TaxTMI 
TaxTMI 
Master Circular for Mutual Funds
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....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, 2012) issued by other Department/Division of SEBI relevant to Mutual Funds. INDEX ABBREVIATIONS ............................................................................. 5 CHAPTER 1 .................................................................................... 7 OFFER DOCUMENT FOR SCHEMES ................................................ 7 CHAPTER 2 .................................................................................. 17 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN ........................................................................ 17 CHAPTER 3 .................................................................................. 23 NEW PRODUCTS ......................................................................... 23 CHAPTER 4 ......................................................................................
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......................................... .................160 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 Multilateral Memorandum of U....
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....ebsite - 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 single SAI (common for all the schemes) can be filed with Board along with first draft of S....
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....ed by June 30, 2009 and for a scheme launched in December 2008, the SID shall be updated by June 30, 2010) 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 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 cha....
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....ix 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 Chapter on Formats. 1.5.2 SEBI may revise the Standard Observations from time to time and in tha....
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....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 index as above and the other 50% from an appropriate bo....
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....ty provisions such as listing, repurchase, redemption. b. Aggregate fees and expenses charged to the scheme. c. Any safety net or guarantee provided. CHAPTER 2 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN PART I - CONVERSION OF SCHEMES 2.1 Conversion of Close Ended Scheme(s) to Open Ended Scheme(s) ^SEBI Circular No. MFD/CIR No.22/2311/03 dated January 30, 2003. 2.1.1 Although the procedure for conversion of close ended scheme(s) to open ended scheme(s) has been clearly enumerated in the Mutual Funds Regulations ^Regulation 33(3) of the SEBI (Mutual Funds), Regulations, 1996., following requirements are clarified again in the interests of investors: 2.1.1.1 Since the scheme(s) would reopen for fresh subscriptions, disclosures contained in the SID shall be revised and updated. A copy of the draft SID shall be filed with the Board as required under Regulation 28(1) of the Mutual Funds Regulations along with filing fees prescribed under Regulation 28(2) of the Mutual Funds Regulations. Instructions issued by the Board ^SEBI Circular No. SEBI/IMD/Cir No 5/126096/08 dated May 23, 2008 for filing of the SID shall also be ....
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...., 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 the unit holders, giving them the option to exit at prevailing NAV without charging exit load, shall disclose all relevant information enabling them to take well informed decisions. This information will include, inter alia: 1. Latest portfolio of the concerned schemes ^Refer format of half yearly portfolio disclosure under chapter on Formats. 2. Details of the financial performance of the concerned schemes since inception in the format prescribed in SID ^Please refer to SID Format under Chapter on Formats along with comparisons with appropriate benchmarks. 3. Information on the investment objective, asset allocation and the main features of the new consolidated scheme. 4. Basis of allocation of new units by way of a numerical illustration 5. Percentage of total NPAs and percentage of total illiquid assets to net assets of each individual scheme(s) as well the consolidated scheme. 6. Tax impact of the cons....
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.....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 details which in the opinion of the AMC/ Trustees is material. The addendum shall be filed with SEBI 21 days in advance of opening of plan(s). 2.3.2.2 AMC(s) shall publish an advertisement or issue a press release at the time of launch of such additional plan(s). CHAPTER 3 NEW PRODUCTS 3.1 Fund of Funds Scheme ^SEBI Circular No. MFD/CIR. No.04/11488/2003 dated June 12, 2003. 3.1.1 The SID and the advertisements pertaining to Fund of Funds Scheme ^Regulation 2(ma) of the Mutual Funds Regulations introduced vide Gazette Notification No. S.O 632(E) dated May 29, 2003. shall disclose that the investors are bearing the recurring expenses of the scheme, in addition to the expenses of other schemes in which the Fund of Funds Scheme makes investments. 3.1.2....
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.... be calculated up to four decimal points as shown below: Market or Fair Value of Scheme's investments + Current Assets - Current Liabilities and Provision NAV (in ` terms) = ___________________________________________________________________ Number of Units outstanding under Scheme on the Valuation Date 3.2.4 Recurring Expenses ^SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 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 ....
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....ing Manual ^The Manual has been developed by AMFI in association with Pricewaterhouse Coopers as a part of Indo-US Financial Institutions Reforms and Expansion Project.for Risk Management has been developed to ensure minimum standards of due diligence and Risk Management Systems for all the Mutual Funds in various operational areas (for e.g. Fund Management, Operations, Customer Service, Marketing and Distribution, Disaster Recovery and Business Contingency, etc.) and is enclosed herewith as Annexure 2. 4.2 The Risk Management practices covered in the Operating Manual are under three categories as detailed below: 4.2.1 Existing Industry Practices: 4.2.1.1 Under each head of risk, the Manual covers the exemplary practices followed by some / most of Mutual Funds in India. However, the extent and degree of observance of these practices differs among the Mutual Funds. Mutual Funds shall accordingly develop their systems and follow these practices. 4.2.2 Practices to be followed on Mandatory Basis: 4.2.2.1 Mutual Funds shall follow the practices which have been indicated as mandatory in the operating manual. These are Risk Management function that shall be ass....
