TaxTMI 
TaxTMI 
TaxTMI 
Master Circular for Mutual Funds
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 issued to Mutual Funds. Efforts have been made to incorporate certain applicable provisions of existing circulars (as on March 31, 2013) issued by other Departments/Divisions of SEBI relevant to Mutual Funds. INDEX ABBREVIATIONS ............................................................................. 5 CHAPTER 1 .................................................................................... 7 OFFER DOCUMENT FOR SCHEMES ................................................ 7 CHAPTER 2 .................................................................................. 19 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN ........................................................................ 19 CHAPTER 3 .................................................................................. 26 NEW PRODUCTS ........................................................................... 26 CHAPTER 4 ........................................................
X X X X Extracts X X X X
X X X X Extracts X X X X
............................................172 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 Hindu Undivided Family HUF International Organization of Securities Commission IOSCO Investor Service Center ISC Key Information Memorandum KIM Know Your Client KYC Monthly Cumulative Report MCR Monthly Average Assets Under Management MAAUM Multilateral Memorandum of Understanding MMOU National Stock Exchange NSE Net Asset Value NAV New....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TML 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 single SAI (common for all the schemes) can be filed with Board along with first draft of SID or can be filed separately. After incorporating the comments/observations, if any, from the Board, AMC shall file a soft copy of SAI with the Board in PDF format a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 latest applicable load structure shall be attached to all KIM and SID already in stock till it is updated). 4. A public notice shall be given in respect of such changes in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of region where the Head Office of the Mutual Fund is situated. 1.2.1.3 A copy of all changes made to the scheme shall be filed with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ertify 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 SEBI may revise the Standard Observations from time to time and in that case the date of revision shall also be mentioned. 1.5.3 While filing the SID and SAI, AMC shall highlight and clearly mention the page number of the SAI and SID on which each standard observation has been incorporated. 1.6 KIM 1.6.1 Application forms for schemes of mutual funds shall be accompanied by the KIM in terms of Regulation 29 (4). KIM shall be printed at least in 7 point font size w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the distributors/ISCs and confirm the same to SEBI in the half yearly trustee report. 1.9 Selection of Benchmarks EBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000, SEBI Circular No. MFD/CIR/16/400/02 dated March 26, 2002, SEBI Circular No. MFD/CIR/01/071/02 April 15, 2002. 1.9.1 In case of equity oriented schemes, mutual funds may appropriately select any of the indices available, (e.g. BSE (Sensitive) Index, S&P CNX Nifty, BSE 100, BSE 200 or S&P CNX 500 etc.) as a benchmark index depending on the investment objective and portfolio. 1.9.2 Benchmarks for debt oriented and balanced fund schemes SEBI Circular No. MFD/CIR/01/071/02 dated April 15, 2002. developed by research and rating agencies recommended by the AMFI on a regular basis shall be used by the Mutual Funds. 1.9.3 In case of sector or industry specific schemes, Mutual Funds may select any sectoral indices as published by the Stock Exchanges and other reputed agencies. 1.9.4 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 fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iption SEBI Circular No. CIR/IMD/DF/02/2013 dated February 6, 2013. 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, repurchase, redemption. b. Aggregate fees and expenses ch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 emerges after such consolidation or merger) and draft of the letter to be issued to the unit holders of all the concerned schemes. b. The letter addressed to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 characteristics of the scheme may be launched as additional plans as part of existing schemes by issuing an addendum. Such proposal should be approved by the Board(s) of AMC and Trustees. In this regard please note that: 2.3.2.1 The addendum shall contain information pertaining to salient features like applicable entry/exit loads, expenses or such other ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../8/2010 dated August 6, 2010, shall, with the approval of trustees, adopt either of the total expense structures laid out in Regulation Regulation 52 (6)(a) of SEBI (Mutual Funds) Regulations, 1996 and change the total expense structure after giving the unit holders an option to exit in accordance with Regulation Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Protection Oriented Scheme Regulation 2(ea), 33(2A) and 38A of the Mutual Funds Regulations introduced vide Gazette Notification No. S.O. 1254(E) dated August 3, 2006. shall disclose that the scheme is "oriented towards protection of capital" and not "with guaranteed returns." It shall also be indicated that the orientation towards protection of capital originates from the portfolio structure of the scheme and not from any bank guarantee, insurance cover etc. 3.3.2 The proposed portfolio structure indicated in the SID and KIM shall be rated by a Credit Rating Agency from the view point of assessing the degree....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 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 notification states that the eligible securities brought into the demat account will automatically be subject to lock-in during the first year, unless the new investor specifies otherwise and for such specifications, the new retail investors shall submit a declaration indicating that such securities are not to be included within the above limit of investment. It is clarified that such declaration shall be submitted by an investor to its Depository Participant within a period of one month from the date of transaction. d. For transactions undertaken by investors through their RGESS designated demat account, Depositories may ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 Best Practices to be followed by Mutual Funds: 4.2.3.1 Mutual Funds shall adopt these practices as a part of their due diligence exercise after considering the size of their operations. 4.3 Implementation of the Risk Management System 4.3.1 Mutual Funds shall adopt the following approach to implement the Risk Management System: 4.3.2 Identification of observance of each recommendation: 4.3.2.1 Mutual Funds shall identify areas of current adherence as well as non-adherence of various Risk Management practices under each of the three 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 R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....closure of derivatives, please refer to the section on Formats for the purpose of uniform disclosure of investments in derivative instruments by Mutual Funds in half yearly portfolio disclosure, annual report or in any other disclosures is prescribed. 