TaxTMI 
TaxTMI 
Master Circular for Mutual Funds
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.... upto September 14, 2016. 2. In case of any inconsistency between 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 .................................................................................. 29 NEW PRODUCTS ......................................................
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....189 CHAPTER 17 ............................................................................... 198 MISCELLANEOUS ........................................................................ 198 FORMATS ------------------------------------------- Refer the attachment ANNEXURES --------------------------------------- Refer the attachment ABBREVIATIONS American Depository Receipt ADR Asset Management Company AMC Asset under Management AUM Association of Mutual Funds in India AMFI Authorized Dealer AD Bombay Stock Exchange BSE Central Board of Direct Taxes CBDT Compliance Test Reports CTR(s) Common Account Statement CAS Contingent Deferred Sales Charge CDSC Compound Annual Growth Rate CAGR Depository Participant DP External Commercial Borrowings ECB Financial Action Task Force FATF Foreign Exchange Management Act FEMA Foreign Institutional Investor FII Fixed Maturity Plans FMP(s) Global Depository Receipt GDR Gold Exchange Traded Fund GETF Gold Monetization Scheme GMS Hindu Undivided Family HUF International Organization of Securities Commission ....
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....aft SID of schemes of Mutual Funds filed with the Board shall also be available on SEBI's website - www.sebi.gov.in for 21 working days from the date of filing. b. AMC shall submit a soft copy of draft SID to the Board in HTML or PDF format. For this purpose, AMC shall be fully responsible for the contents of soft copies of the SID. AMC shall also submit an undertaking to the Board while filing the soft copy of draft SID certifying that the information contained in the soft copy matches exactly with the contents of the hard copy filed with the Board. c. In case of any inaccurate filing, the SID will be returned and refiling will be required. 21 working days ^Regulation 29(3) of SEBI (Mutual Funds) Regulation 1996 shall be calculated from the date of refiling; ^SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997. d. If any changes to the SID are made after filing, the 21 working day(s) period will recommence from the date of submission of the last additional statement(s) ^SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997, SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997. 1.1.3.2 Filing of SAI a. A ....
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....inancial year, SID shall be updated within 3 months of the end of the subsequent financial year. (For example, for a scheme launched in May, 2016 the SID shall be updated by June 30, 2017 and for a scheme launched in December 2015, the SID shall be updated by June 30, 2017) Thereafter, the SID shall be updated once every year. 1.2.1.2 The procedure to be followed in case of changes to the scheme shall be as under: a. In case of change in fundamental attributes in terms of Regulation ^Regulation 18 (15A) of SEBI (Mutual Funds) Regulation, 1996, SID shall be revised and updated immediately after completion of duration of the exit option. b. In case of other changes: 1. The AMC shall be required to issue an addendum and display it on its website. 2. The addendum shall be circulated to the entire distributors/brokers/Investor Service Centre (ISC) so that the same can be attached to copies of SID already in stock, till the SID is updated. 3. In case any information in SID is amended more than once, the latest applicable addendum shall be a part of SID. (For example, in case of changes in load structure the addendum carrying the lates....
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.... SEBI. If the AMC intends to launch the scheme at a date later than six months, it shall refile the SID with SEBI under Regulation 28 (1) along with filing fees. 1.4 Undertaking from Trustees for new Scheme ^SEBI Cir No IMD/CIR No.5/70559/06 dated June 30,2006 1.4.1 In the certificate submitted by Trustees with regard to compliance of AMC with Regulations, ^Regulation 18 (4) of SEBI ( Mutual Funds) Regulations, 1996. the Trustees are required to certify as follows: "The Trustees have ensured that the (name of the scheme/Fund) approved by them is a new product offered by (name of the Mutual Fund) and is not a minor modification of any existing scheme/fund/product." 1.4.2 This certification shall be disclosed in the SID along with the date of approval of the scheme by the Trustees. 1.4.3 This certification is not applicable to close ended schemes except for those close ended schemes which have the option of conversion into open ended schemes on maturity. 1.5 Standard Observations 1.5.1 Standard Observations have been prescribed to ensure minimum level of disclosures in the SID and SAI ^For Standard Observations, please refer to the section on Formats. 1.5.2 SE....
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....dustry specific schemes, Mutual Funds may select any sectoral indices as published by the Stock Exchanges and other reputed agencies. 1.8.4 These benchmark indices may be decided by the AMC(s) and Trustees. Any change at a later date in the benchmark index shall be recorded and reasonably justified ^SEBI Circular No. MFD/CIR/16/400/02 dated March 26, 2002. Also please note that for review of scheme performance with benchmark indices please refer to section on governance norms. 1.8.5 Examples of benchmarks are illustrated below ^SEBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000: 1.8.5.1 Growth funds maintaining minimum 65% of their investments in equities shall always be compared against The Bombay Stock Exchange Ltd. (BSE) Sensex or The National Stock Exchange Ltd. (NSE) Nifty or BSE 100 or CRISIL 500 or similar standard indices. 1.8.5.2 Income funds maintaining 65% or more of investments in debt instruments shall be compared with a suitable index that is a representative of the fund's portfolio. 1.8.5.3 Balanced funds with equity investments of 40%-60% shall be compared with a tailored index having 50% of its weight selected from any equity in....
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....t large, rather than in any issuer specific securities. 1.10.1 Presently in terms of circular SEBI/IMD/CIR No.5/126096/08 dated May 23, 2008, facility of restriction on redemption under any scheme of the mutual fund can be made only after the approval from the Board of Directors of the Asset Management Company (AMC) and the Trustees. The provisions are general in nature and do not specifically spell out the circumstances in which restriction on redemption may be applied; leading to discretionary disclosures and practices in the industry. 1.10.2 As a philosophy, restriction on redemption should apply during excess redemption requests that could arise in overall market crisis situations rather than exceptional circumstances of entity specific situations. The circumstances calling for restriction on redemption should be such that illiquidity is caused in almost all securities 1.10.3 Therefore, in order to bring more clarity and to protect the interest of the investors, the following requirement shall be observed before imposing restriction on redemptions: 1.10.3.1 Restriction may be imposed when there are circumstances leading to a systemic crisis or event that sever....
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....(ii) all the existing schemes with effect from July 01, 2016. 1.11 Discontinuation of the nomenclature - 'Liquid Plus Scheme(s)' ^SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009 1.11.1 The nomenclature "Liquid Plus Scheme(s)" has been discontinued from January 2009 since it gives a wrong impression of added liquidity. 1.12 Fundamental Attributes ^SEBI Circular No- IIMARP/MF/CIR/01/294/98 dated February 4, 1998 1.12.1 The words "fundamental attributes" ^Clause (d) of sub-regulation (15) of Regulation 18 of SEBI (Mutual Funds) Regulations, 1996 are elaborated below: 1.12.1.1 Type of a scheme a. Open ended/Close ended/Interval scheme b. Sectoral Fund/Equity Fund/Balance Fund/Income Fund/Debt Fund/Index Fund/Any other type of Fund 1.12.1.2 Investment Objective(s) a. Main Objective - Growth/Income/Both. b. Investment pattern - The tentative Equity/Debt/Money Market portfolio break-up with minimum and maximum asset allocation, while retaining the option to alter the asset allocation for a short term period on defensive considerations. 1.12.1.3 Terms of Issue a. Liquidity provisions such as listing, ....
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....xit load. PART II - CONSOLIDATION OF SCHEMES 2.2 Consolidation of Schemes ^SEBI Circular No. SEBI/MFD/CIR No.5/12031/03 dated June 23, 2003. 2.2.1 Any consolidation or merger of Mutual Fund schemes will be treated as a change in the fundamental attributes of the related schemes and Mutual Funds shall be required to comply with the Mutual Funds Regulations in this regard ^Regulation 18(15A) of the Mutual Funds Regulations. 2.2.2 Further, in order to ensure that all important disclosures are made to the investors of the schemes sought to be consolidated or merged and their interests are protected; Mutual Funds shall take the following steps: 2.2.2.1 Approval by the Board of the AMC and Trustee(s): a. The proposal and modalities of the consolidation or merger shall be approved by the Board of the AMC and Trustee(s), after they ensure that the interest of unit holders under all the concerned schemes have been protected in the said proposal. 2.2.2.2 Disclosures: a. Subsequent to approval from the Board of the AMC and Trustee(s), Mutual Funds shall file the proposal with the Board, along with the draft SID, requisite fees (if a new scheme e....