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....ach Half Year (i.e. March 31 and September 30), if such statement is not published by way of advertisement ^Regulation 59A of the Mutual Funds Regulations & SEBI Circular No. MFD/CIR No.010/024/00 dated January 17, 2000. 5.1.2 The Scheme Portfolio(s)^ For format of half yearly portfolio, please refer to the formats chapter shall also be disclosed on the Mutual Funds' web sites before the expiry of one month from the closure of each Half Year (i.e. March 31 and September 30) and a copy of the same shall be filed with the Board along with the Half Yearly Results ^SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001. 5.1.3 Disclosure of derivatives in Half Yearly Portfolios ^SEBI Circular Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010. 5.1.3.1 A format ^For formats on disclosure of derivatives, please refer to the chapter 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. 5.1.3.2 Further, while listing net assets, the margin amounts paid should be reported separately under cash or bank balances. 5.2 Una....
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....r abridged summary prominently on their websites and make the physical copies available to the investors at their registered offices at all times. These websites should also be linked with AMFI website so that the investors and analyst(s) can access the annual reports of all mutual funds at one place ^SEBI Cir No - MFD/CIR/15/041/2002 dated March 14,2002. However, as per the Regulations ^Regulation 56(1) & 56(3) of SEBI (Mutual Funds) Regulations, 1996, a copy of Scheme wise Annual Report shall be also made available to unitholder(s) on payment of nominal fees. 5.4 Disclosure of large unit holdings ^SEBI Circular No. MFD/CIR No.3/211/2001 dated April 30, 2001. 5.4.1 The number of investors holding over 25 % of the NAV ^For further details, refer Section II - Scheme Governance in the Chapter on Governance Norms in a scheme and their total holdings in percentage terms shall be disclosed in the Statement of Accounts issued after the NFO and also in the Half Yearly and Annual Results ^Please refer the Chapter on Formats for requisite formats. 5.5 Portfolio disclosure for debt oriented close-ended and interval schemes/plans ^SEBI Circular No. IMD/CIR No.15/157701/2009 dated Mar....
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....es and the Board. For this purpose, 'key personnel' would be the Chief Executive Officer (CEO), fund manager(s), dealer(s) & heads of other departments of the AMC ^For format of bio-data of key personnel, please refer the Chapter on Formats. 5.10 Disclosure of investor complaints with respect to Mutual Funds ^SEBI Circular No. Cir /IMD/DF/2/2010 dated May 13, 2010 5.10.1 Mutual Funds shall disclose ^For disclosure format please refer to chapter 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. 5.10.2 The Mutual Funds are advised to: 5.10.2.1 Upload the report for the year 2009-10 by June 30, 2010. 5.10.2.2 Upload the report for the following financial years within 2 months of the close of the financial year. 5.10.2.3 Include the report in their annual reports, as part of the Report of the Trustees, beginning with the annual report for the year 2009-10. 5.11 Brokerage and commission paid to associates ^SEBI Circular No. SEBI/IMD/CIR No 18/198647/2010....
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.... allotment in the prescribed format ^For details on format of NSR please refer the Chapter on Formats. 5.14 Bi-monthly Compliance Test Reports ^SEBI Circular No. SEBI/IMD/CIR NO 6/98057/07 dated July 5, 2007, SEBI Circular No MFD/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, 5.14.1 AMCs' shall do exception reporting on a bi-monthly basis. AMCs' are required to report only exceptions in the CTR to SEBI, i.e. AMCs' shall report for only those points in the CTR where they have not complied with the same. 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). 5.14.2 The CTRs ^For CTR format, please refer the Chapter 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 fo....
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....eporting by AMC to Trustees. 5.17.4 The half-yearly report on the activities of the mutual fund to be submitted by the trustees to the Board under the Mutual Funds Regulations ^Regulation 18(23)(a) of SEBI (MF) Regulations, 1996 shall cover all issues mentioned in the prescribed format as well as any other issue relevant to the operation of the Mutual Fund ^For format of Trustee Report, please refer to the formats chapter. 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. 5.17.5 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. 5.18 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 (A....
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....gested by internal and external auditors are acted upon. 6.1.2 Valuation Committee 6.1.2.1 The AMC shall constitute an in-house valuation committee consisting of senior executives including personnel from accounts, fund management and compliance departments. This committee shall, on a regular basis review the systems and practices of valuation of securities. 6.2 Review and Reporting of Transactions ^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 `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 `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 Rev....
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....hen he cannot be considered as "Independent" from December 2, 2004. There must be a cooling off period of 3 years from the date he ceases to be an Associate Director. 6.3.4 Mutual Funds are required to have a minimum of 50 per cent. and two-third independent directors on the Board of the AMC(s) and Trustees respectively ^Regulation 21(d) and Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996. In case the composition of the directors does not meet these requirements, Mutual Funds are required to inform the Board along with the steps proposed to ensure compliance. 6.3.5 AMC(s) or Trustees shall appoint Independent Directors in place of the resigning director(s) within a period of 3 months from the date of resignation. Where Mutual Funds are unable to meet this time limit, they shall report to the Board explaining the reasons for non compliance. Mutual Funds may maintain a panel of eligible persons who can be appointed as Independent Directors ^For biodata of directors (AMC and Trustee), please refer to Chapter 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 c....