5.2.3.2 Further, while listing net assets, the margin amounts paid should be reported separately under cash or bank balances. 5.3 Unaudited Half Yearly Financials SEBI Circular MFD/CIR/1/200/2001 dated April 20, 2001 & SEBI Circular No. IMD/CIR No.8/132968/2008 dated July 24, 2008 5.3.1 The publication of the unaudited half-yearly results shall be made in line with provisions of the Regulations Regulation 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 Mai....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and also in the Half Yearly and Annual Results Please refer the section on Formats for requisite formats. 5.6 Asset Under Management (AUM) disclosure SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011 5.6.1 Wherever the Mutual Funds discloses the AUM figures for the fund, disclosure on bifurcation of the AUM into debt/equity/ balanced etc, and percentage of AUM by geography (i.e. top 5 cities, next 10 cities, next 20 cities, next 75 cities and others) shall be made. The Mutual Funds shall disclose the aforesaid data on their respective websites & to AMFI and AMFI shall disclose industry wide figures on its website. 5.7 Commission disclosure SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011 5.7.1 Mutual Funds / AMCs shall disclose on their respective websites the total commission and expenses paid to distributors who satisfy one or more of the following conditions with respect to noninstitutional (retail and HNI) investors:- 5.7.1.1 Multiple point of presence (More than 20 locations) 5.7.1.2 AUM raised over `100 crore across industry in the non institutional category but including high networth individuals (HNIs). 5.7.1.3 Commission received of over ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... close of the financial year. 5.10.2.2 Include the report in their annual reports, as part of the Report of the Trustees. 5.11 Brokerage and commission paid to associates SEBI Circular No. SEBI/IMD/CIR No 18/198647/2010 dated March 15, 2010 5.11.1 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. 5.11.2 Disclosures on brokerage and commission paid to associates/related parties/group companies of sponsor/Asset Management Company in the unaudited half yearly financial results, the abridged scheme wise annual report and the SAI, shall be made in the format as prescribed Please refer to the section on Formats. PART II - REPORTS 5.12 Monthly Cumulative Report (MCR) SEBI circular MFD/CIR/07/206/2001 dated July 19, 2001, SEBI circular No IMD/Cir No.15/87045/2007 dated February 22, 2007, SEBI circular SEBI/IMD/CIR No 3/124444/08 dated April 30, 2008. 5.12.1 Date and Mode of Submission: 5.12.1.1 MCR For format of MCR please refer to section on Formats. shall be submitted to the Board by 3rd of each month by way of an email. Hard copy ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctions of the format, based on amendments to the Regulations/guidelines issued in the future from time to time. 5.15 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, 5.15.1 AMC should submit the annual statistical report to SEBI in the prescribed format by 30th of April each year For format of ASR refer the section on Formats Quarterly Movement of Net Assets- SEBI CIR - IIMARP/MF/CIR/05/788/97 dated April 28, 1997 required mutual funds to submit the statement for quarterly movement of net assets. However, SEBI circular MFD/CIR/12/16588/02 dated August 28,2002 stated that such Statement of movement of net assets /portfolios are no more to be submitted. 5.16 Daily Transaction Report SEBI Circular No.MFD/CIR/07/384/99 dated December 17, 1999 and MFD/CIR/08/23026/99 dated December 23, 1999 5.16.1 All Mutual Funds shall submit details of transactions in secondary market on daily basis in the prescribed format For format of daily transaction report, please refer the section on formats. Accordingly, Mutual Funds are advised to make necessary arrangements with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs) 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 and ensure that all the columns are correctly filledin and submit a 'Supplementary Information Report', if need be, to the Income Tax Department. 5.18.1 Mutual Funds are required to submit the Annual Information Return under section 285 BA in the Income-tax Act. As per this requirement, Trustees of Mutual Funds or such other person managing the affairs of the Mutual Funds (as may be duly authorized by the trustees in this behalf) have to report specified financial transactions in electronic media to Income Tax Department giving PAN of the transacting parties in an Annual Information Return (AIR). 5.18.2 Some common errors in these returns have been pointed out by the Directorate of Income Tax (Systems) as: 5.18.2.1 Not mentioning PAN or mentioning invalid PAN. 5.18.2.2 Entering incomprehensible/ incomplete names of transacting parties, e.g. names of 2 or 3 letters. 5.18.2.3 Entering incomprehensible/ incomp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, 1996 and SEBI Circular No. MFD/CIR No.010/024/2000 dated January 17, 2000.. 6.3 Role of Independent Director on the Board of the AMC and Independent Trustees SEBI Circular No. MFD/CIR/11/354/2001 dated December 20, 2001, SEBI Circular No. MFD/CIR/13/16799/2002 dated August 29, 2002, SEBI Circular No. MFD/CIR/17/21105/2002 dated October 28, 2002 6.3.1 An Independent Trustee shall not be associated in any manner with the Sponsor(s) Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996.. The independent directors on the Board of the AMC shall not be associate of, or associated in any manner with, the sponsor or any of its subsidiaries or the trustees Regulation 21(d) of the SEBI (Mutual Funds) Regulations, 1996.. 6.3.2 An 'associate' shall be defined as: 6.3.2.1 Relatives As defined under Section 6 of the Companies Act 1956. of Sponsor(s) or directors of the Sponsor Company or relatives of Associate Directors of the AMC(s) and Trustee. 6.3.2.2 Persons providing any type of professional service to the Mutual Funds, the AMC and the Trustees and the Sponsor(s). Also, persons having a material pecuniary relationship with the above mentioned entities that may, in the jud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The guidelines enumerated below specify the minimum requirements that have to be followed. The AMC(s) and Trustees are free to set more stringent norms for investment and/or trading in securities by their employees. 