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 December 31, 2010) issued by other Department/Division of SEBI relevant to Mutual Funds. INDEX ABBREVIATIONS............................................................................. 5 CHAPTER 1..................................................................................... 6 OFFER DOCUMENT FOR SCHEMES ................................................. 6 CHAPTER 2................................................................................... 16 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN........................................................................ 16 CHAPTER 3................................................................................... 22 NEW PRODUCTS ........................................................................... 22 CHAPTER 4..................................................................................
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....--------Refer the attachment ABBREVIATIONS American Depository Receipt ADR Association of Mutual Funds in India AMFI Asset Management Company AMC(s) Bombay Stock Exchange BSE Compliance Test Reports CTR(s) Contingent Deferred Sales Charge CDSC Fixed Maturity Plans FMP(s) Foreign Institutional Investor FII Global Depository Receipt GDR Gold Exchange Traded Fund GETF Hindu Undivided Family HUF Investor Service Center ISC Key Information Memorandum KIM Monthly Cumulative Report MCR National Stock Exchange NSE Net Asset Value NAV New Fund Offer NFO Non Performing Assets NPA(s) Permanent Account Number PAN Regulation Reg. SEBI (Mutual Funds) Regulations 1996 Regulations Securities and Exchange Board of India the Board Scheme Information Document SID Offer Statement of Additional Information SAI Document Systematic Investment Plan SIP Systematic Transfer Plan STP Systematic Withdrawal Plan SWP Trustee(s) Board of Trustee(s)/Trustee Company Uniform Client Code UCC CHAPTER 1 OFFER DOCUMENT FOR SCHEMES ....
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.... 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 alongwith printed copy of the same ^SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009, upload the SAI on its website and on AMFI website. 1.1.3.3 Filing of Final SID a. Final SID (after incorporating comments of the Board) must reach the Board before it is issued for circulation. Soft copy of the final SID in PDF format along with a printed copy should be filed with Board two working days prior to the launch of the scheme. AMC shall also submit an undertaking to the Board while filing the soft copy that information contained in the soft copy of SID to be uploa....
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.... 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. 5. The account statements issued to investors shall indicate the applicable load structure. 1.2.1.3 A copy of all changes made to the scheme shall be filed with Board within 7 days of the change. A soft copy of updated SID shall be filed with Board in PDF Format along with printed copy of the same. AMC shall also submit an undertaking to the Board while filing the soft copy that information contained in the soft copy of SID to be uploaded on SEBI website is current and relevant and matches exactly with the contents of the hard copy and that the AMC is fully responsibl....
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....icable 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 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 with proper spacing for easy readability. 1.6.2 Format of KIM 1.6.2.1Mutual Funds shall prepare KIM in the prescribed format ^For fomat of KIM please refer to the Chapter on Formats. The contents of KIM shall follow the same sequence as prescribed in the format. 1.6.3 Frequency of updation 1.6.3.1 KIM shall be updated at least once a year and ....
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....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 bond return index. 1.8.5.4 Money Market funds or liquid plans can be compared against a suitable Money Market Instrument or a combination of such instruments. 1.9 New Fund Offer (NFO) Period ^SEBI circular no MFD/Cir.No 9/120/2000 dated November 24, 2000. SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010. The provisions mentioned shall be applicable for all NFOs launched on or after July 01, 2010. 1.9.1 In case of open ended and close ended schemes (except ELSS schemes), the NFO should be open for 15 days (from 30 days in case of Open ended schemes and 45 days of close ended scheme). 1.9.2 The NFO period in case of ELSS schemes shall continue to be governed by guidelines issued by Government of India. 1.9.3 Mutual Funds/AMCs....