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....O/Managing Director/President or by any other name), the Fund Managers, Dealers, Research Analysts, all employees in the Fund Operations Department, Compliance Officer and Heads of all divisions and/or departments or any other employee as decided by the AMC(s) and/or Trustees. c. To guide employees of AMC(s) and Trustees in maintaining a high standard of probity that one would expect from an employee in a position of responsibility. 6.4.4 General 6.4.4.1 Investments Covered: a. These Guidelines cover transactions for purchase or sale of any securities such as shares, debentures, bonds, warrants, derivatives and units of Mutual Fund schemes. b. These Guidelines do not apply to the following investments by the employees: 1. Investments in Fixed Deposits with banks and/or Financial Institutions and/or companies, Life Insurance Policies, Provident Funds (including Public Provident Fund) 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 pursuan....
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....IMD/CIR No.7/13391/03 dated July 11, 2003. However, in cases where it is done, the employee shall provide a suitable explanation to the Compliance Officer, which shall be reported to the Board of the AMC and the Trustees at the time of review. 6.4.5 Investments in Shares and/or Debentures and/or Bonds and/or Warrants and/or Derivatives Investments in securities shall broadly be classified into investments through (a) primary markets and (b) secondary markets. 6.4.5.1 Investments through the primary markets: a. An employee including access person is permitted to apply to a public issue of shares and/or debentures and/or bonds and/or warrants of any company, as long as the application is made in the normal course of the public issue. Such an application may be made without seeking the clearance from the Compliance Officer. Employees of AMC(s) and Trustees 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 an....
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..... The Compliance Officer shall ensure that the last transaction in that particular security was done by the Mutual Fund at least 15 calendar days prior to the date of the written application by the access person. In other words, an application for a purchase /sale transaction on a personal basis would be cleared only if the Mutual Fund has not transacted in that particular security for at least 15 calendar days. c. The Compliance Officer shall keep a track of the transactions of the employees and transactions of the Mutual Fund to ensure that there is no conflict of interest between them i.e. the Compliance Officer should track whether the Mutual Fund has transacted in the same securities either before or after the employee's transaction(s). d. The Compliance Officer shall maintain a record of all requests for pre clearance regarding the purchase or sale of a security, including the date of the request, the name of the access person, the details of the proposed transaction and whether the request was approved or denied and waivers given, if any, and its reasons. e. No employee shall purchase any security (including derivatives) on a "Carry Forward" basis ....
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....not been communicated to the investors; b. There is a likelihood of a rights and/or bonus issue in the concerned Mutual Fund Scheme(s) and this has not been communicated to the investors; c. The concerned Mutual Fund Scheme is contemplating to issue dividend to the unit holders and this has not been communicated to the investors; d. There is a likelihood of a change in the accounting policy, or a significant change in the valuation of any asset, or class of assets and the same has not been communicated to the investors; e. There is a likelihood of conversion of a close ended scheme to an open ended scheme and vice versa and this has not been communicated to the investors. 6.4.7 Periodic Disclosures 6.4.7.1 All access persons shall submit, in the form prescribed by the Mutual Fund of which the AMC is the investment manager, details of their personal transactions of purchase or sale of securities to the Compliance Officer. The details to be submitted are as follows: a. Details of transactions effected for purchase and/or sale of securities including transactions in rights entitlements through the secondary market within 7 calen....
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....ctly by the trustee companies, asset management companies and their employees and directors. PART II -SCHEME GOVERNANCE 6.7 Minimum Number of investors^ SEBI Circular No. SEBI/IMD/CIR No.10/22701/03 dated December 12, 2003, SEBI Circular No. SEBI/IMD/CIR No.1/42529/05 dated June 14, 2005. 6.7.1 Applicability for an open-ended scheme 6.7.1.1 The Scheme/Plan shall have: a. a minimum of 20 investors and b. no single investor shall account for more than 25% of the corpus of the Scheme/Plan(s). 6.7.1.2 If either/both of such limit(s) is breached during the NFO of the Scheme, it shall be ensured that within a period of three months or the end of the succeeding calendar quarter from the close of the NFO of the Scheme, whichever 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 applicab....
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....lding limit by an investor, net assets under the scheme shall be calculated daily and the daily holding limit shall be determined accordingly. At the end of the quarter, average daily holding by each investor shall be calculated and any breach of the 25% holding limit will be accordingly determined. 6.7.4 Applicability 6.7.4.1 These Guidelines are applicable at the Portfolio level. 6.7.4.2 These Guidelines are not applicable to Exchange Traded Funds (ETFs). 6.7.5 Redemptions 6.7.5.1 Redemptions effected pursuant to these Guidelines shall be completed within 10 days from the day of winding up of the scheme(s) and/or plan(s). 6.7.6 Reporting to the Board 6.7.6.1 Compliance with these Guidelines shall be reported in Compliance Test Reports (CTRs) and Half Yearly Trustee Reports. 6.8 Scheme Performance Review 6.8.1 AMCs and Trustees shall review the performance of their schemes on periodic basis^ SEBI Circular No. dated July 27, 2000 & SEBI Cir 16/400/02 dated March 26, 2002. Such review can take place by comparing the performance of the schemes with benchmark indices as well as in light of the performance of the entire Mutual Funds in....