6.4.3 Guidelines for Investment and/or Trading in Securities by Employees of AMC(s) and Trustees: 6.4.3.1 Applicability a. These Guidelines shall be applicable to all employees of AMC(s) and Trustees and shall form a part of the Code of Conduct for employees adopted by the AMC(s) and/or Trustees. New employees shall be bound by these Guidelines from the date of joining the AMC(s) and/or Trustees. b. These Guidelines shall cover transactions for sale or purchase of securities made in the employees' name, either individually or jointly, and in the name of the employees' spouse and/or dependent children and transactions as a member of HUF. 6.4.3.2 The objectives and principles of these Guidelines are: a. To ensure that all securities transactions made by employees in their personal capacity are conducted in consonance with these Guidelines and in such manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pply to the Head of the AMC(s). The decision of the Compliance Officer shall be final and binding on the employee. b. In these Guidelines, in the case of the Compliance Officer's own transactions for purchase or sale of securities or disclosure or any other related matter, the term "Compliance Officer" wherever it appears, shall be read as "Head of the AMC." c. The Compliance Officer may coordinate with the Fund Management Department of the Mutual Fund, wherever necessary, to clear requests of investment and/or trading in securities by the employees. d. The approval of Compliance Officer for carrying out a transaction of sale or purchase of a security by the access person shall not be valid for more than seven calendar days from the date of approval SEBI Circular No. SEBI/IMD/CIR No.7/13391/03 dated July 11, 2003.. e. If a transaction approved by Compliance Officer has not been effected within seven SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009 calendar days from the date of its approval, the access person shall be required to obtain approval once again from Compliance Officer prior to effecting the transaction. f. All employees shall refr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce of the Compliance Officer for the same. Such purchases shall be done only at market prices. Details of any applications made in any rights issue, whether in the normal course, or through purchase of rights renunciations, shall be intimated to the Compliance Officer. 6.4.5.2 Investments through the secondary markets: a. An access person who wishes to make a secondary market transaction shall submit a written application to that effect to the Compliance Officer. Such an application shall specify the name of the company whose securities the employee wishes to buy and/or sell, type of security, and the number of shares and/or debentures and/or bonds and/or warrants and/or derivatives that the access person wishes to buy/sell. b. The Compliance Officer shall clear these requests if the following conditions are met: 1. If the shares and/or debentures and/or bonds and/or warrants of the company or derivatives specified by the access person are not held by any scheme of the Mutual Fund of which the AMC is the investment manager; 2. If such shares and/or debentures and/or bonds and/or warrants of the company or derivatives specified by the employee are held by any scheme of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has access by virtue of his office. Declaration to this effect may be taken from the employee while clearing the proposals for investment. h. The employees shall not insist or suggest to the concerned brokers to charge reduced brokerage, or accept any contract with a clause on reduced brokerage charge. 6.4.6 Investments in units of Mutual Fund Schemes 6.4.6.1 Access persons as well as other employees do not require prior permission of the Compliance Officer for purchase or sale of units of Mutual Fund schemes. However, details of each such transaction, excluding transactions in Money Market Mutual Fund schemes shall be reported by them to the Compliance Officer within 7 calendar days from the date of transaction. 6.4.6.2 In case of investments in SIP of any Mutual Fund scheme, the employees may report only at the time of making the first installment of the SIP. 6.4.6.3 Notwithstanding anything mentioned earlier, in the following cases employees of AMC & Trustees shall not purchase or sell /or repurchase or redeem units of any scheme, including Money Market Mutual Fund scheme of their Mutual Fund: a. There is a likelihood of a change in the investment objectives of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2002 shall be followed strictly by the trustee companies, asset management companies and their employees and directors. 6.5.2 Review by the Board of Directors of AMC and the Trustee(s) 6.5.2.1 The Board of the AMC and the Trustees shall review the compliance of these Guidelines in their periodic meetings. They shall review the existing procedures and recommend changes in procedures based on the AMCs experience, industry practices and/or developments in applicable laws and regulations. They shall report compliance and any violations and remedial action taken by them in their reports submitted to the Board. 6.6 Responsibilities of AMC & Trustees MFD/CIR/09/014/2000 dated January 5, 2000 6.6.1 For effective discharge of their responsibilities under the Mutual Funds Regulations, the AMC(s) shall provide infrastructure and administrative support to the Trustees. The Mutual Fund may decide to appoint independent auditors and/or may have separate full fledged administrative set up for the Trustees. However, the expenditure incurred in this regard shall be within the limits as specified in Regulation 52(6) of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....condition of minimum 20 investors, the Scheme(s)/Plan(s) shall be wound up in accordance with Regulation Reg. 39 (2) (c) of SEBI (MF) Regulations, 1996 automatically without any reference from SEBI. 6.7.2.4 In case of non-fulfillment with the condition of 25% holding by a single investor on the date of allotment, the application to the extent of exposure in excess of the stipulated 25% limit would be liable to be rejected and the allotment would be effective only to the extent of 25% of the corpus collected. Consequently, such exposure over 25% limits will lead to refund within 6 weeks of the date of closure of the New Fund Offer. 6.7.2.5 For interval scheme the aforesaid provision will be applicable at the end of NFO and each specified transaction period. 6.7.2.6 Requisite disclosure in this regard shall be made in the SID. 6.7.3 Determination of breach: 6.7.3.1 The average shall be calculated, at the end of each quarter, on the basis of number of investors at the end of the business hours of the scheme on a daily basis. 6.7.3.2 To determine breach of 25% holding limit by an investor, net assets under the scheme shall be calculated daily and the daily holding limi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Trustees of the mutual fund. 6.13 The systems audit report/findings along with trustee comments should be communicated to SEBI. 6.14 For the financial years April 2013 - March 2014, the systems audit should be completed by September 30, 2014. 149 PART IV - ROLE OF MUTUAL FUNDS IN CORPORATE GOVERNANCE OF PUBLIC LISTED COMPANIES SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 6.15 MFs should play an active role in ensuring better corporate governance of listed companies. 6.16 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. 6.17 AMCs are required to disclose on the website of the respective AMC as well as in the annual report distributed to the unit holders, the actual exercise of their proxy votes in the AGMs/EGMs of the investee companies in respect of the following matters:- 6.17.1 Corporate governance matters, including changes in the state of incorporation, merger and other corporate restructuring, and anti takeover provisions 6.17.2 Changes to capital structure, includ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ual schemes shall be done in the post closing session. SEBI Circular No. MRD/DoP/SE/Cir-35/2004 dated October 26, 2004. The UCC can be shared with the unit holders to facilitate tax benefits linked to payment of Securities Transaction Tax (STT). 