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....scriptions, disclosures contained in the SID shall be revised and updated. A copy of the draft SID shall be filed with the Board as required under Regulation 28(1) of the Mutual Funds Regulations along with filing fees prescribed under Regulation 28(2) of the Mutual Funds Regulations. Instructions issued by the Board ^SEBI Circular No. SEBI/IMD/Cir No 5/126096/08 dated May 23, 2008 for filing of the SID shall also be followed. 2.1.1.2 A draft of the communication to be sent to unit holders shall be submitted to the Board which shall include the following: a. Latest portfolio of the scheme(s) in the prescribed format ^Refer to format of half yearly portfolio disclosure under chapter on formats. b. Details of the financial performance of the scheme(s) since inception in the format prescribed in SID ^Please refer to format of SID under chapter on Formats. along with comparisons with appropriate benchmark(s) ^For examples of Benchmarks, refer to chapter on SID. c. The addendum to the SID detailing the modifications (if any) made to the scheme(s). 2.1.1.3 The letter to unit holders and revised SID (if any) shall be issued only after the final....
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....s 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 consolidation on the unit holders. 7. Any other disclosure as specified by the Trustees. 8. Any other disclosure as directed by the Board. 2.2.2.3 Updation of SID shall be as per the requirements for change in fundamental attribute of the scheme ^Please refer to SID chapter for further details. 2.2.2.4 Maintenance of Records: a. AMC(s) shall maintain records of dispatch of the letters to the unit holders and the responses received from them. A report giving information on total number of unit holders in the schemes and their net assets, number of unit holders who opted to exit and net assets held by them and number of unit holders and net assets in the consolidated scheme shall be filed with the Board within 21 days from the da....
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..... 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 AMCs shall not enter into any revenue sharing arrangement with the underlying funds in any manner and shall not receive any revenue by whatever means/head from the underlying fund. Any commission or brokerage received from the underlying fund shall be credited into concerned scheme's account ^SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010. 3.1.3Fund of funds mutual fund schemes shall adopt either of the total expense structures laid out in Regulations ^Regulation 52(6)(a) of SEBI (Mutual Funds) Regulations, 1996, which Asset Management Companies shall clearly indicate in the SIDs. 3.1.4 Fund of Fund schemes ^existing as on July 29, 2010, Cir/IMD/DF/8/2010 dated August 6, 2010, shall, with the approval of trustees, adopt either of ....
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.....7 Half yearly report by Trustees ^SEBI Circular No. Cir/IMD/DF/20/2010 dated December 06, 2010 3.2.7.1. 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. 3.2.7.2 The confirmation on physical verification of gold as above shall also form part of half yearly report ^Please refer to the Chapter 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 p....
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..... However, the extent and degree of observance of these practices differs among the Mutual Funds. Mutual Funds shall accordingly develop their systems and follow these practices. 4.2.2 Practices to be followed on Mandatory Basis: 4.2.2.1 Mutual Funds shall follow the practices which have been indicated as mandatory in the operating manual. These are Risk Management function that shall be assigned to Compliance Officer or Internal Risk Management Committee or to an external agency a. Disaster Recovery and Business Contingency plans, and b. Insurance cover against certain risks. 4.2.3 Best Practices to be 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 aforesaid three ca....
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....s 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 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 5.2.1 The publication of the unaudited half-yearly results in news paper and websites shall be made in the format prescribed in Twelfth Schedule in line with provisions of the Regulations ^Regulation 59 of SEBI (Mutual Funds) Regulations, 1996. 5.2.2 The half yearly results must be published before the expiry of one month from the close of each half year. Copies of the advertisements carrying the results must be filed with SEBI within 7 days from the date of publication^ For format of Half Yearly Financials, please refer to the formats chapter. 5.3 Abridged Schemewise Annual Report Format ^SEBI Circular No. IMD/CIR No.8/132968/2....
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....bmit the bio data of all key personnel to Trustees 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. 5.8 Disclosure of investor complaints with respect to Mutual Funds ^SEBI Circular No. Cir /IMD/DF/2/2010 dated May 13, 2010 5.8.1 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. 5.8.2 The Mutual Funds are advised to: 5.8.2.1. Upload the report for the year 2009-10 by June 30, 2010. 5.8.2.2. Upload the report for the following financial years within 2 months of the close of the financial year. 5.8.2.3. 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. 5.9 Brokerage and commission paid to associates ^SEB....