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....n 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, including increases and decreases of capital and preferred stock issuances. 6.17.3 Stock option plans and other management compensation issues; 6.17.4 Social and corporate responsibility issues. 6.17.5 Appointment and Removal of Directors. 6.17.6 Any other issue that may affect the interest of the shareholders in general and interest of the unit-holders in particular. 6.18 The format ^For disclosure of voting by mutual funds in general meetings of listed companies, please refer to the chapter on formats for disclosure of voting by mutual funds in general meetings of listed companies is provided. CHAPTER 7 SECONDARY MARKET ISSUES 7.1 Non Applicability of Listing Deposit ^SEBI Circular No. SMD-II(N)/2113/94 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 ....
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....ock 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 regarding the extent and manner of participation of the schemes of the Mutual Funds in derivatives and the risk factors, which should be explained by suitable numerical examples. 7.4.1.4 The participation of existing schemes of the Mutual Funds in the derivatives market shall be subject to the following conditions: a. The extent and the manner of the proposed participation in derivatives shall be disclosed to the unit holders. b. The risks associated with such participation shall be disclosed and explained by suitable numerical examples. c. Positive consent shall be obtained from majority of the unit holders. d. An exit option shall be 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 e....
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.... 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 AMFI and the Board and shall also be reported in the CTR(s) ^For format of CTR, please refer to chapter on formats in terms of number of days of non adherence of time limit for uploading NAV on AMFI's website and the reasons for the same. Corrective 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 Aug....
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....t 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 applicable NAV ^SEBI Circular No SEBI/IMD/DF/15/2010 dated November 26, 2010: 8.3.5.1 The following cut-off timings shall be observed by a mutual fund in respect 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....
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.... 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: a. 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; b. Where the application is received after 3.00 pm with a local cheque or demand draft payable at par at the place where it is received - closing NAV of the next business day; and c. 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. 8.3.6.3 In respect of purchase of units in Income/ Debt oriented schemes (other than liquid fund schemes and plans) with amount equal to or more than `1 crore, irrespective of the time of receipt of application, the closing NAV of the day on which the funds are available f....
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....m 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. 8.3.9 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 chapter on formats of the AMC(s) and the Half Yearly Trustee Reports ^For Trustee report, please refer to the chapter 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. ....
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....ll 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/08/514/2002 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 ....
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....02. 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 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 p....
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....d 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 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 r....
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....sted 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 Yield ^SEBI Circular No. MFD/CIR/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 ....
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....: 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 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 ....
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....: ^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 value. 9.6.2 All Mutual Funds shall....
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.... such that to ensure full provisioning prior to the closure of the scheme or the scheduled phasing which ever is earlier. 9.7.4.2 The value of the asset shall be provided in the following manner or earlier at the discretion of the Mutual Fund. Mutual Funds will not have discretion to extend the period of provisioning. The provisioning against the principal amount or installments shall be made at the following rates irrespective of whether the principal is due for repayment or not. a. 10 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 ....
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.... installments and interest payment were in default earlier. 3. Explanation: The words "2nd quarter" wherever appear, shall mean 2nd calendar quarter. ^SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001. e. An asset is reclassified as 'standard asset' only when both, the overdue interest and overdue installments are paid in full and there is satisfactory performance for a subsequent period of 6 months. 9.7.6 Receipt of past dues: 9.7.6.1 When the Mutual Fund has received income/ principal 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 NPA....
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....scheme. In the list of investments and asterisk mark shall be given against such investments which are recognized as NPAs. Where the date of redemption of an investment has lapsed, the amount not redeemed shall be shown as 'Sundry Debtors' and not investment, provided, that where an investment is redeemable by installments, that will be shown as an investment until all installments have become overdue. 9.8 Investment in Unlisted Equity Shares ^SEBI Circular No. MFD/CIR/03/526/2002 dated May 9, 2002. 9.8.1 To ensure uniformity in calculation of NAV the 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 shal....
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....ed using the aforesaid methodology. 9.8.3 Due Diligence 9.8.3.1 Mutual Funds shall not make Investment in unlisted equity shares at a price higher than the price obtained by using the aforesaid methodology. However, this restriction is not applicable for investment made in the Initial Public Offers (IPOs) of the companies or firm allotment in public issues where all the regulatory requirements and formalities pertaining to public issues have been complied with by the companies and where the Mutual Funds are required to pay just before the date of 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 chapter on formats and Half Yearly Reports ^For Half Year....