7.4 Trading in Exchange Traded Derivatives Contracts SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005; SEBI Circular No. DNPD/Cir-30/2006 dated January 20, 2006, SEBI Circular No. SEBI/DNPD/Cir-31/2006 dated September 22, 2006. 7.4.1 For trading in Exchange Traded Derivatives Contracts, following should be observed:- 7.4.1.1 Mutual Fund schemes can participate in derivatives market as per the guidelines issued by SEBI in this regard from time to time. SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005. 7.4.1.2 The Mutual Funds shall be treated at par with a registered FII in respect of position limits in index futures, index options, stock options and stock futures contracts. The Mutual Funds will be considered as trading members like registered FIIs and the schemes of Mutual Funds will be treated as clients like subaccounts of FIIs. 7.4.1.3 Appropriate disclosures shall be made in the offer document regar....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../171/01 dated February 9, 2001, SEBI Circular No. MFD/CIR/13/087/2001 dated March 28, 2001; SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006, SEBI Circular No. SEBI/IMD/CIR No.5/96576/2007 dated June 25, 2007, SEBI Cir No. SEBI/IMD/Cir No.12/147132/08 dated December 11,2008 8.1.1 The NAV of schemes shall be published on a daily basis by the Mutual Funds at least in two daily newspapers Regulation 48(2) of SEBI (Mutual Funds) Regulations, 1996. 8.1.2 NAV and sale/repurchase price of all Mutual Fund schemes except for Fund of Fund Schemes shall be updated on AMFI's website and the Mutual Funds' websites by 9 p.m. of the same day SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006.. 8.1.3 Fund of Fund Schemes shall have an extended time up to 10 a.m. the following business day in this regard SEBI Circular No. SEBI/IMD/CIR No.5/96576/2007 dated June 25, 2007. and the NAVs shall be published in newspapers with an asterisk to indicate the one day time lag/or the actual time lag. 8.1.4 Delay beyond 10 a.m. of the following business day in case of Fund of Fund schemes and 9 p.m. on the same day for all other schemes shall be explained in writing to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....delines Please refer to the Section on liquid schemes issued by SEBI in this regard SEBI Circular No.SEBI/IMD/CIR No.13/150975/09 dated January 19, 2009. 8.3.3 Applicability 8.3.3.1 The Guidelines on Cut off Timings for applicability of Net Asset Value of Mutual Fund scheme(s) and/ or plan(s) shall be applicable to all schemes and plans of Mutual Funds except: a. International schemes and b. Transactions in Mutual Fund units undertaken on a recognized Stock Exchange. 8.3.4 Fixation of uniform Cut-off Timings 8.3.4.1 Mutual Funds shall reckon the Cut-off Timings for their schemes and plans in compliance with these Guidelines and the same shall be uniformly implemented for all investors. 8.3.4.2 Mutual Funds shall ensure that each payment instrument for subscription or purchase of units is deposited in a bank expeditiously by utilization of the appropriate banking facility, so as to comply with the requirement in Clause 8.3.4.1 above. 8.3.4.3 AMCs shall compensate any loss occasioned to any investor or to the scheme and/or plan on account of non compliance with Clause 8.3.4.2 above. 8.3.5 Cut-off Timings for liquid fund schemes and plans For determining the applicabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... repurchase: a. Where the application is received up to 3.00 pm - the closing NAV of day immediately preceding the next business day; and b. Where the application is received after 3.00 pm - the closing NAV of the next business day. 8.3.5.5 Mutual Funds shall calculate NAV for each calendar day for their liquid fund schemes and plans. a. Explanation: "Business Day" does not include a day on which the Money Markets are closed or otherwise not accessible. 8.3.6 Cut-off Timings for schemes and plans other than liquid fund schemes and plans 8.3.6.1 A Mutual Fund shall reckon only prospective NAV, in accordance with this clause, in respect of all their schemes and plans i.e. for other than liquid fund schemes and plans 8.3.6.2 The following Cut-off Timings shall be observed by Mutual Funds in respect of purchase of units in other schemes and plans and following NAVs shall be applied for such purchase: 8.3.6.2.1 Where the application is received up to 3.00 pm with a local cheque or demand draft payable at par at the place where it is received - closing NAV of the day on which the application is received; 8.3.6.2.2 Where the application is received after 3.00 pm wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ceived; and 8.3.6.5.2 An application received after 3.00 pm - closing NAV of the next business day. 8.3.7 Switch and Sweep Transactions 8.3.7.1 Paragraphs 8.3.5 and 8.3.6 shall apply to 'switch in' transactions as if they were purchase transactions and to 'switch out' transactions as if they were repurchase transactions. 8.3.7.2 Paragraphs 8.3.5 and 8.3.6 shall apply to 'sweep' transactions as if they were purchase transactions and to 'reverse sweep' transactions as if they were repurchase transactions. 8.3.7.3 In case of 'switch' transactions from one scheme to another, the allocation shall be in line with redemption payouts. 8.3.8 Time Stamping 8.3.8.1 Application from investors shall be received by Mutual Funds only at official points of acceptance, addresses of which shall be disclosed in the SID and on Mutual Funds' websites. 8.3.8.2 Cut off timings as prescribed under Paragraphs 8.3.5 and 8.3.6 shall apply with reference to the point of time at which the applications are received at such official points of acceptance. 8.3.8.3 Time stamping machines at all official points of acceptance shall be in compliance with the requirements mentioned in Section 8.4. 8.3.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....7 Breakage of seal and/or breakdown of the time stamping process shall be duly recorded and reported to the Trustees. 8.4.8 Every effort should be made to ensure uninterrupted functioning of the time stamping machine. In case of breakdown, the Mutual Funds shall take prompt action to rectify the situation. During the breakdown period, Mutual Funds shall adopt an alternative time stamping method that has already been approved by the Board of the AMC and the Trustee(s). An audit trail shall be available to check and ensure the accuracy of the time stamping process during the said period. 8.4.9 Any alternate mode of application that does not have any physical or electronic trail shall be converted into a physical piece of information and time stamped in accordance with these Guidelines. 8.4.10 Mutual Funds shall maintain and preserve all applications/ requests, duly time stamped as aforesaid, at least for a period of eight years Regulation 50(2) of SEBI (Mutual Funds) Regulations, 1996 to be able to produce 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/08/514/20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be used by the Mutual Funds. e. If the shares are not listed on the Stock Exchanges which provide such information, then Mutual Funds shall make their own analysis in line with the above criteria to check whether such securities are thinly traded or not and then value them accordingly. 