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....rviving scheme' means the scheme which remains in existence after the merger. b. Mutual Funds are able to demonstrate that the circumstances merit merger or consolidation of schemes and the interest of the unitholders of surviving scheme is not adversely affected. c. After approval by the Boards of AMCs and Trustees, the mutual funds shall file such proposal with SEBI. SEBI would communicate its observations on the proposal within the time period prescribed ^Regulation 29(3) of SEBI (Mutual Funds) Regulations, 1996. d. The letter to unitholders shall be issued only after the final observations communicated by SEBI have been incorporated and final copies of the same have been filed with SEBI. PART III - LAUNCH OF ADDITIONAL PLANS ^SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15, 2009 2.3 Launch of Additional Plans 2.3.1 Additional plans sought to be launched under existing open ended schemes which differ substantially from that scheme in terms of portfolio or other characteristics shall be launched as separate schemes in accordance with the regulatory provisions. 2.3.2 However, plan(s) which are consistent with the cha....
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....EBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010. 3.1.3 Fund of funds mutual fund schemes shall adopt the total expense structures laid out in Regulations ^Regulation 52(6)(a) of SEBI (Mutual Funds) Regulations, 1996, which Asset Management Companies shall clearly indicate in the SIDs. 3.2 Gold Exchange Traded Fund Scheme ^SEBI Circular No. SEBI/IMD/CIR. No.4/58422/06 dated January 24, 2006, SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006, SEBI Circular No. SEBI/IMD/CIR No.14/84243/07 dated January 15, 2007. 3.2.1 A Gold Exchange Traded Fund (GETF) Scheme^ Regulation 2(mb) of the SEBI (Mutual Funds) Regulations, 1996 introduced vide Gazette Notification No. S.O. 38(E) dated January 12, 2006. shall invest primarily in: 3.2.1.1 Gold and 3.2.1.2 Gold related instruments ^Regulations 2(mc) of the Mutual Funds Regulations introduced vide Gazette Notification No. S.O. 38(E) dated January 12, 2006. However investments in gold related instruments shall be done only after such instruments are specified by the Board ^SEBI Circular No. SEBI/IMD/CIR No. 4/58422/06 dated January 24, 2006. 3.2.1.3 Gold Deposit Scheme (G....
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.... 2006. 3.2.4.1 The recurring expenses limits applicable to equity schemes ^Regulation 52(6) of the SEBI (Mutual Funds) Regulations, 1996. shall be applicable to GETF Scheme(s). 3.2.5 Benchmarks for GETF Scheme ^SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006. 3.2.5.1 GETF Scheme(s) shall be benchmarked against the price of gold. 3.2.6 Half yearly report by Trustees ^SEBI Circular No. Cir/IMD/DF/20/2010 dated December 06, 2010 3.2.6.1 Physical verification of gold underlying the Gold ETF units shall be carried out by statutory auditors of mutual fund schemes and reported to trustees on half yearly basis. 3.2.6.2 The confirmation on physical verification of gold as above shall also form part of half yearly report ^Please refer to the section on Formats for the disclosures in the Half Yearly Trustee Report w.r.t physical verification of Gold. This will be effective from the half yearly report ending April 2011 by Trustees to SEBI. by trustees to SEBI. 3.3 Capital Protection Oriented Scheme ^SEBI Circular No. SEBI/IMD/CIR No.9/74364/06 dated August 14, 2006. 3.3.1 The SID, KIM and advertisements pertaining to Capital Pro....
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....012 dated November 23, 2012, the scheme has been notified by the Department of Revenue, Ministry of Finance (MoF). The notification is available on the website of Income Tax Department under section "Notifications". 3.5.3 AMCs / Trustees shall ensure that RGESS eligible Exchange Traded Funds (ETFs) and Mutual Funds (MFs) schemes are in compliance with the aforementioned notification. 3.5.4 With regard to implementation of the MoF notification, the following is clarified: a. For RGESS eligible close-ended Mutual Funds schemes, advice given by AMCs to the depository for extinguishment of units of close-ended schemes considered as settled through depository mechanism and therefore RGESS compliant. b. AMCs shall disclose that the concerned RGESS eligible Exchange Traded Funds and Mutual Fund schemes is in compliance with the provisions of RGESS guidelines notified by Ministry of Finance vide notification no. 51/2012 F. No. 142/35/2012-TPL dated November 23, 2012, in Scheme Information Document (SID), in case of new fund offer, or by way of addendum, in case of existing RGESS eligible Exchange Traded Funds and Mutual Fund schemes. c. Para 6(c) of the not....
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....hall be filed with SEBI as per the prescribed format^ Please refer to section on Formats for requisite Formats Regulations, 1996 the following categories of FPIs are designated as long term investors only for the purpose of IDF:. 3.6.2 The Asset Management Companies shall ensure that the Placement Memorandum is uploaded on their respective websites after allotment of units, and on the website of such recognized Stock Exchange, where it is proposed to be listed, at the time of listing of the scheme. 3.6.3 FPIs which are long term investors 3.6.3.1 The universe of strategic investors in the IDF has been expanded to include, inter alia, FPIs registered with SEBI which are long term investors subject to their existing investment limits. With reference to regulation 49L of the SEBI (Mutual Funds) a. Foreign Central Banks b. Governmental Agencies c. Sovereign Wealth Funds d. International/Multilateral Organizations/ Agencies e. Insurance Funds f. Pension Funds g. Foreign feeder funds, having at all times, at least 20% of their assets under management held by investors belonging to one of more of the above categ....
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....e categories. They shall examine the areas where development or improvement of systems is required. 4.3.2.2 After identifying the same, Mutual Funds shall review the progress made on implementation of the systems on a monthly basis and place the progress report in periodical meetings of the Board of the AMC and Trustees. 4.3.3 Review of Progress of implementation by Board of AMC and Trustee(s): 4.3.3.1 The Board of the AMC and Trustee(s) shall review the progress made by the Mutual Funds with regard to Risk Management practices and the same shall be reported to the Board at the time of sending CTR(s) and Half Yearly Trustee Reports. 4.3.4 Review by Internal Auditors: 4.3.4.1 The review of Risk Management Systems shall be a part of internal audit and the auditors shall check their adequacy on a continuing basis. Their reports shall be placed before the Board of the AMC and Trustee(s) who shall comment on the adequacy of systems in the CTRs and Half Yearly Reports filed with the Board. 4.4 Stress Testing of Liquid Fund and Money Market Mutual Fund Schemes ^SEBI Circular No. CIR/IMD/DF/03/2015 dated April 30, 2015. 4.4.2.3 The concerned schemes shal....
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.... the stress testing framework in the dayto- day risk management processes iv. Adequacy of the corrective actions and the efficacy of the systems for their activation. 4.4.2.7 Further, Trustees shall be required to report compliance with this circular and steps taken to deal with adverse situations faced, if any, in the Half Yearly Trustee Report submitted to SEBI. 4.5 Internal Credit Risk Assessment ^SEBI Circular No. SEBI/HO/IMD/DF2/CIR/2016/42 dated March 18, 2016. ^Will be effective from May 01, 2016. 4.5.1 In order to ensure that MFs / AMCs are able to carry out their own credit assessment of assets and reduce reliance on credit rating agencies, all MFs/ AMCs are required to have an appropriate policy and system in place to conduct an in-house credit risk assessment / due diligence before investing in fixed income products. CHAPTER 5 DISCLOSURES & REPORTING NORMS PART I - DISCLOSURES 5.1 Monthly Portfolio Disclosures ^SEBI Cirular No. CIR/IMD/DF/21/2012 dated September 13, 2012 5.1.1 Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the last day of the month for all their schemes on their respective website on or before th....
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....ulation 59 of SEBI (Mutual Funds) Regulations, 1996, in the format prescribed in Twelfth Schedule. 5.3.2 The half yearly disclosures ^SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 of the unaudited financial results on respective website should be made in a user-friendly and downloadable format (preferably in a spreadsheet). 5.4 Mailing of Schemewise Annual Report or Abridged Summary ^SEBI Circular No. IMD/CIR No.8/132968/2008 dated July 24, 2008 and Circular No. Cir/IMD/DF/16/2011 dated September 8, 2011 5.4.1 Mailing of Schemewise Annual Reports ^For format of abridged schemewise report, please refer the section on formats or abridged summary thereof shall be subject to the following: 5.4.1.1 In case of unitholders whose email addresses are available with the Mutual Fund, the AMCs shall communicate to them stating that henceforth, the scheme annual reports or abridged summary would only be sent by email. 5.4.1.2 In case of unitholders whose email addresses are not available with the Mutual Fund, the AMCs shall communicate to the unitholders to obtain their email addresses for registration of the same in their database. 5.4.1.3 Th....
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....dustry wide figures on its website. 5.6.2 Mutual Funds shall disclose the following on monthly basis on their website and also share the same with Association of Mutual Funds in India (AMFI) ^SEBI Circular No. CIR/IMD/DF/05/2014 dated March 24, 2014: a. Monthly AAUM ^SEBI Circular No. CIR/IMD/DF/07/2014 dated April 2, 2014 from different categories of schemes such as equity schemes, debt schemes, etc. b. Contribution to Monthly AAUM from B-15 cities (i.e. other than top 15 cities as identified by AMFI) and T-15 cities (Top 15 cities). c. Contribution to Monthly AAUM from sponsor and its associates. d. Contribution to Monthly AAUM from entities other than sponsor and its associates. e. Contribution to Monthly 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 pe....