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....tual funds which voluntarily propose to implement the valuation under the aforesaid circular before August 1, 2010 are permitted to do so. CHAPTER 10 LOADS, FEES, CHARGES AND EXPENSES 10.1 Limits on fees and expenses charged to schemes ^SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997, SEBI Circular No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998, SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 10.1.1 Mutual Funds may charge certain expenses to a scheme, as specified under Regulations. ^Regulation 52(4) of the Mutual Funds Regulations,1996 Apart from the these expenses, any other expense as may be approved by SEBI under clause (xiii) of Sub Regulation 52(4) can also be charged to the Mutual Fund schemes. Other expenses directly attributable to 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 The following expenses cannot be charged to the schemes of Mutual Funds: 10.1.2.1 Penalties and fines for infraction of laws. 10.1.2.2 Interest on delayed payment to the unit holders. 1....
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....Circular No SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009 10.4.1 In order to empower investors in deciding the commission paid to distributors in accordance with the level of service received, it has been mandated that: 10.4.1.1There 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. 10.4.1.2The 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, ba....
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....per subscription of `10,000/- and above be allowed to be paid to the distributors of the 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 `100/- as transaction charge per subscription of `10,000/- and above. 10.5.1.2 As an incentive to attract new investors, the distributor may be paid `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 distribut....
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..... SEBI / IMD / CIR No. 6 /172445/ 2009 dated August 7,2009 All Mutual Funds shall ensure compliance with this circular on or before August 24, 2009. While complying with the same, 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 a....
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....8647 /2010 dated March 15, 2010 11.3.1 Regulations ^Ninth and Eleventh Schedule of SEBI (Mutual Funds) Regulations, 1996 provide the accounting policies to be followed for determining 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 unrealised 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 be....
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....ecurities with put and call options (daily or otherwise) the residual maturity of the securities shall not be greater than 91 days ^w.e.f May 01, 2009. c. In case the maturity of 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: 12.3.1 Close 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 Stock Lending Scheme ^SEBI Circular No MFD/CIR/01/047/99 dated February 10, 1999. 12.4.1 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. 12.4.2 Disclosure Requirements 12.4.2.1The following information....
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....ted security falling outside the prescribed parameters. 12.6 Investments in Units of Venture Capital Funds ^SEBI Circular No. MFD/CIR/9/230/2001 dated August 14, 2001. 12.6.1 Mutual Fund schemes can invest in listed or unlisted securities or units of Venture Capital Funds within the prescribed investment limits as applicable. ^Clauses 10 and 11, Seventh Schedule of SEBI (Mutual Funds), Regulations, 1996. 12.7 Investment limits for Government guaranteed debt securities^ SEBI Circular No. SEBI/IMD/CIR No.8/18944/03 dated October 6, 2003. 12.7.1 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. 12.8 Investment Restrictions for Securitised Debt ^SEBI Circular No. SEBI/IMD/CIR No.6....
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....o certify the same in its CTR(s). 12.9.1.9Investments made in short term deposits pending deployment of funds ^Clause 8, Schedule Seven, SEBI (Mutual Funds), Regulations, 1996. shall be recorded ^SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. and reported to the Trustees including the reasons for the investment especially comparisons with interest rates offered by other scheduled commercial banks. ^SEBI Circular No. SEBI/IMD/CIR No.9/20306/03 dated November 12, 2003. 12.9.1.10 Except for clause (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. 12.10 Reconciliation Procedure for Investment in Government Securities^ SEBI Circular No. MFD/CIR/19/22474/2002 dated November 20, 2002. 12.10.1According 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....
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....sure compliance with the Seventh Schedule of the Mutual Funds Regulations about restrictions on investments, wherever applicable, with respect to repo transactions in corporate debt securities. 12.11.1.7 The details of repo transactions of the schemes in corporate debt securities, including details of counterparties, amount involved and percentage of NAV shall be disclosed to investors in the half yearly portfolio statements and to SEBI in the half yearly trustee report. 12.11.1.8 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 12.12 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. 12.12.1 Applicable limits: 12.12.1.1 Aggregate ceiling for overse....
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....12.3.3 Due Diligence: a. The Board of the AMC and Trustees shall exercise due diligence in making investment decisions and record the same. ^SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. They shall make a detailed analysis of risks and returns of overseas investment and how these investments would be in the interest of investors. Investment shall be made in liquid actively traded securities /instruments. b. The Board of the AMC and Trustees may prescribe detailed parameters for making such investments which may include identification of countries, country rating, country limits etc. They shall satisfy themselves that the AMC has 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. 12.12.3.4 Mandatory Disclosure Req....
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.... 12.12.3.6 Detailed periodic reporting to Trustees by AMC(s) shall include: a. Performance of overseas investments b. Amount invested in various schemes and any breach of the exposure limit laid down in the SID. 12.12.3.7 Review of Performance: a. The Board of the AMC and Trustees shall review the performance of schemes making overseas investments with appropriate benchmark(s) as disclosed in the SID. 12.12.3.8 Reporting to the Board: a. The Trustees shall offer their comments on the compliance of these guidelines in the Half Yearly Reports filed with the Board. 12.12.3.9 Prudential Investment Norms: a. Investment restrictions specified in Schedule Seven of the Mutual Funds Regulations are applicable to overseas investments stipulated under paragraph 12.12.2.1- 12.12.2.9 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....