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.... within 10 working days from the date of allotment in the prescribed format^ For details on format of NSR please refer the Chapter on Formats. 5.12 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, 5.12.1 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). 5.12.2 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/addition....
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....he formats chapter for format for reporting by AMC to Trustees. 5.15.4 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. 5.15.5 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. 5.16 Filing of Annual Information Return by Mutual Funds^ SEBI cir no IMD/CIR No.8/73580/06 dated August 4,2006. ^It may be note....
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....and ensure that the rectifications as suggested 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 Rs. 1 lakh ^SEBI Circular No. SEBI/MFD/CIR/10/039/2001 dated February 9, 2001. 6.2.1.2 Trustee(s) Directors a. Trustees are required to report to Mutual Funds only those transactions in securities that exceed Rs. 1 lac in value ^Regulation 18(11) of SEBI (MF) Regulations, 1996 and SEBI Circular No. MFD/C....
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.... an Associate Director, say on December 2, 2001, then 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 I....
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....shall mean the Head of the AMC (designated as CEO/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 ....
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.... of their personal transaction ^SEBI Circular No. SEBI/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....
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....ere should be a "cooling off" period of 15 calendar days. 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 secu....
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....ves of the concerned Mutual Fund Scheme(s) and this has 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 ....
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....ng) (Amendment) Regulations, 2002 shall be followed strictly 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....
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....ly 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 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 i....
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....roxy 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, 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 a....
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....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 sub-accounts 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 e....
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....o 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 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 date....
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....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 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 with....
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....und 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: 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 Rs. 1 crore, irrespective of the time of receipt of application, t....
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....tions. 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. 8.3.9 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 th....
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....d 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/08/514/2002 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 T....
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....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 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....
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....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 91 days: 1. All money market and debt securities, including floating rate securities, with residual maturity of upto 91 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 91 days then those shall be valued on amortization basis taking the coupon r....
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....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 matrix with the GOI securities matrix. Accordingly: a. All traded paper (with minimum traded value of Rs. 1 crore) will be cla....
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.... 2002. Category Discretionary mark up/mark down + - Rated instruments with duration upto 2 years 100 bps 50 bps Rated instruments with duration 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 and above mandatory discount of +25 bps 2. The benchmark yield/ matrix of spreads over risk free benchmark yield obtained....
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....alue 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 disclose as on March 31 and September 30 the scheme wise total illiquid securities in value and percent....
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.... 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. 86 Master Circular for Mutual Funds 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....
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.... i. 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 NPAs 9.7.7.1 Investments in Deep Discount Bonds can ....
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....hich 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 shall again be calculated and shall be = [Share Capital + consideration on exercise of Option and/....
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.... 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 Yearly Reports, please refer to the chapter on formats filed with the Board. 9.9 Valuation of ....
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....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. 10.1.2.3 Legal, marketing, publication and other general expenses not attributable to any scheme(s). 10.1.2.4 Fund Accounting Fees. 10.1.2.5 Expenses on investment management/general management. 10.1.2.6 Expenses on general administration, corporate advertising and infrastructure costs. 10.1.2.7 Depreciation on fixed assets and software development expenses. 10.1.2.8 Such other costs as may be prohibited by the Board. 10.1.3 The expenditure and/or fee payable by Mutual Funds to the Depositories may either be capitalized ....
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....enter/Investor Service Centre and not routed through any distributor or agent or broker. This waiver was applicable to both additional purchases under the same folio and 'switch in' to a scheme from other schemes also done directly by the investor. AMCs shall follow the provisions pertaining to informing the unitholders upon a change in load structure as per clause 3(d) of standard observations. for all Mutual Fund schemes. 10.4.1.2 The scheme application forms shall carry a suitable disclosure to the effect that the upfront commission to distributors will be paid by the investor directly to the distributor, based on his assessment of various factors including the service rendered by the distributor. 10.4.1.3 Of the exit load or CDSC charged to the investor, a maximum of 1% of the redemption proceeds shall be maintained in a separate account which can be used by the AMC to pay commissions to the distributor and to take care of other marketing and selling expenses. Any balance shall be credited to the scheme immediately. 10.4.1.4 The distributors should disclose all the commissions (in the form of trail commission or any other mode) payable to them for the....