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.... 5.8.1.1 The tenure for which the fund manager has been managing the scheme shall be disclosed, along with the name of scheme's fund manager(s); 5.8.1.2 Scheme's portfolio holdings (top 10 holdings by issuer and fund allocation towards various sectors), along with a website link to obtain scheme's latest monthly portfolio holding; 5.8.1.3 In case of FoF schemes, expense ratio of underlying scheme(s); 5.8.1.4 Scheme's portfolio turnover ratio. 5.8.2 Further, the following additional disclosures shall be provided in SID of the MF scheme: 5.8.2.1 The aggregate investment in the scheme under the following categories: a) AMC's Board of Directors b) Concerned scheme's Fund Manager(s) and c) Other key managerial personnel. 5.8.2.2 Illustration of impact of expense ratio on scheme's returns (by providing 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 s....
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....rom the end of the respective financial year (effective from FY 2015-16). 5.12 Disclosure of investor complaints with respect to Mutual Funds^ SEBI Circular No. Cir /IMD/DF/2/2010 dated May 13, 2010 5.12.1 Mutual Funds shall disclose ^For disclosure format please refer to section on Formats. on their websites, on the AMFI website as well as in their Annual Reports, details of investor complaints received by them from all sources. The said details should be vetted and signed off by the Trustees of the concerned Mutual Fund. 5.12.2 The Mutual Funds are advised to: 5.12.2.1 Upload the report for the financial year within 2 months of the close of the financial year. 5.12.2.2 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....
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....FD/CIR/11/36222/2005 dated March 16,2005, SEBI Circular No IIMARP/MF/CIR/10/1076/97 dated June 05,1997 & SEBI Circular No.MFD/CIR/5/360/2000 dated July 4, 2000, 5.16.1 AMCs' shall do exception reporting on a bi-monthly basis. The details sought in the annexures of the CTR shall be furnished to the Board in case of non-compliance only along with exception report. This exception report shall also be placed before the Trustee(s). 5.16.2 The CTRs ^For CTR format, please refer the section on Formats. should be 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. 5.17 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, 5.17.1 AMC should submit the annual statistical report to SEBI in the prescribed format by 30th of April each year ^For fo....
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.... refer to the formats section.. The Trustees may mention in their report, if they so desire, that they have relied on the reports obtained from the independent auditor or internal/ statutory auditors or the Compliance Officer as the case may be. The report shall mention that the Trustees have satisfied themselves about the adequacy of compliance systems in the Mutual Fund. 5.19.5 AMC(s) and the Trustees shall update the reporting formats including relevant provisions of amendments made to the Mutual Funds Regulations and/or guidelines and/or circulars issued by the Board and shall specifically comment on their compliance. 5.20 Filing of Annual Information Return by Mutual Funds ^SEBI 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 Rep....
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....ions ^SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000, SEBI Circular No. MFD/CIR No.010/024/2000 dated January 17, 2000, SEBI Circular No. SEBI/MFD/CIR/10/039/2001 dated February 9, 2001. 6.2.1 Reporting of transactions 6.2.1.1 Transaction(s) by directors of the AMC a. Directors of the AMC shall file with the trustees on a quarterly basis details of transactions in securities exceeding Rs. 1 lac^ SEBI Circular No. SEBI/MFD/CIR/10/039/2001 dated February 9, 2001. 6.2.1.2 Trustee(s) Directors a. Trustees are required to report to Mutual Funds only those transactions in securities that exceed Rs. 1 lac 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 Indep....
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....ointed as Independent Directors ^For biodata of directors (AMC and Trustee), please refer to section on Formats as and when required. They may also consider appointing more than the required minimum number of Independent Directors to enhance the standards of corporate governance and also to meet the regulatory requirements in case of resignation of an independent director. 6.3.7 On appointment of new directors of the AMC or Trustee, their biodata^ For biodata of directors (AMC and Trustee), please refer to section on Formats shall be filed with the Board for information or approval respectively. 6.4 Investment and/or for / Trading in Securities by the employees of the AMC(s) and Trustee(s) ^SEBI Circular No. MFD/CIR No.4/216/2001 dated May 8, 2001, SEBI Circular No. SEBI/IMD/CIR No.7/13391/03 dated July 11, 2003. 6.4.1 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. 6.4.2 The guidelines enumerated below specify the minimum requirements that have t....
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....nd) or investment in savings schemes such as National Savings Certificates, National Savings Schemes, Kisan Vikas Patra, or any other similar investment. 2. Investments of a non-financial nature such as gold etc., ^Real Estate has been deleted pursuant to the amendment to the Mutual Funds Regulations launching the Real Estate Mutual Funds Schemes wherein guidelines have been prescribed for employee investment in Real Estate. where there is no likely conflict between the Mutual Fund's interest and the employees' interest. 3. Investments in government securities, Money Market instruments, Money Market Mutual Fund schemes and liquid schemes ^SEBI/IMD/DF/10/2014 dated May 22, 2014. 6.4.4.2 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. 6.4.4.3 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 th....
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....es are prohibited from applying in any reserved quota such as promoters' quota, employees' quota etc. Employees shall not participate in any private placement of equity by any company. b. Notwithstanding anything stated in (a) above, an employee of an AMC(s) and/or Trustees may apply for shares and/or debentures and/or bonds and/or warrants in a preferential offer, in cases where such a preferential offer is being made 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 w....
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....urity, 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 Officer may take a declaration in this regard from the employee. Such declaration may be included in the application form itself. g. Any transaction of self dealing by any ....
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....ersons 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. 6.4.7.2 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 in tandem with SEBI (Insider Trading) Regulations. b. A statement of holding in securities as on March 31 within 30 cal....
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....hever is earlier, the Scheme complies with these two conditions. 6.7.1.3 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. 6.7.1.4 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. 6.7.1.5 The two conditions mentioned above shall also be complied within each subsequent calendar quarter thereafter, on an average basis, as specified by SEBI. 6.7.1.6 The Fund shall adhere to the requirements prescribed by SEBI from....
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.... in Compliance Test Reports (CTRs) and Half Yearly Trustee Reports. 6.8 Minimum Assets under Management (AUM) of Debt Oriented Schemes ^SEBI Circular No. Cir/IMD/DF/15/2014 dated June 20, 2014 6.8.1 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. 6.8.2 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 su....
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....BI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 6.16 MFs should play an active role in ensuring better corporate governance of listed companies. 6.17 AMCs shall disclose their general policies and procedures for exercising the voting rights in respect of shares held by them on the website of the respective AMC as well as in the annual report distributed to the unit holders from the financial year 2010-11. 6.18 AMCs are required to disclose on the website of the respective AMC as well as in the annual report distributed to the unit holders from the financial year 2010-11, the actual exercise of their proxy votes in the AGMs/EGMs of the investee companies in respect of the following matters. 6.18.1 Corporate governance matters, including changes in the state of incorporation, merger and other corporate restructuring, and antitakeover provisions 6.18.2 Changes to capital structure, including increases and decreases of capital and preferred stock issuances. 6.18.3 Stock option plans and other management compensation issues; 6.18.4 Social and corporate responsibility issues. 6.18.5 Appointment and Removal of Directors. 6.18.6 Any other issue that may affe....
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....13/94 dated April 12, 1994. Further, in this regard, circulars issued by SEBI from time to time may be considered. 7.1.1 The requirement of collecting listing deposit as specified under Circular Letter No. SE/12936 dated April 6, 1992 shall not be applicable to Mutual Fund schemes seeking listing on the Stock Exchanges. 7.2 Payment of Margins ^SEBI Circular No. MFD/CIR/9/230/2001 dated August 14, 2001 7.2.1 The applicable margins shall be paid as per the guidelines issued by SEBI and as directed by stock exchanges from time to time. 7.3 Unique Client Codes ^SEBI Circular No. MFD/CIR No.8/290/01 dated July 30, 2001, SEBI Circular No. SEBI/SMD/SE/11/2003/31/03 dated March 31, 2003, SEBI Circular No. SEBI/IMD/CIR No.01/1756/04 dated January 27, 2004, SEBI Circular No. MRD/DoP/SE/Cir-35/2004 dated October 26, 2004, SEBI Circular No. SEBI/IMD/CIR No.2/46603/05 dated August 10, 2005. Further, in this regard, circulars issued by SEBI from time to time may be considered 7.3.1 Mutual Funds are not permitted to operate in the securities market without furnishing a valid Unique Client Code (UCC). ^SEBI Circular No. SMDRP/Policy/Cir-39/2001 dated July 18, 2001. Mutual Funds are ....
