMPs), index schemes, Retirement benefit schemes having tax benefits and Liquid schemes/ Money Market Mutual Fund schemes SEBI Circul....
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....ing the unique identity number of such sales personnel along with the ARN of distributor. CHAPTER 17 TRANSACTION IN MUTUAL FUNDS UNITS 17.1 Maintenance of documents SEBI Circular No - SEBI/IMD/CIR No.12 /186868 /2009 dated December 11,2009 17.1.1 As per the requirements specified by Board in respect of "Anti Money Laundering (AML) Standards/Combating Financing of Terrorism (CFT) / Obligations of Securities Market Intermediaries under Prevention of Money Laundering Act, 2002 and Rules framed there-under" SEBI Circular No ISD/AML/CIR-1/2008 dated December 19, 2008, maintenance of all documentation pertaining to the unitholders/ investors is the responsibility of the AMC. 17.1.2 Accordingly, vide SEBI Circular No - SEBI/IMD/CIR No.12 /186868 /2009 dated December 11, 2009, AMCs were advised to confirm whether all the investor related documents were maintained/ available with the AMC. If not, and to the extent of and relating to such investor accounts/folios where investor related documentation was incomplete/inadequate/not available or was stated to be maintained by the distributors, then the Trustees were advised to ensure the following: 17.1.2.1 No further payment of any commi....
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....tock brokers of recognized stock exchanges and such stock brokers will be eligible to be considered as official points of acceptance SEBI Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006. 17.2.3 The respective stock exchange would provide detailed operating guidelines to facilitate the same. 17.2.4 In this regard, Mutual Funds/AMC are advised that: 17.2.4.1 Empanelment and monitoring of Code of Conduct for brokers acting as mutual fund intermediaries- a. The stock brokers intending to extend the transaction in Mutual Funds through stock exchange mechanism shall be required to comply with the requirements of passing the AMFI certification examination Please refer Chapter 16 on Certification and Registration of Mutual Funds intermediaries. All such stock brokers would then be considered as empaneled distributors with mutual fund/AMC. b. These stock brokers shall also comply with Code of Conduct For Code of Conduct, please refer to Annexure I for intermediaries of Mutual Funds, and applicable SEBI guidelines Please refer Chapter 16 on Certification and Registration of Mutual Funds intermediaries, applicable to intermediaries engaged in selling and marketing of mu....
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.... terms of SEBI requirements SEBI Circular No - MRD/DoP/Dep/Cir-29/2004 dated August 24, 2004 would be considered compliance with applicable requirements specified in this regard SEBI Circular No - ISD/AML/CIR-1/2008 dated December 19, 2008 by Mutual Funds/AMCs. b. The Mutual Funds/AMC shall take necessary steps to do KYC requirements of all investors as per the prescribed guidelines SEBI Circular No. MIRSD/SE/Cir-21/2011, dated October 5, 2011, SEBI Circular No.MIRSD/Cir-23/2011 dated December 2, 2011 and SEBI Circular No.MIRSD/Cir- 26 /2011 dated December 23, 2011. 17.2.4.8 Stock exchanges and mutual funds/AMCs, based on the experience gained may improve the mechanism in the interest of investors. 17.2.4.9 In addition to the existing facilities of purchasing and redeeming directly with the Mutual Funds and Stock Brokers, the following be noted SEBI Circular No CIR/IMD/DF/17/2010 dated November 9, 2010: a. Units of mutual funds schemes may be permitted to be transacted through clearing members of the registered Stock Exchanges. b. Permit Depository participants of registered Depositories to process only redemption request of units held in demat form. 17.2.4.10 The followin....
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....of SEBI (Mutual Fund) Regulations, 1996 states that "a unit unless otherwise restricted or prohibited under the scheme, shall be freely transferable by act of parties or by operation of law." The spirit and intention of this regulation is not to prohibit transferability of units as a general rule or practice. b. All AMCs shall clarify by way of an addendum that units of all mutual fund schemes held in demat form shall be freely transferable from the date of the issue of said addendum which shall be not later than October 1, 2010. However, restrictions on transfer of units of ELSS schemes during the lock-in period shall continue to be applicable as per the ELSS Guidelines. 17.2.5 Stock exchanges and mutual funds/AMCs, based on the experience gained may further improve the mechanism in the interest of investors. Necessary clarifications, if any, would be issued at appropriate time by SEBI in this regard. 17.2.6 SEBI Circular No. SEBI/HO/MRD/DSA/CIR/P/2016/113 dated October 19, 2016 SEBI Registered Investment Advisors (RIAs) has been allowed to use infrastructure of the recognised stock exchanges to purchase and redeem mutual fund units directly from Mutual Fund/Assets Management ....
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.....in. 18.2 Clarification SEBI Circular No.Cir/IMD/DF/7/2012 dated February 28, 2012 to Regulation 24 Of SEBI (Mutual Funds) Regulations, 1996 18.2.1 The amended Regulation mandates that AMCs shall appoint separate fund manager for each separate fund managed by it unless the investment objectives and assets allocations are the same and the portfolio is replicated across all the funds managed by the fund manager. 18.2.2 The replication of minimum 70% of portfolio value shall be considered as adequate for the purpose of said compliance, provided that AMC has in place a written policy for trade allocation and it ensures at all points of time that the fund manager shall not take directionally opposite positions in the schemes managed by him. 18.2.3 Wherein a fund manager is common across mutual fund schemes and schemes/products under other permissible activities of AMC, then the AMC shall: 18.2.3.1 disclose on their websites, the returns provided by the said manager for all the schemes (mutual fund, pension funds, offshore funds etc) on a monthly basis. 18.2.3.2 in case of any performance advertisement is issued by the AMC for any scheme, then the details of returns of all the sc....