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....ircular No - SEBI / IMD / CIR No. 7 /173650 / 2009 dated August 17,2009 CHAPTER 11 DIVIDEND DISTRIBUTION PROCEDURE^ SEBI Circular No. SEBI/IMD/CIR No.1/64057/06 dated April 4, 2006., ^For details on advertisement on dividend please refer to Chapter on 'Advertisements' 11.1 Regulations^ Regulation 53(a) of the SEBI (Mutual Funds) Regulations, 1996 permit Mutual Funds to distribute returns including dividend. To introduce uniform practices in dividend distribution, the following guidelines should be followed: 11.2 These guidelines are applicable to all Mutual Fund schemes/plans which intend to declare the dividend irrespective of their dates of launch. ^SEBI Circular No SEBI/IMD/CIR No. 3/65370/06 dated April 21,2006 11.2.1 Unlisted Scheme(s)/ Plan(s) 11.1.1.1 The Trustees shall decide the quantum of dividend and the record date in their meeting ^Clause 20 of Third Schedule of SEBI (Mutual Funds) Regulations, 1996. 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 th....
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.... 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 become positive after adjusting the amount debited to reserves as per Regulations ^Paragraph 2(a) (ix) of Eleventh Schedule of SEBI (Mutual Funds) Regulations, 1996. CHAPTER 12 INVESTMENT BY SCHEMES ^Investments in Money Market instruments (MMIs) ^In case of the existing schemes ( i.e. existing on date of issue of SEBI Circular No - SEBI / IMD / CIR No.3 / 166386 / 2009 dated June 15, 2009) where the investments in money market instruments of an issuer are not in compliance with the Gazette Notification No. LAD - NRO/GN/2009-10/07/165404 dated June 5, 2009, AMC shall ensure compliance within a period of 3 months ....
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.... 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 12.4.2.1 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. 12.4.3 Reporting Requirement ....
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....mits 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.6/63715/06 dated March 29, 2006. 12.8.1 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. 12.9 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. 12.9.1 The guidelines for deployment....
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....rading 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. 12.10.1 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. 12.10.2 Mutual Funds shall reconcile the balances reported in the monthly statements furnished by RBI with the transactions undertaken by them. 12.10.3 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 a....
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....ognized Stock Exchanges overseas or c. Unlisted overseas securities, not exceeding 10% of their net assets 12.11.3 Other Conditions: 12.11.3.1 Apart from the Mutual Funds Regulations and guidelines issued from time to time, Mutual Funds shall adhere to the following specific guidelines while making overseas investments: 12.11.3.2 Appointment of a Dedicated Fund Manager: a. A dedicated fund manager shall be appointed for making the above overseas investments stipulated under clause 12.11.2.1 to 12.11.2.9. 12.11.3.3 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 t....
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....ires, may make such investments in accordance with these Guidelines, provided that prior to the overseas investments for the first time, the AMC shall ensure that a written communication about the proposed investment is sent to each unit holder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the Mutual Fund is situated. The communication to unit holders shall also disclose the risk factors associated with such investments. 12.11.3.6 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. 12.11.3.7 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. 12.11.3.8 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. ....
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.....14 Recording of Investment Decisions ^SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. 12.14.1 AMC(s) shall exercise due diligence and care in all investment decisions as would be exercised by other persons engaged in the same business. ^Regulation 25(2) of the SEBI (Mutual Funds) Regulations, 1996. Further AMC(s) shall maintain records in support of each investment decision which will indicate data, facts and opinion leading to that decision. While broad parameters for investments can be prescribed by the Board of Directors of the AMC, the basis for taking individual scrip wise investment decision in equity and debt securities shall be recorded. A detailed research report 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. 12.14.2 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 deb....