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.... provided to the dissenting unit holders. Such option shall be kept open for a period of one month prior to the scheme commencing trading in derivatives. e. No exit load shall be charged to the unit holders exercising such exit options. 7.4.1.5 Positions limits as specified by SEBI for Mutual Funds and its schemes from time to time shall be applicable ^Please refer SEBI Circular No DNPD/Cir - 29/2005 Dated September 14, 2005 for position limits and subsequent circulars issued in this regard from time to time. 7.5 Trading in Interest Rate Derivatives ^SEBI Circular No. SEBI/MFD/CIR No.03/158/03 dated June 10, 2003. 7.5.1 Mutual Fund schemes are permitted to undertake transactions in Forward Rate Agreements and Interest Rate Swaps with banks, PDs & FIs as per applicable RBI Guidelines ^RBI Circular dated November 1, 1999., mutual funds can also trade in interest rate derivatives through the Stock Exchanges subject to requisite disclosures in the SID ^SEBI Circular 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 ....
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....ve steps taken by AMC to reduce the number of occurrences shall also be disclosed ^SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006. 8.1.5 In case the NAVs are not available before the commencement of business hours on the following day due to any reason, Mutual Funds shall issue a press release giving reasons for the delay and explain when they would be able to publish the NAVs ^SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006. 8.2 Rounding off NAVs^ SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002, SEBI Circular No. MFD/CIR/11/16159/2002 dated August 22, 2002. 8.2.1 To ensure uniformity, 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.....
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....spect of purchase of units in liquid fund schemes and their plans, and the following NAVs shall be applied for such purchase: a. where the application is received upto 2.00 p.m. on a day and funds are 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 of receipt of application; b. where the application is received after 2.00 p.m. on a day and funds are available for utilization on the same day without availing any credit facility, whether, intra-day or otherwise - the closing NAV of the day immediately preceding the next business day ; and c. irrespective of the time of receipt of application, where the funds 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.....
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....h a local cheque or demand draft payable at par at the place where it is received - closing NAV of the next business day; and 8.3.6.2.3 Where the application is received with an outstation cheque or demand draft which is not payable on par at the place where it is received - closing NAV of day on which the cheque or demand draft is credited. In respect of purchase of units of mutual fund schemes (other than liquid schemes), the closing NAV of the day on which the funds are available for utilization shall be applicable for application amount equal to or more than Rs. 2 lakh, irrespective of the time of receipt of such application ^SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 8.3.6.3 For allotment of units in respect of purchase in income/debt oriented mutual fund schemes/plans other than liquid schemes, it shall be ensured that ^SEBI Circular No SEBI/IMD/DF/15/2010 dated November 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 cu....
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.....3 Time stamping machines at all official points of acceptance shall be in compliance with the requirements mentioned in Section 8.4. 8.3.9 Compliance Reporting 8.3.9.1 Status of compliance with these Guidelines shall be reported to the Board in the CTR(s) ^for CTR format, please refer to the section on formats of the AMC(s) and the Half Yearly Trustee Reports ^For Trustee report, please refer to the section on formats. 8.3.9.2 The Half Yearly Trustee Reports shall contain a declaration on whether the Trustees are satisfied with the systems and procedures of the Mutual Fund designed for the purpose of compliance with these Guidelines. 8.3.9.3 Further, the substance of these Guidelines shall be disclosed to investors in the SID or in any addendum thereto. 8.3.9.4 Encumbrance of the scheme property ^SEBI Circular No SEBI/IMD/DF/15/2010 dated November 26, 2010 Regulations ^Fourth Schedule of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 provides that the AMC shall not acquire any of the assets out of the scheme property which involves the assumption of any liability which is unlimited or which may result in encumbrance o....
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....uce them as and when required by the Board or auditors appointed by the Board. 8.5 Uniformity in calculation of sale and repurchase price ^SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002 & SEBI Circular No. SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009 8.5.1 The following method is being prescribed 8.5.1.1 To streamline the calculation of sale and repurchase price of mutual fund units ^Regulation 49(3) of the SEBI (Mutual Funds) Regulations, 1996. 8.5.1.2 To avoid variation in the amounts payable to investors and/or number of units allotted to them, and 8.5.1.3 To make the calculations more comprehensible to the investors. 8.5.2 Exit loads shall be charged as a percentage of the NAV i.e. applicable load as a percentage of NAV will be subtracted from the NAV to calculate the repurchase price. 8.5.3 The formula for the same is as follows: 8.5.3.1 Sale Price = Applicable NAV 8.5.3.2 Repurchase Price = Applicable NAV *(1 - Exit Load, if any) CHAPTER 9 VALUATION 9.1 Definitions ^SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000, SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001 and SEBI C....
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....ular valuation day, the value at which it was traded on the selected Stock Exchange, as the case may be, on the earliest previous day may be used provided such date is not more than thirty days prior to valuation date. 9.2.1.2 When a debt security (other than Government Securities) is not traded on any Stock Exchange on any particular valuation day, the value at which it was traded on the principal Stock Exchange or any other Stock Exchange, as the case may be, on the earliest previous day may be used provided such date is not more than fifteen days prior to valuation date. When a debt security (other than Government Securities) is purchased by way of private placement, the value at which it was bought may be used for a period of fifteen days beginning from the date of purchase. 9.2.2 Non-Traded /and/or Thinly Traded Securities: ^SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.2.2.1 AMCs shall value non traded and/or thinly traded securities "in good faith" based on the Valuation norms prescribed below: 9.2.3 Non-traded/ and/or thinly traded equity securities: 9.2.3.1 Based on the latest available Balance Sheet, Net Worth shall be ca....
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....rket and debt securities with residual maturity of upto 60 ^SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012 days: 1. All money market and debt securities, including floating rate securities, with residual maturity of upto 60 days shall be valued at the weighted average price at which they are traded on the particular valuation day. When such securities are not traded on a particular valuation day they shall be valued on amortization basis. It is further clarified that in case of floating rate securities with floor and caps on coupon rate and residual maturity of upto 60 days then those shall be valued on amortization basis taking the coupon rate as floor. b. Valuation of money market and debt securities with residual maturity of over 60 ^SEBI Circular No. Cir/IMD/DF/6/2012 dated February 28, 2012 days: 1. All money market and debt securities, including floating rate securities, with residual maturity of over 60 days shall be valued at weighted average price at which they are traded on the particular valuation day. When such securities are not traded on a particular valuation day they shall be valued at benchmark yield/ matrix of spread over ris....
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....IR/8/92/2000 dated September 18, 2000. 9.3.2.1 Mark up for credit risk over the risk free benchmark YTM as calculated in 9.3.1 above, will be determined using the trades of corporate debentures/bonds of different ratings. All trades on appropriate stock exchange during the fortnight prior to the benchmark date will be used in building the corporate YTM and spread matrices. Initially these matrices will be built only for corporate securities of investment grade. The matrices are dynamic and the spreads will be computed every week. The matrix will be built for all duration buckets for which the benchmark GOI matrix is built to effectively link the corporate matrix with the GOI securities matrix. Accordingly: a. All traded paper (with minimum traded value of Rs. 1 crore) will be classified by their ratings and grouped into 7 duration buckets; for rated securities, the most conservative publicly available rating will be used; b. For each rating category, average volume weighted yield will be obtained both from trades on the appropriate stock exchange and from the primary market issuances c. Where there are no secondary trades on the appropriate stock....
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....cally. b. Adjustments for Internally Rated Securities ^SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 1. To value an un-rated security, the fund manager shall assign an internal credit rating, which will be used for valuation. Since unrated instruments tend to be more illiquid than rated securities, the yields would be marked up by adding discretionary discount as under: Category Discretionary discount Unrated instruments with duration upto 2 years Discretionary discount of upto +50 bps over and above mandatory discount of +50 bps Unrated instruments with duration over 2 years Discretionary discount of upto +50 bps over and above mandatory discount of +25 bps 2. The benchmark yield/ matrix of spreads over risk free benchmark yield obtained from any agency suggested by AMFI, must be applied for valuation of securities on the day of release of such bench mark yield/ matrix of spreads by the aforesaid agency. ^SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.3.3.2 Chief Executive Officer (whatever his designation may be) of the AMC shall give prior approval to the use of discretionary mark up or down....
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..... ^3. Where a scheme has illiquid securities as at September 30, 2001 not exceeding 15% in the case of an open-ended fund and 20% in the case of closed fund, the concessions of giving time period for reducing the illiquid security to the prescribed limits would not be applicable and at all time the excess over 15% or 20% shall be assigned nil value 9.6.1 Aggregate value of "illiquid securities" under a scheme, which are defined as non-traded, thinly traded and unlisted equity shares, shall not exceed 15 per cent of the total assets of the scheme and any illiquid securities held above 15 per cent. of the total assets shall be assigned zero value. 9.6.2 All Mutual Funds shall disclose as on March 31 and September 30 the scheme wise total illiquid securities in value and percentage of the net assets while disclosing Half Yearly Portfolios to the unit holders. In the list of investments, an asterisk mark shall be given against all such investments which are recognised as illiquid securities. 9.6.3 Mutual Funds shall not be allowed to transfer illiquid securities among their schemes. 9.7 Guidelines for Identification and Provisioning for Non Performing Assets (Debt Securi....