9.1.3 Thinly traded Debt Securities SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.1.3.1 A debt security (other than Government Securities) shall be considered as a thinly traded security if, on the valuation date, there are no individual trades in that security in marketable lots (currently applicable) on the principal Stock Exchange or any other Stock Exchange. 9.2 Valuation of Securities 9.2.1 Traded Securities: SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.2.1.1 When a security (other than debt securities) is not traded on any Stock Exchange on a particular 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve and the proportion which it bears to the total net assets of the scheme to which it belongs will be compared on the date of valuation SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001. g. In case trading in an equity security is suspended up to thirty days, then the last traded price shall be considered for valuation of that security. If an equity security is suspended for more than thirty days, then the AMC(s) or Trustees shall decide the valuation norms to be followed and such norms shall be documented and recorded. 9.2.4 Non traded/thinly Traded Debt security 9.2.4.1 A thinly traded debt security as defined above shall be valued as per the norms for non traded debt security. a. Valuation SEBI Circular No. SEBI/IMD/CIR No.16/ 193388/2010 dated February 02, 2010 of money market 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....years, 4-5 years, 5-6 years and 6 years and the volume weighted yield would be computed for each bucket. These duration buckets may be changed to reflect the market value more closely by any agency suggested by AMFI giving benchmark yield/ matrix of spreads over benchmark yield. b. The benchmark as calculated above will be set at least weekly, and in the event of any significant movement in prices of Government Securities on account of any event impacting interest rated on any day such as a change in the Reserve Bank of India (RBI) policies, the benchmark will be reset to reflect any change in the market conditions. 9.3.2 Building a Matrix of Spreads for Marking-up the Benchmark Yield203 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.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k. As the level of illiquidity risk would be higher for non rated securities the marking process for rated and non rated securities would be differentiated as follows: a. Adjustments for Securities rated by external rating agencies SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. Category Discretionary mark up/mark down + - Rated instruments withduration upto 2 years 100 bps 50 bps Rated instruments withduration over 2 years 75 bps 25 bps 1. The rationale for the above discount structure is to take cognizance of the differential interest rate risk of the securities. This structure will be reviewed periodically. 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 un-rated 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 2years Discretionary discount of upto +50 bps over and above mandatory dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mit of 15 per cent. in the following time frame: a. All the illiquid securities above 20 per cent. of total assets of the scheme shall be assigned zero value on September 30, 2001. b. All the illiquid securities above 15 per cent. of total assets of the scheme shall be assigned zero value on September 30, 2002. 2. In respect of closed ended funds, for the purposes of valuation of illiquid securities, the limits of 15 per cent. and 20 per cent. applicable to open ended funds should be increased to 20 per cent. and 25 per cent. respectively. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 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 is due on a half yearly basis and the due date falls on 30.06.2000 and the interest is not received till 1st quarter after due date i.e. 30.09.2000. The provisioning will be do....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uarters 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 made if the rating comes down to Grade 'D' (or its equivalent). 9.7.8 Reschedulement of an asset 9.7.8.1 In case a company defaults in payment of either interest or principal amount and the Mutual Fund has accepted a rescheduling of the schedule of payments, then the following practice shall be adhered to: a. In case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- 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 calculation in (c) below. b. Average capitalisation rate (P/E ratio) for the industry based upon either BSE or NSE data (which shall be followed consistently and changes, if any, noted with proper justification thereof) shall be taken and discounted by 75 per cent. i.e. only 25 per cent of the industry average P/E shall be taken as capitalisation rate (P/E ratio). Earnings per share (EPS) of the latest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 exceed 5% of the total AUM of the scheme. 9.9.2 AMFI has been advised that the valuation agencies should ensure that the valuation of such securities gets covered in the valuation framework within six weeks from the date of receipt of such intimation from mutual fund. 9.9.3 In the interim period, till AMFI makes provisions to cover such securities in the valuation of securities framework, the mutual funds shall value such securities using their proprietary model which has been approved by their ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 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 inflows from beyond top 15 cities so charged shall be clawed back in case the same is redeemed within a period of 1 year from the date of investment. 10.1.4 Mutual funds/AMCs shall make complete disclosures in the half yearly report of Trustees to SEBI regarding the efforts undertaken by them to increase geographical penetration of mutual funds and the details of opening of new branches, especially at locations beyond top 15 cities. 10.1.5 Brokerage and transaction cost SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 & SEBI C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompanies in case of schemes launched on no load basis SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010. 10.1.10.1 AMC shall not collect any additional management fees referred to in Regulation Regulation 52(3) of SEBI Mutual Funds Regulation, 1996 and SEBI Circular No. SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009. 10.1.10.2 Mutual Fund Schemes to be launched including those for which observation letter have been issued under Regulation Regulation 29 of SEBI (Mutual Funds) Regulations, 1996 would be required to carry out the changes in SID and file the same with SEBI before the launch. 10.2 Restriction on paying brokerage or commission SEBI Circular No. MFD/CIR No.3/211/2001 dated April 30, 2001, SEBI Circular No. MFD/CIR No.5/153/2001 dated May 24, 2001. 