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....a single counterparty in such transactions should not exceed 10% of the net assets of the scheme. 12.15.1.7 Exposure due to derivative positions taken for hedging purposes in excess of the underlying position against which the hedging position has been taken, shall be treated under the limits mentioned in point 12.15.1.1. Definition of Exposure in case of Derivative Positions 12.15.1.8 Each position taken in derivatives shall have an associated exposure as defined under. Exposure is the maximum possible loss that may occur on a position. 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 Futures Price * Lot Size * Number ofContracts Option bought Option Premium Paid * Lot Size * Number of Contracts. 12.15.1.9 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. 12.16 Interval Schemes/Plan....
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....e, TV interview public speaking, presentation at seminars, freelance writing and websites. 13.2.2 Advertisement shall have the same meaning as defined under Regulations^ Regulation 2(b) of the SEBI (Mutual Funds) Regulations, 1996 and would include any material published or designed to be published, in which a Mutual Fund has no control over the audience and which is broadly distributed. The purpose of such communication shall be either to sell Mutual Fund units or to convey the performance of the schemes or to influence the opinion or behavior of those who receive such communication. All material contained in such advertisements must be verified or substantiated with the disclosures made in the Scheme Information Document (SID). 13.2.3 Sales Literature means any written communication not amounting to "advertisement" and distributed to sell or induce sale of units of a mutual fund scheme or convey periodic performance of the schemes and disclosure of their portfolios or to influence the opinion or behavior of those who receive such communication. It includes leaflets, newsletters, brochures, mailers, performance reports or summaries, circulars, seminars/workshop materials, ^S....
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....ion ^SEBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000. 13.4.1 An Advertisement or Sales Literature or Communication is misleading if it: 13.4.1.1 Contains an untrue statement. 13.4.1.2 Omits a fact, material to an investor's decision to buy/hold/sell units 13.4.1.3 Does not contain appropriate explanation or limitations to make the statements made therein clear. 13.4.1.4 Portrays part incomes, returns, growth in NAV unless such incomes, returns or growth are computed according to these Guidelines. 13.4.1.5 Contains forecasts of growth in NAVs or promises returns that is not backed by adequate reserve funds or sponsors' or third party guarantees. 13.4.1.6 Contains unwarranted or unexplained comparisons. 13.4.1.7 Contains claims about management capability where such capability is not supported by a track record of minimum 3 years. 13.5 Applicability 13.5.1 These guidelines apply to T.V. interviews, public speaking, presentations in seminars and workshops, and any forum used by Mutual Funds to market or convey the performance of their schemes. However these guidelines will not be applicable for communicatio....
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....f sale and redemption of units. e. Investor benefits and general services offered i.e. frequency of NAV disclosure etc. f. In case of assured return schemes, the resources that back such assurances. g. Logo or trademark or corporate symbol, if any. h. Risk factors as stated in the SID with a font equal to that of the text of the highlights. i. Applicable load structure j. Contact information of person from whom a copy of SID and SAI and Key Information Memorandum along with an application form may be obtained. k. The statement that an investor should read the SID and SAI before investing in the scheme l. In addition, any other information as may be required by the Advertisement Code or voluntarily disclosed by the Mutual Fund as long as such information is not specifically prohibited by these Guidelines. . 13.6.2.2 The following information is prohibited in this form of advertisement: a. Declaration of NAV and performance figures of any of the previous schemes unless such performance statements conform to these Guidelines. b. Comparisons with other Mutual Funds or schemes. c.....
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....the advertisement, immediately after the returns or yields and in the same font that past performance may or may not be sustained in future. If the returns or yield are unrealistically higher due to extraordinary circumstances (e.g. rise or fall in interest rates etc.), the same shall be clarified in the advertisement. g. All performance data contained in the advertisement must be of most recent practicable date depending upon the type of communication. In any case, the data used must not be older than the most recent calender quarter ended prior to the release of the advertisement. h. Appropriate benchmark(s) and identical time periods shall be used for comparisons. ^For examples of benchmarks and other details refer Chapter on Scheme Information Document. i. 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.^ SEBI Circular No. SEBI/MFD/CIR No.6/12357/03 dated June 26, 2003. j. Pay out of Dividend: While advertising pay out of dividends, all advertisements shall disclose, immediately below the dividend ....