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.... percent of the book value of the asset shall be provided for after 6 months past due date of interest i.e. 3 months form the date of classification of the asset as NPA. b. 20 percent of the book value of the asset should be provided for after 9 months past due date of interest i.e. 6 months from the date of classification of the asset as NPA. c. Another 20 percent of the book value of the assets shall be provided for after 12 months past due date of interest i.e. 9 months from the date of classification of the asset as NPA. d. Another 25 percent of the book value of the assets shall be provided for after 15 months past due date of interest i.e. 12 months from the date of classification of the asset as NPA. e. The balance 25 percent of the book value of the asset shall be provided for after 18 months past due date of the interest i.e. 15 months from the date of classification of the assets as NPA. 9.7.4.3 Book value for the purpose of provisioning for NPAs shall be taken as a value determined as per the prescribed valuation method. 9.7.4.4 This can be explained by an illustration: a. Let us consider that interest income....
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....l amount after their classifications as NPAs: a. For the next 2 quarters, income shall be recognized on cash basis and thereafter on accrual basis. The asset will be continued to be classified as NPA for these two quarters. b. During this period of two quarters although the asset is classified as NPA no provision needs to be made for the principal if the same is not due and outstanding. c. If part payment is received towards principal, the asset continues to be classified as NPA and provisions are continued as per the norms set at 9.7.4 above any excess provision will be written back. 9.7.7 Classification of Deep Discount Bonds as NPAs 9.7.7.1 Investments in Deep Discount Bonds can be classified as NPAs, if any two of the following conditions are satisfied: a. If the rating of the Bond comes down to Grade 'BB' (or its equivalent) or below b. If the company is defaulting in their commitments in respect of other assets, if available. c. Full Net worth erosion. 9.7.7.2 Provision should be made as per the norms set at 9.7.4 above as soon as the asset is classified as NPA. 9.7.7.3 Full provision can be m....
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....following guidelines are issued: 9.8.1.1 Methodology for Valuation - unlisted equity shares of a company shall be valued "in good faith" as below: a. Based on the latest available audited balance sheet, Net Worth shall be calculated as the lower of item (1) and (2) below: 1. Net Worth per share = [Share Capital + Free Reserves (excluding revaluation reserves) - Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] / Number of Paid up Shares. 2. After taking into account the outstanding warrants and options, Net Worth per share shall again be calculated and shall be = [Share Capital + consideration on exercise of Option and/or Warrants received/receivable by the Company + Free Reserves (excluding Revaluation Reserves) - Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] / Number of Paid up Shares plus Number of Shares that would be obtained on conversion and/or exercise of Outstanding Warrants and Options. 3. The lower of (1) and (2) above shall be used for calculation of Net Worth per share and for further calc....
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.... public issue. 9.8.3.2 The Board of the AMC and Board of Trustees shall lay down the parameters for investing in unlisted equity shares. They shall pay specific attention as to whether due diligence was exercised while making such investments and shall review the performance of such investments in their periodical meetings ^SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000.. 9.8.4 Reporting of Compliance 9.8.4.1 Comments on compliance of these Guidelines shall be indicated by the AMCs and Trustees in their CTRs ^For CTR format please refer to the section on formats and Half Yearly Reports^ For Half Yearly Reports, please refer to the section on formats filed with the Board. 9.9 Valuation of securities not covered under the current valuation policy ^SEBI/IMD/CIR No.16/193388/2010 dated February 02, 2010 and Cir/IMD/DF/4/2010 dated June 21, 2010^: 9.9.1 In case of securities purchased by mutual funds do not fall within the current framework of the valuation of securities then such mutual fund shall report immediately to AMFI regarding the same. Further, at the time of investment AMCs shall ensure that the total exposure in such securities does not exc....
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....o a scheme may be charged with the approval of trustees within the overall limits as provided in the Regulation 52(6). ^SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 10.1.2 Additional TER ^SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. can be charged up to 30 basis points on daily net assets of the scheme as per Regulation 52 ^Regulation 52 of the Mutual Funds Regulations,1996, if the new inflows from beyond top 15 cities are at least (a) 30% of gross new inflows in the scheme or (b) 15% of the average assets under management (year to date) of the scheme, whichever is higher. In case inflows from beyond top 15 cities is less than the higher of (a) or (b) above, additional TER on daily net assets of the scheme shall be charged as follows: Daily net assets X 30 basis points X New inflows from beyond top 15 cities 365* X Higher of (a) or (b) above * 366, wherever applicable. The top 15 cities shall mean top 15 cities based on Association of Mutual Funds in India (AMFI) data on 'AUM by Geography - Consolidated Data for Mutual Fund Industry' as at the end of the previous financial year. 10.1.3 The additional TER on account of in....
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....e schemes of Mutual Funds: 10.1.8.1 Penalties and fines for infraction of laws. 10.1.8.2 Interest on delayed payment to the unit holders. 10.1.8.3 Legal, marketing, publication and other general expenses not attributable to any scheme(s). 10.1.8.4 Fund Accounting Fees. 10.1.8.5 Expenses on investment management/general management. 10.1.8.6 Expenses on general administration, corporate advertising and infrastructure costs. 10.1.8.7 Depreciation on fixed assets and software development expenses. 10.1.8.8 Such other costs as may be prohibited by the Board. 10.1.9 The expenditure and/or fee payable by Mutual Funds to the Depositories may either be capitalized or included as part of recurring expenditure within the limits prescribed under Regulation 52(6) of the Mutual Funds Regulations ^SEBI Circular No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998.. 10.1.10 Further, each item of expenditure accounting for more than 10% of total expenditure shall be disclosed in the accounts or the notes thereto of the schemes ^SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000.. 10.1.11 Provision of charging of ....
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....id to distributors in accordance with the level of service received, it has been mandated that: 10.4.1.1 There shall be no entry load ^Waiver of load for direct applications - Vide SEBI Circular No. SEBI/IMD/CIR No.10/112153/07 dated December 31, 2007,SEBI mandated w.e.f January 4,2009 no entry load shall be charged for applications received directly by the AMC(s) through internet or submitted directly to the AMC(s) or Collection Center/Investor Service Centre and not routed through any distributor or agent or broker. This waiver was applicable to both additional purchases under the same folio and 'switch in' to a scheme from other schemes also done directly by the investor. AMCs shall follow the provisions pertaining to informing the unitholders upon a change in load structure as per clause 3(d) of standard observations. for all Mutual Fund schemes. 10.4.1.2 The scheme application forms shall carry a suitable disclosure to the effect that the upfront commission to distributors will be paid by the investor directly to the distributor, based on his assessment of various factors including the service rendered by the distributor. 10.4.1.3 The load balances a....
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....he Mutual Fund products. However, there shall be no transaction charges on direct investments. The transaction charge shall be subject to the following: 10.5.1.1 For existing investors in a Mutual Fund, the distributor may be paid Rs. 100/- as transaction charge per subscription of Rs. 10,000/- and above. 10.5.1.2 As an incentive to attract new investors, the distributor may be paid Rs. 150/- as transaction charge for a first time investor in Mutual Funds. 10.5.1.3 The terms and conditions relating to transaction charge shall be part of the application form in bold print. 10.5.1.4 The transaction charge, if any, shall be deducted by the AMC from the subscription amount and paid to the distributor; and the balance shall be invested. 10.5.1.5 The statement of account shall clearly state that the net investment as gross subscription less transaction charge and give the number of units allotted against the net investment. 10.5.1.6 Distributors shall be able to choose to opt out of charging the transaction charge. However, the 'opt-out' shall be at distributor level and not investor level i.e. a distributor shall not charge one inves....
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....ame, Mutual Funds should ensure that "any imposition or enhancement in the load shall be applicable on prospective investments only. ^SEBI Circular No - SEBI / IMD / CIR No. 7 /173650 / 2009 dated August 17,2009 and SEBI circular No. SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008 (clause 16 of the standard observations) 10.8.2 Further, the parity among all classes of unit holders in terms of charging exit load shall be made applicable at the portfolio level. ^SEBI Circular No - SEBI / IMD / CIR No. 7 /173650 / 2009 dated August 17,2009 CHAPTER 11 DIVIDEND DISTRIBUTION PROCEDURE ^SEBI Circular No. SEBI/IMD/CIR No.1/64057/06 dated April 4, 2006., For details on advertisement on dividend please refer to Chapter on 'Advertisements' 11.1 Regulations^ Regulation 53(a) of the SEBI (Mutual Funds) Regulations, 1996 permit Mutual Funds to distribute returns including dividend. To introduce uniform practices in dividend distribution, the following guidelines should be followed: 11.2 These guidelines are applicable to all Mutual Fund schemes/plans which intend to declare the dividend irrespective of their dates of launch. ^SEBI Circular No SEBI/IMD/CIR No. 3/65370/06 dated Apri....