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....s for taking individual scrip wise investment decision in equity and debt securities shall be recorded. A detailed research report analyzing various factors for each investment decision taken for the first time shall be maintained and the reasons for subsequent purchase and sales in the same scrip shall also be recorded. The contents of the research reports may be decided by the AMC(s) and the Trustees. 12.15.2 The Board of the AMC shall develop a mechanism 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. 12.15.3 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 chapter 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. 12.1....
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....n. However, certain derivative positions may theoretically have unlimited possible loss. Exposure in derivative positions shall be computed as follows: Position Exposure Long Future Futures Price * Lot Size * Number of Contracts Short Future Future Price * Lot Size * Number of Contracts Option bought Option Premium Paid * Lot Size * Number of Contracts. 12.15.1.4 The provisions shall be applicable for all new schemes launched post the issue of the aforementioned guidelines. For all existing schemes, compliance with the guidelines shall be effective from October 01, 2010. 12.17Interval Schemes/Plans^ SEBI Circular No. CIR/IMD/DF /19/2010 dated November 26, 2010 12.17.1 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'. 12.17.2 For all interval schemes/plans^ Applicability: ^The AMC shall ensure compliance with the requireme....
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....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.Cir/IMD/DF/13/2011 dated August 22, 2011 13.3.1 When the scheme has been in existence for more than three years: 13.3.1.1 Point-to-point returns on a standard investment of `10,000/- shall also be shown in addition to CAGR for a scheme in order to provide ease of understanding to retail investors. 13.3.1.2 Performance advertisement shall be provided since inception and for as many twelve month periods as possible for the last 3 years, such periods being counted from the last day of the calendar quarter preceding the date of advertisement, along with benchmark index performance for the same periods. 13.3.2 Where scheme has been in existence for more than one year but less than three years, performance advertisement of scheme(s) shall be provided for as many as twelve month periods as possible, such 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 exi....
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.... close ended debt oriented mutual fund schemes ^SEBI Circular No. CIR/IMD/DF/12/2011 dated August 01,2011 Mutual Funds (MFs) / AMCs may make following additional disclosures in the SID/SAI and KIM without indicating the portfolio or yield, directly or indirectly: 13.4.2.1 MFs/AMCs shall disclose their credit evaluation policy for the investments in debt securities. 13.4.2.2 MFs/AMCs shall also disclose the list of sectors they would not be investing. 13.4.2.3 MFs shall disclose the type of instruments which the schemes propose to invest viz. CPs, CDs, Treasury bills etc 13.4.2.4 MFs shall disclose the floors and ceilings within a range of 5% of the intended allocation (in %) against each sub asset class/credit rating. For example, it may be disclosed that x-y % would be in AAA rated bank CD as per the sample matrix below: 13.4.2.5 After the closure of NFO, the AMCs will report in the next meeting of AMCs and Trustees the publicized percentage allocation and the final portfolio. Variations between indicative portfolio allocation and final portfolio will not be permissible. CHAPTER 14 INVESTOR RIGHTS & OBLIGATIONS PART I ....
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....f 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 accepted and also send confirmation specifying the number of units allotted to the applicant by way of email and/or SMS's to the applicant's registered email address and/or mobile number as soon as possible but not later than five working days from the date of closure of the initial subscription list and/or from the date of receipt of the request from the unitholders. 14.3.2 Consolidated Account Statement ^SEBI Circular No.Cir/IMD/DF/16/2011 dated September 08, 2011 14.3.2.1 As per regulation ^Regulation 36(4) of SEBI (Mutual Funds) Regulations, 1996, AMCs shall issue consolidated account statement for each calendar month to the investors in whose folios transaction(s) has/have taken place during that month. 14.3.3 Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) or Systematic Withdrawal Plan (SWP)^ SEBI Circular No. IMD/CIR/12/80083/2006 dated November 20, ....
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....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 Supported by Blocked Amount (hereinafter referred to as "ASBA") in Mutual Funds ^SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 14.7.1 ASBA facility which investors have been enjoying for subscription to public issue of equity capital of companies has been extended to the investors subscribing to New Fund Offers (NFOs) of mutual fund schemes. It shall co-exist with the current process, wherein cheques/ demand drafts are used as a mode of payment. 14.7.2 The banks which are in SEBI's list shall extend the same facility in case of N....
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....o 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. CHAPTER 15 CERTIFICATION AND REGISTRATION OF INTERMEDIARIES ^SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001, SEBI Circular No. MFD/CIR/20/23230/2002 dated November 28, 2002, SEBI Circular No. SEBI/MFD/CIR No.01/6693/03 dated April 3, 2003, SEBI Circular No. SEBI/IMD/CIR No.2/254/04 dated February 4, 2004, SEBI Circular No. MFD/CIR/06/210/2002 dated June 26, 2002., ^Exemption for Senior Citizens: Senior citizens with experience in distributing Mutual Funds units are exempt from the mandatory certification examination if they have completed 50 years of age and have experience of at least 5 years as on September 30, 2003.316 They are also required to follow the guidelines prescribed by the Board and AMFI. They had to attend a mutual fund training programme and a certificate to that effect endorsed by a mutual fund s....