10.2.1 In case of investments made by the Sponsor(s), no brokerage or commission shall be paid. 10.3 Restriction on charging Service Tax SEBI Circular No. MFD/CIR/04/430/2002 dated June 19, 2002, SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 10.3.1 AMC(s) can charge Service Tax, as per applicable Taxation Laws, to the scheme(s) within the limits prescribed under Regulati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e (NAV). The usage SEBI Circular No.CIR/IMD/DF/4/2011 dated March 9, 2011 of the load account shall be subject to the following: a. The load balance shall be segregated into two accounts in the books of accounts of the scheme - one to reflect the balance as on July 31, 2009 and the other to reflect accretions since August 01, 2009. b. However, not more than one- third of load balance as on July 31, 2009 shall be used in any financial year. It is clarified though the unutilized balances can be carried forward, yet in no financial year the total spending can be more than one third of the load balances on July 31, 2009. The accretions after July 31, 2009 can be used by mutual funds for marketing and selling expenses including distributor's/agent's commissions without any restrictions mentioned in Para (b) above. The exit load charged Regulation 51A of SEBI (Mutual Funds) Regulations, 1996., if any, after the commencement of SEBI (Mutual Funds) (Second Amendment) Regulations, 2012, shall be credited to the scheme. 10.4.1.4 The exit load charged Regulation 51A of SEBI (Mutual Funds) Regulations, 1996., if any, after the commencement of SEBI (Mutual Funds) (Second Amend....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evying transaction charge based on type of the product SEBI Circurlar No. CIR/IMD/DF/21/2012 dated September 13, 2012. 10.5.1.7 The AMCs shall be responsible for any malpractice/mis-selling by the distributor while charging transaction costs. 10.5.1.8 There shall be no transaction charge on subscription below `10,000/- 10.5.1.9 In case of SIPs, the transaction charge shall be applicable only if the total commitment through SIPs amounts to `10,000/- and above. In such cases the transaction charge shall be recovered in 3-4 installments. 10.5.1.10 There shall be no transaction charge on transactions other than purchases/ subscriptions relating to new inflows. 10.5.2 Mutual Funds shall institute systems to detect if a distributor is splitting investments in order to enhance the amount of transaction charges and take stringent action including recommendations to AMFI to take appropriate action. 10.5.3 Mutual Funds/AMCs shall carry out an exercise of de-duplication of folios across all Mutual Funds within a period of 6 months from August 22, 2011. 10.6 No Load on Bonus Units and Units allotted on Reinvestment of Dividend231 SEBI Circular No. SEBI/IMD/CIR No. 14/120784/08 dated....
X X X X Extracts X X X X
X X X X Extracts X X X X
....96. Dividend so decided, shall be paid, subject to availability of distributable surplus. 11.2.1.2 Record date shall be the date which will be considered for the purpose of determining the eligibility of investors whose names appear on the register of unit holders for receiving dividends. The NAV shall be adjusted to the extent of dividend distribution and statutory levy, if applicable, at the close of business hours on record date. 11.2.1.3 Within one calender day of the decision of the Trustees with respect to the dividend to be distributed, the AMC(s) shall issue a notice to the public communicating the decision including the record date. The record date shall be five calendar days from the issue of public notice. 11.2.1.4 Before the issue of such notice, no communication whatsoever indicating the probable date of dividend declaration shall be issued by any Mutual Fund or its distributors of its products. 11.2.1.5 Such notice shall be given in at least one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the head office of the Mutual Fund is situated. 11.2.1.6 The notice shall, in font size 10....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ensure compliance within a period of 3 months from the date of notification. 12.1 Investments by Index Funds: SEBI Circular No - MFD/CIR/09/014/2000 dated January 5, 2000 12.1.1 Investments by index funds shall be in accordance with the weightage of the scrips in the specific index as disclosed in the SID See Clause 10, Seventh Schedule of Mutual Funds Regulations. In case of sector or industry specific scheme, the upper ceiling on investments may be in accordance with the weightage of the scrips in the representative sectoral index or sub index as disclosed in the SID or 10% of the NAV of the scheme, whichever is higher. 12.2 Investments by Liquid Schemes and plans SEBI Circular No - SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009 12.2.1 The 'liquid fund schemes and plans' shall make investment in /purchase debt and money market securities with maturity of upto 91 days only With effect from February 01, 2009 make investment in /purchase debt and money market securities with maturity of upto182 days only.. This shall also be applicable in case of inter scheme transfer of securities Transition provision: Inter-scheme transfers of securities having maturity upto 365 day....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the scheme." 12.4.2 Appropriate disclosures shall be made in Scheme Information Document (SID) and Key Information Memorandum (KIM) of debt schemes. 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 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. associated with such transactions. 12.5.3 Reporting Requirement 12.5.3.1 The AMC(s) shall report to the Trustees on a quarterly basis about th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6. 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 Mutual Funds Regulations, 1996. 12.10.1 The guidelines for deployment of funds in short term deposits of commercial banks for schemes are as under: 12.10.1.1 "Short Term" for park....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 to the Audit Committee. These reports shall be placed in the meetings of the Board of the AMC and Trustees. Mutual Funds shall submit, on a quarterly basis to the RBI, a certificate confirming compliance with these requirements and any other guidelin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y 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. 12.13.2 Permissible investments: 12.13.2.1 ADR(s) and/or GDR(s) issued by Indian or foreign companies. 12.13.2.2 Equity of overseas companies listed on recognized Stock Exchanges overseas. 12.13.2.3 Initial and Follow on Public Offerings for listing at recognized Stock Exchanges overseas. 12.13.2.4 Foreign debt securities in the countries with fully convertible cur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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). b. Mutual Funds shall disclose the name of the Dedicated Fund Manager for making overseas investments. c. Mutual Funds shall disclose exposure limits i.e. the percentage of assets of the scheme they would invest in foreign securities / ETF(s). d. Such investments shall be disclosed while disclosing Half Yearly portfolios in the prescribed format under a separate heading "Foreign Securities and/or overseas ETF(s)." Scheme wise percentage of investments made in such securities shall be disclosed while publishing Half Yearly Results in the prescribed format For Half Yearly Results, please refer to the section on Formats as a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt 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 such expenses shall be reported to the Board of the AMC and the Trustees and shall also be disclosed in the Annual Report of the scheme. d. The application Please refer the section on formats for format of proposal for investments in foreign securities and ETFs for seeking approval for investing in foreign securities, ADR/GDR/overseas ETF(s) shall be made in advance of making investments. On receipt of approval from the Board, intimation may be sent by the AMC(s) to Overseas Investment Division, Foreign Exchange Department, RBI. 12.14 Investments in Indian Depository Receipts (IDRs) SEBI Circular No. IMD/CIR. No.1/165935/2009 dated June 09, 2009 12.4.1Mutual funds can invest in Indian Depository Receipts Regulation 43(1) of SEBI (Mutual Funds) Regulations, 1996 [Indian Depository Receipts as defined ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 related to option premium paid must not exceed 20% of the net assets of the scheme. 