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....ported in sales literature of a scheme should be substantiated with the disclosures made in the SID & SAI. ^SEBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000. 13.9.2 Sales Literature containing information on performance of schemes must adhere to the 'performance advertisement' guidelines. 13.10 Use of Rankings in Advertisements and Sales Literature ^SEBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000. 13.10.1 Definition of "Ranking Entity": 13.10.1.1 For purposes of these Guidelines, the term "Ranking Entity" refers to an entity that: a. Provides general information about AMC(s) or Mutual Funds to the public; and b. Is independent of the AMC(s) or Mutual Fund and its affiliates, and c. Whose services have not been procured by the AMC(s) or Mutual Fund or any of its affiliates to assign a ranking to the AMC(s) or Mutual Fund. 13.10.2 No AMC(s) or Mutual Fund shall use rankings except those developed and produced by entities meeting the "Ranking Entity" criteria detailed above and which conform to these guidelines. 13.10.3 Required Disclosures: 13.10.3.1 Headlines/Prominent Statements: a. A headline or othe....
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.... submission for publication or in case of Sales Literature prior to use. 13.10.4.2 Except for Money Market Mutual Funds: a. Advertisements and/ or Sales Literature must not use rankings based on yield for a period of less than one year. b. A ranking based on compounded annualized yield must be based on rankings supplied by the same Ranking Entity, relating to the same category and the same time period and based on returns for 1. One year period for scheme in existence for at least one year; 2. One and five year periods for schemes in existence for at least five years, and 3. One, five and ten year periods for scheme in existence for at least ten years. provided that, if rankings for such one, five and ten year time periods are not published by the Ranking Entity, then rankings representing short, medium and long term performance must be provided in place of rankings for the required time periods. 13.10.5 Categories: 13.10.5.1 The choice of category (including a subcategory) on which the rankings are based must be such that it provides a sound basis for evaluating the performance of the Mutual Fund. 13.10.5.2....
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....of SEBI ( Mutual Funds) Regulations, 1996, it is clarified that : 13.12.1.1 All advertisements announcing the launch of a scheme and those which solicit subscription to the scheme shall disclose all the risk factors as required by the advertisement code. 13.12.1.2 All advertisements containing performance information, advertising yield/return etc. shall also disclose all the risk factors. 13.12.1.3 Any advertisement which discloses only the latest NAV, sale and/or repurchase price without any reference to the corresponding past figures may not disclose all the risk factors. However, it shall include a statement that 'investors are advised to read the offer document before investing in the scheme'. 13.12.1.4 Disclosures as stated in Clauses 10, 13 and 14 of Schedule VI of SEBI (Mutual Funds) Regulations, 1996 on Advertisement Code shall be printed in bold ^SEBI Circular SEBI/IMD/CIR No.15/191378 /2010 dated January 18, 2010. CHAPTER 14 INVESTOR RIGHTS & OBLIGATIONS PART I - INVESTOR RIGHTS 14.1 Payment of interest for delay in dispatch of redemption and/or repurchase proceeds and/or dividend ^SEBI Circular No. SEBI/MFD/CIR/2/266/2000 d....
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....unds shall dispatch Statement of Accounts within 5 business days from the closure of the NFO. 14.3.2 Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) or Systematic Withdrawal Plan (SWP) ^SEBI Circular No. IMD/CIR/12/80083/2006 dated November 20, 2006 a. Mutual Funds may dispatch the Statement of Accounts to the unit holders under SIP or STP or SWP, once every quarter ending March, June, September and December within 10 working days of the end of the respective quarter. The first Statement of Accounts shall however be issued within 10 working days of the initial transaction. b. Mutual funds shall also provide Statement of Accounts to unit holders within 5 working days, without any charges, if specific requests are received from the investors. Further, if so mandated, a soft copy of the Statement of Accounts shall be emailed to the unit holders on a monthly basis. 14.3.3 Dormant Accountholders 14.3.3.1 Mutual Funds shall also provide Statement of Accounts to those unit holders who have not transacted during the last six months prior to the date of generation of the Statement of Accounts. In such cases, the Statement of Accounts may b....