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....ning distributable surplus and accounting the sale and repurchase of units in the books of the Mutual Fund. The format for Scheme Balance Sheet (including Abridged) provides for disclosure of Unit Premium Reserve. 11.3.2 Unit Premium Reserve, which is part of the sales price of units that is not attributable to realized gains, cannot be used to pay dividend. Therefore: 11.3.2.1 When units of an open-ended scheme are sold, and sale price is higher than face value of the unit, part of sale proceeds that represents unrealized gains shall be credited to a separate account (Unit Premium Reserve) and shall be treated at par with unit capital and the same shall not be utilized for the determination of distributable surplus. 11.3.2.2 When units of an open-ended scheme are sold, and sale price is less than face value of the unit, the difference between the sale price and face value shall be debited to distributable reserves and the dividend can be declared only when distributable reserves become positive after adjusting the amount debited to reserves as per Regulations^ Paragraph 2(a) (ix) of Eleventh Schedule of SEBI (Mutual Funds) Regulations, 1996. CHAPTER 12 I....
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.... the security falls on a non-business day then settlement of securities will take place on the next business day. 12.2.2 The above requirements shall be disclosed in the SID and shall form part of the investment allocation pattern. Any deviation from these requirements shall be viewed as violation of investment restrictions. 12.3 Investments by close ended debt schemes: 12.3.1Close ended debt schemes shall invest only in such securities which mature on or before the date of the maturity of the scheme^ SEBI Circular No IMD/CIR No 12/147132/08 dated December 11, 2008. 12.4 Prudential limits and disclosures on portfolio concentration risk in debt oriented mutual fund schemes ^SEBI Circular No. CIR/IMD/ DF/ 21/ 2012 dated September 13, 2012 and SEBI Circular No. CIR/IMD/DF/24/2012 dated November 19, 2012 SEBI/ HO/ IMD/ DF2/CIR/P/2016/35 dated February 15, 2016 and SEBI Circular No. SEBI/ HO/ IMD/ DF2/CIR/P/2016/68 dated August 10, 2016 12.4.1Mutual Funds/AMCs shall ensure that total exposure of debt schemes of mutual funds in a particular sector (excluding investments in Bank CDs, CBLO, G-Secs, T-Bills and AAA rated securities issued by Public Financial Institutions and ....
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....s shall not be required to sell their investments to comply with the restrictions. However, if existing close ended schemes sell their investments then their fresh investments shall be subject to the restrictions. 12.5 Stock Lending Scheme ^SEBI Circular No MFD/CIR/01/047/99 dated February 10, 1999. 12.5.1 The following guidelines are issued to facilitate lending of securities by Mutual Funds through intermediaries approved by the Board in accordance with the Stock Lending & Borrowing Scheme. ^Regulation 44(4) of the SEBI (Mutual Funds) Regulations, 1996. 12.5.2 Disclosure Requirements 12.5.2.1 The following information shall be disclosed in the SID to enable the investors and unit holders to take an informed decision: a. Intention to lend securities belonging to a particular Mutual Fund scheme in accordance with the guidelines on securities lending and borrowing scheme issued by SEBI from time to time. ^SEBI Circular No - SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009 b. Exposure limit with regard to securities lending, both for the scheme as well as for a single intermediary. c. Risks factors such as loss, bankruptcy etc.....
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.... 12.8.1 Prudential investment norms as per Regulations stipulating limits for investments in debt securities ^Clauses 1 and 1A, Seventh Schedule of SEBI (Mutual Funds), Regulations, 1996. issued by a single issuer are applicable to all debt securities issued by public bodies or institutions such as electricity boards, municipal corporations, state transport corporations etc. guaranteed by either State / Central Government. Government securities issued by Central and/or State Government or on its behalf, by the RBI are however exempt from these limits. 12.9 Investment Restrictions for Securitised Debt ^SEBI Circular No. SEBI/IMD/CIR No.6/63715/06 dated March 29, 2006. 12.9.1 For investments made in Securitised Debt (mortgage backed securities and asset backed securities), restrictions as per Clause 1 of Seventh Schedule ^Clause I of Schedule VII of SEBI (Mutual Fund), Regulations, 1996 shall not apply at the originator level. 12.10 Investments in Short Term Deposits of Scheduled Commercial Banks ^SEBI Circulars No. SEBI/IMD/CIR No.9/20306/03 dated November 12, 2003, SEBI Circular No. SEBI/IMD/Cir No.1/91171/07 dated April 16, 2007, SEBI and Clause 8 of Seventh Schedule of....
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....lause (12.9.1.7) the above guidelines shall not apply to term deposits placed as margins for trading in cash and derivatives market ^SEBI Circular No. SEBI/IMD/Cir No.7/129592/08 dated June 23, 2008. However, duration of such term deposits shall be disclosed in the Half Yearly Portfolio ^SEBI Circular No. SEBI/IMD/Cir No.7/129592/08 dated June 23, 2008. 12.11 Reconciliation Procedure for Investment in Government Securities ^SEBI Circular No. MFD/CIR/19/22474/2002 dated November 20, 2002. 12.11.1 According to the RBI guidelines ^RBI Circular No. P.D.O.SGL.CIRR/1945/2002-2003 dated November 1, 2002. issued to all SGL account holders, to make transactions in government securities transparent, a monthly reconciliation system has been introduced between RBI and Mutual Funds maintaining SGL/CSGL accounts with respect to Government Securities on an ongoing basis. 12.11.2 Mutual Funds shall reconcile the balances reported in the monthly statements furnished by RBI with the transactions undertaken by them. 12.11.3 The reconciliation procedure shall be made part of internal audit and the auditors shall on a continuous basis, check the status of reconciliation and submit a report ....
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....SEBI in the half yearly trustee report. 12.12.1.8 To enable the investors in the mutual fund schemes to take an informed decision, the concerned Scheme Information Document shall disclose the following: a. The intention to participate in repo transactions in corporate debt securities in accordance with directions issued by RBI and SEBI from time to time; b. The exposure limit for the scheme; and c. The risk factors associated with repo transactions in corporate bonds 12.13 Overseas Investment ^SEBI Circular No. SEBI/IMD/CIR No.7/104753/07 dated September 26, 2007 & SEBI Circular No. SEBI/IMD/CIR No.2/122577/08 dated April 8, 2008. 12.13.1 Applicable limits: 12.13.1.1 Aggregate ceiling for overseas investments is US $ 7 billion ^SEBI Circular No. SEBI/IMD/CIR No.2/122577/08 dated April 8, 2008. and within this overall limit, Mutual Funds can make overseas investments subject to a maximum of US $ 300 million per Mutual Fund. 12.13.1.2 Aggregate ceiling for investment by Mutual Funds in overseas Exchange Traded Fund (ETF(s)) that invest in securities is US $ 1 billion subject to a maximum of US $ 50 million per Mutual Fund. ....
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....y 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 experienced key personnel, research facilities and infrastructure for making such investments. Other specialized agencies and service providers associated with such investments e.g. custodian, bank, advisors etc. shall also have adequate expertise and infrastructure facilities. Their past track record of performance and regulatory compliance record, if they are registered with foreign regulators, should also be considered. Necessary agreements may be entered into with them as required. 12.13.3.3 Mandatory Disclosure Requirements for Mutual Fund schemes proposing overseas investments: a. Intention to invest in foreign securities and/or ETF(s) shall be disclosed in the SID. The attendant risk factors and returns ensuing from such investments shall be explained clearly in the SID. Mutual Funds shall also disclose as to how such investments will help in the furtherance of the investment objectives of the scheme(s). Such disclosures shall be in a language comprehensible to an averag....
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....ing 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 overseas investments stipulated under paragraph 12.13.2.1- 12.13.2.10 b. However, Clause 4 of the Seventh Schedule of the Mutual Funds Regulations that restricts investments in Mutual Fund units up to 5% of net assets and prohibits charging of fees, shall not be applicable to investments in Mutual Funds in foreign countries made in accordance with these Guidelines. c. Management fees and other expenses charged by the Mutual Funds in foreign countries along with the management fee and recurring expenses charged to the domestic Mutual Fund scheme shall not exceed the total limits on expenses as prescribed under Regulation 52(6) of the Mutual Funds Regulations. Where the scheme is investing only a part of the net assets in overseas Mutual Funds, the same principle shall be applicable for that part of investment. Details of calculation for charging ....
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....sm to verify that due diligence is being exercised while making investment decisions especially in cases of investment in unlisted and privately placed securities, unrated debt securities, NPAs, transactions where associates are involved and instances where the performance of the scheme(s) is poor. 12.16.3 AMC(s) shall report compliance with these requirements in their periodical reports to the Trustees and the Trustees shall report the same to the Board in the Half Yearly Trustee Reports For Half Yearly Trustee Report ^please refer to the section on Formats. Trustees shall also check compliance with these Guidelines through independent auditors or internal and/or statutory auditors or other systems developed by them. 12.17 Norms for investment and disclosure by Mutual Funds in derivatives ^SEBI Circular No. Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010 12.17.1 Exposure Limits 12.17.1.1 The cumulative gross exposure through equity, debt and derivative positions should not exceed 100% of the net assets of the scheme. 12.17.1.2 Mutual Funds shall not write options or purchase instruments with embedded written options. 12.17.1.3 The total exposure re....