12.17.1.4 Cash or cash equivalents with residual maturity of less than 91 days may be treated as not creating any exposure. 12.17.1.5 Exposure due to hedging positions may not be included in the above mentioned limits subject to the following: a. Hedging positions are the derivative positions that reduce possible losses on an existing position in securities and till the existing position remains. b. Hedging positions cannot be taken for existing derivative positions. Exposure due to such positions shall have to be added and treated under limits mentioned in Point12.16.1.1. c. Any derivative instrument used to hedge has the same underlying security as the existing position being hedged. d. The quantity of underlying associated with the derivative position taken for hedging purposes does not exceed the quantity of the existing position against whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ys. 12.18.2.3 Minimum duration of an interval period in an interval scheme/plan shall be 15 days. 12.18.2.4 Investments shall be permitted only in such securities which mature on or before the opening of the immediately following specified transaction period. Explanation: In case of securities with put and call options the residual time for exercising the put option of the securities shall not be beyond the opening of the immediately following transaction period. 12.19 CDS - mutual funds as users (protection buyers) SEBI Circular No. CIR/IMD/DF/23/2012 dated November 15, 2012. 12.19.1 Mutual funds have been permitted to participate in CDS market, as per the guidelines issued by RBI from time to time , subject to the following conditions: a. Mutual funds shall participate in CDS transactions only as users (protection buyer). Thus, mutual funds are permitted to buy credit protection only to hedge their credit risk on corporate bonds they hold. They shall not be allowed to sell protection and hence not permitted to enter into short positions in the CDS contracts. However, they shall be permitted to exit their bought CDS positions, subject to para (d) below. b. Mutual fund....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dated February 28, 2012 13.1 Advertisement shall be in terms of Sixth Schedule Sixth Schedule of SEBI (Mutual Funds) Regulations, 1996 as amended via gazette notification No. LADNRO/ GN/2011-12/38/4290 dated February 21, 2012. 13.2 In addition to the provisions of the Sixth Schedule, mutual funds shall comply with the following: SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012 13.2.1 While advertising pay out of dividends, all advertisements shall disclose the dividends declared or paid in rupees per unit along with the face value of each unit of that scheme and the prevailing NAV at the time of declaration of the dividend. 13.2.2 Impact of Distribution Taxes: While advertising returns by assuming reinvestment of dividends, if distribution taxes are excluded while calculating the returns, this fact shall also be disclosed. 13.2.3 Pay out of Dividend/ Bonus: While advertising pay outs, all advertisements shall disclose, immediately below the pay out figure (in percentage or in absolute terms) that the NAV of the scheme, pursuant to pay out would fall to the extent of payout and statutory levy (if applicable). 13.3 Transparency of Information SEBI Circular No.C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hen the AMC may disclose the total number of schemes managed by that fund manager along with the performance data of top 3 and bottom 3 schemes (in addition to the performance data of the scheme for which the advertisement is being made) managed by that fund manager in all performance related advertisement. However, in such cases AMCs shall ensure that true and fair view of the performance of the fund manager is communicated by providing additional disclosures, if required. 13.4 Indicative portfolios and yields in mutual funds schemes SEBI Circular No. IMD/CIR No. 14/1510/2009 dated January 19, 2009 13.4.1 Mutual Funds shall not offer any indicative portfolio and indicative yield. No communication regarding the same in any manner whatsoever shall be issued by any Mutual Fund or distributors of its products. The compliance of the same shall be monitored by the AMC and Trustees and reported in their respective reports to SEBI. 13.4.2 Indicative portfolio or yield in close ended debt oriented mutual fund schemes SEBI Circular No. CIR/IMD/DF/12/2011 dated August 01,2011 Mutual Funds (MFs) / AMCs may make following additional disclosures in the SID/SAI and KIM without in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....14.2.2 Investors claiming these amounts within three years from the due date shall be paid at the prevailing NAV. At the end of three years, the amount can be transferred to a pool account and investors can claim the amount at the NAV prevailing at the end of the third year. 14.2.3 Income earned on such funds can be used for the purpose of investor education. 14.2.4 The AMC shall make a continuous effort to remind the investors through letters to take their unclaimed amounts. 14.2.5 The investment management and advisory fee charged by the AMC for managing unclaimed amounts shall not exceed 50 basis points. 14.2.6 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 application has been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nnual Report of Mutual Funds schemes that the unitholders, if they so desire may request for the Annual Report of the AMC. 14.5 Distribution of Proceeds realized from illiquid securities/ NPAs SEBI Circular No. MFD/CIR/05/432/2002 dated June 20, 2002. 14.5.1 Some of the investments made by Mutual Funds may become non-performing 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....funds SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 14.10.1 In order to help enhance the reach of mutual fund products amongst small investors, who may not be tax payers and may not have PAN/bank accounts, such as farmers, small traders/businessmen/workers, cash transactions in mutual funds to the extent of 20,000/- per investor, per mutual fund, per financial year shall be allowed subject to (i) compliance with Prevention of Money Laundering Act, 2002 and Rules framed there under; the SEBI Circular(s) on Anti Money Laundering (AML) and other applicable AML rules, regulations and guidelines and (ii) sufficient systems and procedures in place. 14.10.2 Repayment in the form of redemptions, dividend, etc. with respect to aforementioned investments shall be paid only through banking channel. PART III- INVESTOR EDUCATION 14.11 SEBI Investors Education Programme - Investments in Mutual Funds SEBI Cir No. MFD/CIR NO -13/370/02 dated January 16,2002 14.11.1 Board has prepared a 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs of Mutual Fund products SEBI Circular No. CIR/IMD/DF/13/2011 dated August 22, 2011. 