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....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. 14.7.2The banks which are in SEBI's list shall extend the same facility in case of NFOs of mutual fund schemes to all eligible investors in Mutual Fund units. 14.7.3Mutual Funds shall ensure that adequate arrangements are made by Registrar and Transfer Agents for the implementation of ASBA. Mutual Funds/AMCs shall make all relevant disclosures in this regard in the SAI. 14.7.4SEBI circulars ^SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008, SEBI/CFD/DIL/2008/25/09 dated September 25, 2008, SEBI/CFD/DIL/MB/IS/5/2009/05/08 dated August 5, 2009 and SEBI/CFD/DIL/ASBA/1/2009/30/12 dated December 30, 2009 and CIR/CFD/DIL/7/2010 dated July 13, 2010 related to ASBA shall be followed to the extent applicable. 14.7.5 The Mutual Funds/AMCs have to compulsorily provide ASBA facility to the investors for all NFOs launched on or after October 1, 2010. PART II - INVESTOR'S OBLIGATIONS 14.7 Mandatory mentioning of PAN Number ^SEBI Circular No. MRD/DoP/Cir-05/2007 dated April 27, 2007, S....
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....rience of at least 5 years as on September 30, 2003.326 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 should be submitted to AMFI. 15.1 No Mutual Fund shall deal with any intermediary (i.e. distributors, agents, brokers, sub brokers or called by any other name, whether individuals or belonging to any other organization structure) in relation to selling and marketing of Mutual Fund units unless they have cleared the certification examination. 15.2 No Mutual Fund shall engage/employ employee(s) interacting with investors (i.e. those working in investors relations, call centers, employees engaged in sales and marketing etc) unless they have cleared the certification examination. 15.3 Further, such intermediaries and employees shall also adhere to the Guidelines specified by the Board and AMFI. ^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. 15.4 Code of Conduct: 15.4.1 Mutual Funds are required to monitor the activities of their distributors, a....
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....ad completed fifty years of age and had at least five years of experience in distribution of mutual fund units. As per regulation 4(3) of the Certification Regulations, persons who have attained the age of fifty years or who have at least ten years experience in the securities 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. 15.6.3 The Certification Regulations require the persons referred to in paragraph 15.6.1 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 Regula....
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....s. 16.1.3 Pending completion of documentation, exercise great care and be satisfied of investor bonafides before authorizing any transaction, including redemption, on such accounts/ folios. 16.1.4 The Trustees were required forthwith to confirm to Board that the steps had been taken to address the above and also send a status to the Board as and when process was completed to their satisfaction. 16.1.5 All mutual funds/ AMCs are directed that ^SEBI Circular No Cir /IMD/DF/9 / 2010 dated August 12, 2010: 16.1.5.1 All new folios/ accounts shall be opened only after ensuring that all investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature are available with AMCs/RTAs and not just with the distributor. 16.1.5.2 For existing folios, AMCs shall be responsible for updation of the investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature by November 15, 2010. 16.1.5.3 The trustees shall submit a confirmation after they receive certification from an Independent auditor on completion of the said process latest by November 22, 2010. 16.2 Facil....
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..... 16.2.4.3 Statement of Account a. Where investor desires to hold units in dematerialised form, demat statement given by depository participant would be deemed to be adequate compliance with requirements for account statement prescribed by SEBI ^For details on dispatch of statement of accountts. refer to Chapter 14- Investor Rights and services. 16.2.4.4 Investor grievance mechanism a. Stock exchanges shall provide for investor grievance handling mechanism to the extent they relate to disputes between brokers and their client. 16.2.4.5 Dematerialization of existing units held by investors a. In case investors desire to convert their existing physical units (represented by statement of account) into dematerialized form, mutual funds / AMCs shall take such steps in coordination with Registrar and Transfer Agents, Depositories and Depository participants (DPs) to facilitate the same. 16.2.4.6 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 com....