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....w of associates and subsidiaries on above factors. d. Organizational controls to ensure that the following processes are delinked from sales and relationship management processes and personnel: 1. Customer risk / investment objective evaluation. 2. MF scheme evaluation and defining its appropriateness to various customer risk categories. 15.4.1.4 In this respect, customer relationship and transactions shall be categorized as: a) Advisory - where a distributor represents to offer advice while distributing the product, it will be subject to the principle of 'appropriateness' of products to that customer category. Appropriateness is defined as selling only that product categorization that is identified as best suited for investors within a defined upper ceiling of risk appetite. No exception shall be made. b) Execution Only - in case of transactions that are not booked as 'advisory', it shall still require: i. The distributor has information to believe that the transaction is not appropriate for the customer, a written communication be made to the investor regarding the unsuitability of the product. The communication shall....
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....d shall also be reported to the Board by the AMC(s) in their CTR(s) and by the Trustees in their Half Yearly Reports. 15.5.2 AMFI has prescribed a Code of Conduct for Mutual Fund intermediaries enclosed herewith as Annexure 1^Refer Annexure and Reports for details on Code of Conduct. All intermediaries shall follow the Code of Conduct strictly and not indulge in any practice contravening it directly or indirectly. 15.5.3 Non compliance with the Code of Conduct shall be reported by the Mutual Funds to the Board and AMFI. Further, no Mutual Fund shall deal with intermediaries contravening the prescribed Code of Conduct. 15.6 Empanellment of Intermediaries by Mutual Funds 15.6.1 Empanelment of intermediaries by Mutual Funds, payment of commissions, brokerage and/or sub-brokerage etc. shall be in accordance with parameters and guidelines specified by the Board and AMFI from time to time. Mutual Funds shall monitor the compliance of these guidelines and Code of Conduct by their intermediaries in terms of business done across all Mutual Funds. In case of non-compliance, Mutual Funds shall suspend further business and payment of commissions, etc. until full compliance by the e....
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.... after obtaining certification, as per the Circular dated November 28, 2002, would continue. CHAPTER 16 TRANSACTION IN MUTUAL FUNDS UNITS 16.1 Maintenance of documents ^SEBI Circular No - SEBI/IMD/CIR No.12 /186868 /2009 dated December 11,2009 16.1.1 As per the requirements specified by Board in respect of "Anti Money Laundering (AML) Standards/Combating Financing of Terrorism (CFT) / Obligations of Securities Market Intermediaries under Prevention of Money Laundering Act, 2002 and Rules framed there-under" ^SEBI Circular No ISD/AML/CIR-1/2008 dated December 19, 2008, maintenance of all documentation pertaining to the unitholders/ investors is the responsibility of the AMC. 16.1.2 Accordingly, vide SEBI Circular No - SEBI/IMD/CIR No.12 /186868 /2009 dated December 11, 2009, AMCs were advised to confirm whether all the investor related documents were maintained/ available with the AMC. If not, and to the extent of and relating to such investor accounts/folios where investor related documentation was incomplete/inadequate/not available or was stated to be maintained by the distributors, then the Trustees were advised to ensure the following: 16.1.2.1 No furthe....
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....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 Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006. 16.2.3 The respective stock exchange would provide detailed operating guidelines to facilitate the same. 16.2.4 In this regard, Mutual Funds/AMC are advised that: 16.2.4.1 Empanelment and monitoring of Code of Conduct for brokers acting as mutual fund intermediariesa- a. The stock brokers intending to extend the transaction in Mutual Funds through stock exchange mechanism shall be required to comply with the requirements of passing the AMFI certification examination ^Please refer Chapter 15 on Certification and Registration of Mutual Funds intermediaries. All such stock brokers would then be considered as empanelled distributors with mutual fund/AMC. b. These stock brokers shall also comply with Code of Conduct ^For Code of Conduct, please refer to Annexure I for intermediaries of Mutual Funds, and applicable SEBI guidelines ^Please refer Chapter 15 on Certification....
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....scheme, in all Statement of Account/Common Account Statement (CAS) issued to the investors. 16.2.4.7 Know your client (KYC). a. Where investor desires to hold units in dematerialised form, the KYC performed by DP in terms of SEBI requirements ^SEBI Circular No - MRD/DoP/Dep/Cir-29/2004 dated August 24, 2004 would be considered compliance with applicable requirements specified in this regard ^SEBI Circular No - ISD/AML/CIR-1/2008 dated December 19, 2008 by Mutual Funds/AMCs. b. The Mutual Funds/AMC shall take necessary steps to do KYC requirements of all investors as per the prescribed guidelines ^SEBI Circular No. MIRSD/SE/Cir-21/2011, dated October 5, 2011, SEBI Circular No.MIRSD/Cir-23/2011 dated December 2, 2011 and SEBI Circular No.MIRSD/Cir- 26 /2011 dated December 23, 2011. 16.2.4.8 Stock exchanges and mutual funds/AMCs, based on the experience gained may improve the mechanism in the interest of investors. 16.2.4.9 In addition to the existing facilities of purchasing and redeeming directly with the Mutual Funds and Stock Brokers, the following be noted ^SEBI Circular No CIR/IMD/DF/17/2010 dated November 9, 2010: a. Units o....