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....ew schemes launched post the issue of the aforementioned guidelines. For all existing schemes, compliance with the guidelines shall be effective from October 01, 2010. 12.18 Interval Schemes/Plans ^SEBI Circular No. CIR/IMD/DF /19/2010 dated November 26, 2010 12.18.1 Certain SIDs provide that the subscription to the scheme can be made during a specific period (known as specified transaction period) and the repurchase of units is permitted on all business days subject to applicable loads (except for redemption during specified transaction period when no load is charged). These schemes are generally referred to as 'interval schemes'. 12.18.2 For all interval schemes/plans ^Applicability: The AMC shall ensure compliance with the requirements mentioned in Clause 12.16.2 from the date of next specified transaction period or April 1, 2011 whichever is later. Schemes for which observations (final) under Regulation 29 of SEBI (Mutual Funds) Regulations, 1996 have been issued but are yet to be launched would be required to carry out the changes in Scheme Information Document and file the same with SEBI before the launch.: 12.18.2.1 The units shall be mandatorily listed. ....
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....hall put in place a written policy on participation in CDS approved by the Board of the Asset Management Company and the Trustees as per the guidelines specified by RBI and Securities and Exchange Board of India (SEBI). The policy shall be reviewed by mutual funds, at least once a year. g. To enable the investors in the mutual funds schemes to take an informed decision, the concerned Scheme Information Document (SID) shall disclose the intention to participate in CDS transaction in corporate debt securities in accordance with directions issued by RBI and SEBI from time to time, and related information as appropriate in this regard. h. Mutual funds shall also disclose the details of CDS transactions of the scheme in corporate debt securities in the monthly portfolio statements as well as in the half yearly trustee report, as per the format ^Please refer to section on Formats for requisite formats. Further, mutual funds shall disclose the scheme wise details of CDS transactions in the notes to the accounts of annual report of the mutual fund as per the format^ Please refer to section on Formats for requisite formats^ . 12.19.2 Mutual funds participating in CDS tr....
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....uch periods being counted from the last day of the calendar quarter preceding the date of advertisement, alongwith benchmark index performance for the same periods. 13.3.3 Where the scheme has been in existence for less than one year, past performance shall not be provided. 13.3.4 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 picture of the performance or future performance of the scheme. 13.3.5 For the sake of standardization, a similar return in INR and by way of CAGR must be shown for the following apart from the scheme benchmarks: Scheme Type Benchmark Equity Scheme Sensex or Nifty Long term debt scheme 10 year dated GOI security Short term debt fund 1 year T-bill These disclosures shall form a part of the Statement of Additional Information and all advertisements of Mutual Funds. 13.3.6 Any disclosure regardin....
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....ntage allocation and the final portfolio. Variations between indicative portfolio allocation and final portfolio will not be permissible. CHAPTER 14 INVESTOR RIGHTS & OBLIGATIONS PART I - INVESTOR RIGHTS 14.1 Payment of interest for delay in dispatch of redemption and/or repurchase proceeds and/or dividend ^SEBI Circular No. SEBI/MFD/CIR/2/266/2000 dated May 19, 2000. 14.1.1 In the event of failure to dispatch: a. Redemption or repurchase proceeds within 10 working days from the date of receipt of such requests and/ or b. Dividend within the stipulated 30 day period ^SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009, 14.1.2 The AMC(s) shall be liable to pay interest @ 15 per cent per annum to the unit holders. ^Regulation 53(c) of the SEBI (Mutual Fund) Regulations, 1996. AMC(s) must ensure that the interest amount due for the period of delay in dispatch of repurchase or redemption and/or dividend is added to the proceeds when such payments are made to the investors. Such interest shall be borne by the AMC(s). 14.1.3 Details of such payments shall be sent to the Board along with the CTR(s). ^For CTR format please r....
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....ding his proper credentials (like PAN, date of birth, etc.) along-with adequate security control measures being put in place by Mutual Fund / AMFI. d. The website of Mutual Funds and AMFI shall also provide information on the process of claiming the unclaimed amount and the necessary forms / documents required for the same. e. Further, the information on unclaimed amount alongwith its prevailing value (based on income earned on deployment of such unclaimed amount), shall be separately disclosed to investors through the periodic statement of accounts / Consolidated Account Statement sent to the investors. 14.2.7 Disclosures on above provisions shall be made in the SAI /SID. Disclosure on the unclaimed amounts and the number of such investors for each scheme shall be made in the Annual Report also. ^Please refer to Schedule XI of SEBI (Mutual Funds) Regulations, 1996 14.3 Dispatch of Statement of Accounts ^SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000, SEBI Circular No. IMD/CIR/12/80083/2006 dated November 20, 2006 and SEBI Circular No.Cir/IMD/DF/16/2011 dated September 08, 2011 14.3.1 AMCs shall allot the units to the applicant whose applica....
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....lidate details across depositories and MF investments and dispatch the CAS to the investor. However, option shall be given to the demat account holder by the default depository to choose the depository through which the investor wishes to receive the CAS. 14.3.2.6 The CAS shall be generated on a monthly basis. The AMCs /MFRTAs shall provide the data with respect to the common PANs to the depositories within three days from the month end. The depositories shall then consolidate and dispatch the CAS within ten days from the month end. 14.3.2.7 Where statements are presently being dispatched by email either by the Mutual Funds or by the Depositories, CAS shall be sent through email. However, where an investor does not wish to receive CAS through email, option shall be given to the investor to receive the CAS in physical form at the address registered in the Depository system. 14.3.2.8 A proper grievance redressal mechanism shall be put in place by the depositories and the AMCs/MF-RTAs which shall also be communicated to the investors through CAS. AMCs/MF-RTAs would be accountable for the authenticity of the information provided through CAS in respect of MF i....
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.... constitute compliance by the Depository Participants with requirement under Regulation 43 of SEBI (Depositories and Participants) Regulations, to provide statements of account to the BOs as also compliance by the MFs with the requirement under Regulation 36(4) of SEBI (Mutual Funds) Regulations. 14.3.2.16 Further, in order to increase transparency of information to investors, it has been decided that ^SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016: a) Each CAS issued to the investors shall also provide the total purchase value / cost of investment in each scheme. b) Further, CAS issued for the half-year (September/ March) shall also provide. i. The amount of actual commission paid by AMCs/Mutual Funds (MFs) to distributors (in absolute terms) during the half-year period against the concerned investor's total investments in each MF scheme. The term 'commission' here refers to all direct monetary payments and other payments made in the form of gifts / rewards, trips, event sponsorships etc. by AMCs/MFs to distributors. ii. The scheme's average Total Expense Ratio (in percentage terms) for the half-year period, of bot....
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.... may become nonperforming assets (NPAs) or illiquid at the time of maturity/winding up of the scheme(s). In due course of time i.e. after the maturity/ winding up of the scheme(s), these NPAs and illiquid securities may be realized by the Mutual Funds. Mutual Funds shall distribute such amounts to the old investors if such amounts are substantial and realized within two years. If the amounts realized are not substantial or are realized after two years, the same may be transferred to the Investor Education Fund maintained by each Mutual Fund. The decision as to the determination of substantial amount shall be taken by the trustees of mutual funds after considering the relevant factors. 14.6 Change of Mutual Fund Distributor 14.6.1 Incase an investor wishes to change his distributor or wishes to go direct, Mutual Funds/AMC's shall ensure compliance with the instruction of the investor informing his desire to change his distributor and / or go direct, without compelling that investor to obtain a 'No Objection Certificate' from the existing distributor. ^SEBI Circular No -SEBI/IMD/CIR No./ 13/187052 /2009 December 11, 2009 14.7 Additional mode of payment through Applications S....
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.... brochure in question-answer format explaining the fundamental issues pertaining to mutual funds. The same is enclosed at Annexure 5. The same is also available at our website www.sebi.gov.in under the "Mutual Funds" section. 14.10.2 AMCs are advised to circulate copies of the brochure among their distributors and agents (including brokers, banks, post offices) and the investors. 14.10.3 AMCs may publish the same as small booklets. In such a case, while the booklets must bear SEBI name and logo, AMC may give their name as publisher. This may also be displayed prominently on their web sites 14.10.4 AMFI may consider including the brochure as a part of study material for their training programmes for investors and for their certification programme conducted for agents and distributors. 14.10.5 Board may be kept informed about the steps taken by the AMCs in this regard from time to time. 14.11 Financial Inclusion: 14.11.1 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 Mutu....