15.4.1 The AMCs shall regulate the distributors by putting in place a due diligence process as follows: 15.4.1.1 The due diligence of distributors is solely the responsibility of mutual funds/AMCs. This responsibility 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 `100 Crore across industry in the non institutional category but including high networth individuals (HNIs). c. Commission received of over `1 Crore p.a. across industry. d. Commission received of over `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,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the periodicity of such review. b. The factors to be included in determining the risk appetite of the customer and the investment categorization and periodicity of such review. 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. 15.4.2 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 ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s markets in the sale and/ or distribution of mutual fund products as on May 31, 2010, will be given the option of 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. 15.7.4 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 R....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... documents were maintained/ available with the AMC. If not, and to the extent of and relating to such investor accounts/folios where investor related documentation was incomplete/inadequate/not available or was stated to be maintained by the distributors, then the Trustees were advised to ensure the following: 16.1.2.1 No further payment of any commissions, fees and / or payments in any other mode should be made to such distributors till full compliance/ completion of the steps enumerated herein. 16.1.2.2 Take immediate steps to obtain all investor/ unit holders documents in terms of the AML/ CFT, including KYC documents/ PoA as applicable. 16.1.2.3 Take immediate steps to obtain all supporting documents in respect of the past transactions. 16.1.2.4 On a one time basis, send statement of holdings and all transactions since inception of that folio in duplicate to the investor and seek confirmation from the unit holders on the duplicate copy. 16.1.2.5 Set up a separate customer services mechanism to handle/ address queries and grievance of the above mentioned unitholders. 16.1.2.6 Pending completion of documentation, exercise great care and be satisfied of investor bonafi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....utors with mutual fund/AMC. b. These stock brokers shall also comply with Code of Conduct For Code of Conduct, please refer to Annexure I for intermediaries of Mutual Funds, and applicable SEBI guidelines Please refer Chapter 15 on Certification and Regiatration of Mutual Funds intermediaries, applicable to intermediaries engaged in selling and marketing of mutual fund units. c. It is clarified that, stock exchanges shall monitor the compliance of the code of conduct specified regarding empanelment of intermediaries by mutual funds Please refer Chapter 15 on Certification and Regiatration of Mutual Funds intermediaries. 16.2.4.2 Time stamping a. Time stamping as evidenced by confirmation slip given by stock exchange mechanism to be considered sufficient compliance with clause for cut-off timing for liquid scheme and plans, cut-off timing for other schemes and plans and time stamping provisions mandated by Board Please refer to Chapter 8 - Net Asset Value for details on cut off timing provisions. 16.2.4.3 Statement of Account 16.2.4.4 a. Where investor desires to hold units in dematerialised form, demat statement given by depository participant would be deemed to be adeq....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ual Funds and Stock Brokers, the following be noted SEBI Circular No CIR/IMD/DF/17/2010 dated November 9, 2010: a. Units of mutual funds schemes may be permitted to be transacted through clearing members of the registered Stock Exchanges. b. Permit Depository participants of registered Depositories to process only redemption request of units held in demat form. 16.2.4.10 The following be noted with respect to investors having demat account and purchasing and redeeming mutual funds units through stock brokers and clearing members: a. Investors shall receive redemption amount (if units are redeemed) and units (if units are purchased) through broker/clearing member's pool account. Mutual Funds(MF)/ Asset management Companies(AMC) would pay proceeds to the broker/clearing member (in case of redemption) and broker/clearing member in turn to the respective investor and similarly units shall be credited by MF/AMC into broker/clearing member's pool account (in case of purchase) and broker/clearing member in turn to the respective investor. b. Payment of redemption proceeds to the broker/clearing members by MF/AMC shall discharge MF/AMC of its obligation of payment to individual i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the mechanism in the interest of investors. Necessary clarifications, if any, would be issued at appropriate time by SEBI in this regard. CHAPTER 17 MISCELLANEOUS 17.1 Investment by Foreign Investors in Mutual Fund Schemes SEBI Circular No.CIR/IMD/DF/14/2011 dated August 9, 2011. 17.1.1 Foreign investors (termed as Qualified Foreign Investors/ QFIs) who meet KYC requirement may invest in equity and debt schemes of Mutual Funds (MF) through the following two routes: 17.1.1.1 Direct route - Holding MF units in demat account through a SEBI registered depository 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 SEBI as Foreign Instituti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ensure that the units held by QFIs by way of UCR/demat holding are non transferable and non tradable. 17.1.2.9 MF/ DP shall capture the bank account details of the QFIs designated overseas bank account and shall ensure that all subscriptions are received from that overseas account and redemption proceeds are also transferred into the same overseas account. MF/ DP shall also ensure that the overseas bank account which QFIs has designated for the purpose is based in countries which 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 red....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om time to time. e. DP shall obtain prior approval of SEBI before commencing the activities relating to accepting MF subscription from QFIs. 17.1.3.4 The qualified DP shall open a demat account for the QFIs after ensuring all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard. 17.1.3.5 For the purpose 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 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Custodian (based in India) and MF. 17.1.4.2 QFIs can subscribe / redeem only through the UCR Issuer. 17.1.4.3 MF shall appoint one or more UCR issuing agent overseas and one SEBI registered custodian in India. 17.1.4.4 UCR issuer appointed 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)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....scheme account (in rupee terms). Upon receipt of funds; the MF shall issue units to the custodian and custodian shall in turn confirm to the UCR Issuer to issue UCR to the QFIs. b. 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. c. 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. 17.1.6 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 24 mandates that AMCs shall appoint separate fund manager for each separate fund managed by it unless the investment objective....