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....d 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. 16.2.4.13 Transferability of Mutual Fund units^ SEBI Circular No - CIR/IMD/DF/10/2010 dated August 18, 2010 a. Regulations ^Regulation 37(1) of SEBI (Mutual Fund) Regulations, 1996 states that "a unit unless otherwise restricted or prohibited under the scheme, shall be freely transferable by act of parties or by operation of law." The spirit and intention of this regulation is not to prohibit transferability of units as a general rule or practice. b. All AMCs shall clarify by way of an addendum that units of all mutual fund schemes held in demat form shall be freely transferable from the date of the issue of said addendum which shall be not later than October 1, 2010. However, restrictions on transfer of units of ELSS schemes during the lock-in period shall continue to be applicable as per the ELSS Guidelines. 16.2.5 Stock exchanges and mutual funds/AMCs, based on the experience gained may further improve the mechanism in the interest of investors. Necessary clarifica....
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....rity of 5 years, shall be subject to a total overall ceiling of US $3 billion within the existing ceiling of US $25 billion for FII investment in corporate bonds issued by infrastructure companies. 17.1.2.6 MF can accept subscriptions from QFIs till such time the investments by QFIs under both the routes reaches US $8 billion in equity schemes and US $2.5 billion in debt schemes and the remaining limit of US $2 billion in equity schemes and US $0.5 billion in debt schemes shall be auctioned by SEBI through bidding process. 17.1.2.7 MF shall file with SEBI a report about the total subscription and redemption by QFIs on a daily basis as per the format. MF shall prepare such report on actual receipt and payment basis. SEBI will disseminate on an aggregate basis the total amount of investments by QFIs in equity and debt schemes of the MF on SEBI's website. When the total investment reaches US $8 billion in equity schemes or US $2.5 billion in debt schemes, MF shall stop accepting fresh investment from QFIs unless they get allotment of limits out of the remaining limit of US $2 billion in equity schemes or US $0.5 billion in debt schemes respectively in the auction pro....
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.... applicable tax at source out of the redemption proceeds before making redemption payments to QFIs. 17.1.2.18 MF/DP shall require QFIs to submit necessary information for the purpose of obtaining PAN. MF/DP may use the combined PAN cum KYC form to be notified by CBDT for QFIs. MF/ DP may take any additional information/ documents from the QFIs other than those mentioned in the common PAN cum KYC from to ensure compliance with Para 17.1.2.3 above. 17.1.3 Other conditions for direct route (demat account). 17.1.3.1 There shall be 3 parties under this route - QFIs, qualified DP and MF. 17.1.3.2 A QFIs can open only one demat account with any one of the qualified DPs and shall subscribe and redeem through that DP only. MF alongwith the DP shall have adequate systems to ensure the compliance of the same. 17.1.3.3 To become a qualified DP, a SEBI registered DP shall fulfill the following: a. DP shall have paid up capital of `50 Crore or more, b. DP shall be either a clearing bank or clearing member of any of the clearing corporations. c. DP shall have appropriate arrangements for receipt and remittance of money with a desig....
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.... Redemption f. QFIs can redeem, either through Delivery Instruction (physical/ electronic) or any another mode prescribed by the Depositories. On receipt of instruction from QFIs, DP shall process the same and forward the redemption instructions to the MF. Upon receipt of instruction from DP, MF shall process the same and shall credit the single rupee pool bank account of the DP with the redemption proceeds. g. The DP can make fresh purchase of units of equity and debt schemes of MF (if so instructed by the QFIs) out of the redemption proceeds received provided that payment is made towards such purchase is made within two working days of receipt of money from MF in the pooled bank account. In case no purchase is made within said period, the money shall be remitted by the DPs to the designated bank overseas account of the QFIs within two working days from the date of receipt of money from the MF in the pooled bank account. Dividend h. In case of dividend payout, the MF shall credit the single rupee pool bank account of the DP with the dividend amount. The DP in turn shall remit the same to the designated bank overseas account of the QFIs wi....
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....ormation to be collected from the QFIs in terms of the requirements mentioned in para 17.1.2.13 above. 17.1.4.13 MF shall obtain the relevant records of KYC/ other documents from the UCR issuer in order to comply with FATF standards, PMLA and SEBI circulars issued in this regard and ensure compliance with para 17.1.2.14. 17.1.4.14 Units purchased and redeemed through UCR issuer shall be settled on gross basis and under no circumstances shall be netted against other investors of UCR issuer 17.1.4.15 Process flow: a. The QFIs places a purchase/ subscription order through the UCR issuer. In case of MF opening bank account overseas (in accordance with the relevant extant FEMA regulations) b. UCR issuer shall forward the order of QFIs to the MF/Custodian. Upon receipt and transfer of funds to India; the MF shall issue units to the custodian and custodian in turn confirm to the UCR Issuer to issue UCR to the QFIs. c. In case of redemption, UCR issuer shall confirm receipt of redemption request to the MF and Custodian. Upon receipt of instruction, MF shall process the same and shall transfer the redemption proceeds to the MF o....