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....lity shall not be delegated to any agency. However, mutual funds/AMCs may take assistance of an agency of repute while carrying out due diligence process of distributors.^ SEBI Circular No. Cir/IMD/DF/7/2012 dated February 28, 2012 15.4.1.2 The due diligence process shall be initially applicable for distributors satisfying one or more of the following criteria: a. Multiple point presence (More than 20 locations) b. AUM raised over Rs. 100 Crore across industry in the non-institutional category but including high networth individuals (HNIs) c. Commission received of over Rs. 1 Crore p.a. across industry d. Commission received of over Rs. 50 Lakh from a single Mutual Fund 15.4.1.3 At the time of empanelling distributors and during the period i.e. review process, 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 corr....
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.... c. Review of transactions, exceptions identification, escalation and resolution process by internal audit. d. Recruitment, training, certification and performance review of all personnel engaged in this business. e. Customer on boarding and relationship management process, servicing standards, enquiry / grievance handling mechanism. f. Internal/ external audit processes, their comments / observations as it relates to MF distribution business. g. Findings of ongoing review from sample survey of investors. 15.4.1.6 Mutual Funds/AMCs may implement additional measures as deemed appropriate to help achieve greater investor protection. 15.5 Code of Conduct: 15.5.1 Mutual Funds are required to monitor the activities of their distributors, agents, brokers to ensure that they do not indulge in any malpractice or unethical practice while selling or marketing Mutual Funds units. Any non compliance with the Mutual Funds Regulations 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 t....
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.... obtaining the certification either by passing the NISM certification examination or qualifying for Continuing Professional Education (CPE) by obtaining such classroom credits as may be specified by NISM from time to time. 15.7.3 The Certification Regulations require the persons referred to in paragraph 15.7.1 above to comply with the requirements for CPE as specified by NISM within the validity period of the certificate obtained by passing the certification examination. However, to facilitate the transition process from AMFI to NISM, it has been decided that a person holding a valid AMFI certification whose validity expires between June 01, 2010 and 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, by December 31, 2010. 15.7.3 An associated person holding a valid AMFI/NISM certification whose validity expires anytime 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. 15.7.4 The requirement of obtaining r....
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....bution not only increases customer convenience, but also significantly improves distributor economics. The online phenomenon is increasing rapidly and it is observed that more and more people especially younger generation prefers online transactions. Therefore, it has been decided that all Mutual Funds should enhance the online investment facility and tap the internet savvy users to invest in Mutual Funds by providing an online investment facility on their websites. Mutual Funds also need to tap the burgeoning mobile-only internet users for direct distribution of Mutual Fund products. 15.10 Unique Identity Number 15.10.1 AMFI shall create a unique identity number of the employee/ relationship manager/ sales person of the distributor interacting with the investor for the sale of mutual fund products, in addition to the AMFI Registration Number (ARN) of the distributor. 15.10.2 The application form for mutual fund schemes shall have provision for disclosing the unique identity number of such sales personnel along with the ARN of distributor. CHAPTER 16 TRANSACTION IN MUTUAL FUNDS UNITS 16.1 Maintenance of documents ^SEBI Circular No - SEBI/IMD/CIR No.12 /186868 /2009 d....
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.... account opening documents, PAN, KYC, PoA (if applicable), specimen signature are available with AMCs/RTAs and not just with the distributor. 16.1.5.2 For existing folios, AMCs shall be responsible for updation of the investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature by November 15, 2010. 16.1.5.3 The trustees shall submit a confirmation after they receive certification from an Independent auditor on completion of the said process latest by November 22, 2010. 16.2 Facilitating transactions in Mutual Fund schemes through the Stock Exchange infrastructure^ SEBI Circular No - SEBI /IMD / CIR No.11/183204/ 2009 dated November 13,2009 16.2.1 Stock Exchange terminals can be used for facilitating transactions in mutual fund schemes. The Stock Exchange mechanism would also extend the present convenience available to secondary market investors to mutual fund investors. 16.2.2 Units of mutual fund schemes may be permitted to be transacted through registered stock brokers of recognized stock exchanges and such stock brokers will be eligible to be considered as official points of acceptance ^SEBI Circula....
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....vestors a. In case investors desire to convert their existing physical units (represented by statement of account) into dematerialized form, mutual funds / AMCs shall take such steps in coordination with Registrar and Transfer Agents, Depositories and Depository participants (DPs) to facilitate the same. 16.2.4.7 Option to hold units in demat form ^SEBI circular no.CIR/IMD/DF/9/2011, dated May 19, 2011 a. Mutual Funds/AMCs are advised to invariably provide an option to the investors to mention demat account details in the subscription form, in case they desire to hold units in demat form while subscribing to any scheme (open ended/close ended/Interval). b. Mutual Funds/AMCs shall ensure that above mentioned option is provided to the investors in all their schemes (existing and new). c. Mutual Funds/AMCs are advised to obtain ISIN for each option of the scheme and quote the respective ISIN along with the name of the scheme, in all Statement of Account/Common Account Statement (CAS) issued to the investors. 16.2.4.8 Know your client (KYC) a. Where investor desires to hold units in dematerialised form, the KYC performed by....
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....nsidered as official points of acceptance ^SEBI Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006 and conditions stipulated^ SEBI Circular dated November 13, 2009 for stock brokers Viz. AMFI /NISM certification, code of conduct prescribed by SEBI for Intermediaries of Mutual Fund, shall be applicable for such Clearing members and Depository participants as well. b. Stock exchanges and Depositories shall provide investor grievance handling mechanism to the extent they relate to disputes between their respective regulated entity and their client and shall also monitor the compliance of code of conduct specified ^SEBI Circulars MFD/CIR/20/23230/02 dated November 28, 2002 and SEBI/IMD/08/174648/2009 dated August 27, 2009 regarding empanelment and code of conduct for intermediaries of Mutual Funds. 16.2.4.13 The respective stock exchanges and Depositories would provide detailed operating guidelines to facilitate the above and ensure that timelines prescribed ^SEBI (Mutual Funds) Regulations, 1996 shall be adhered to with regard to allotment of units and receipt of redemption proceeds at the investor's level. 16.2.4.14 Transferability of Mutual Fu....
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....y participant (DP). 17.1.1.2 Indirect route- Holding MF units via Unit Confirmation Receipt (UCR). 17.1.2 The investment through the above mentioned routes shall be subject to the following conditions: 17.1.2.1 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 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. 17.1.2.2 MF shall ensure that only QFIs who comply with para 17.1.2.1 are allowed to invest under these routes. 17.1.2.3 MF shall ensure t....
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....ich are compliant with FATF standards and are signatory to MMOU of IOSCO. 17.1.2.10 In case of subscription, MF 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 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. 17.1.2.11 MF shall ensure that Systematic Investments/ transfer/ withdrawals and switches are not available to the QFIs. QFIs can only subscribe or redeem. 17.1.2.12 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. 17.1.2.13 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 17.1.2.14 MF shall ensure that all the investor related documents/ records of the QFIs are available with them. 17.1.2.15 MF shall ensure....
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....e of account opening, MF can rely on the KYC done by DPs. Further, MF shall obtain the relevant records of KYC/ other documents from the DP and ensure compliance with para 1.11.3.14. However, MF shall comply with PMLA, FATF standards and SEBI circulars issued in this regard from time to time on an ongoing basis. 17.1.3.6 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. 17.1.3.7 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 f....
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....ointed by MF shall act as agent of the MF. 17.1.4.5 MF can appoint entities fulfilling the following conditions as UCR issuer: a. The entity is able to demonstrate that it has proven track record, expertise and technology in the business of issuance of global depository receipts/global custody agency b. The entity is registered with an overseas securities market/ banking regulator. 17.1.4.6 MF shall seek no objection from SEBI before appointing any UCR issuer and furnish the details and information sought by SEBI about the UCR issuer. SEBI reserves the right to seek additional information / clarification and direct action, including non appointment/ revocation of appointment of that UCR Issuing Agent. 17.1.4.7 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 17.1.4.8 Custodians appointed by the MF shall comply with the SEBI (Custodian of Securities) Regulations, 1996, circulars and guidelines issued by SEBI. 17.1.4.9 The rupee denominated units of the MF would be held as underlying by the custodian in India in demat mode against which....
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....hall 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 the QFIs. g. In case of dividend payout, the MF shall remit the dividend amount proceeds to the UCR issuer which in turn shall remit the dividend amount to the designated bank account of the QFIs. 17.1.5 The investment by the QFIs in MF equity and debt schemes under this scheme shall also be subject to the relevant and extant FEMA regulations and guidelines issued by the Reserve Bank of India under FEMA, 1999 from time to time. 17.2 Clarification ^SEBI Circular No.Cir/IMD/DF/7/2012 dated February 28, 2012 to Regulation 24 ^Of SEBI (Mutual Funds) Regulations, 1996 17.2.1 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 f....