TaxTMI 
TaxTMI 
Securities and Exchange Board of India (Mutual Funds) Regulations, 2026
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....lause (ab) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012; (c) "advertisement" shall include any communication issued by or on behalf of the mutual fund or asset management company that may influence the investment decision of any investor or prospective investor; (d) "associate" includes, - (i) any person who directly or indirectly, either individually or in combination with relatives, exercises control over the asset management company or the trustee or the sponsor, as the case may be; (ii) any person, in respect of whom the asset management company or the trustee or the sponsor, directly or indirectly, by itself, or in combination with other persons, exercises control; (iii) a company whose director, other than an independent director, or officer or employee is also a director, or officer or employee of the asset management company; or (iv) in respect of a pooled investment vehicle including private equity funds that acts as a sponsor of a mutual fund, a. an associate or group company of the manager of the pooled investment vehicle;....
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....) Regulations, 1996; (l) "depository" means a body corporate as defined in the Depositories Act, 1996 (22 of 1996); (m) "economic offence" means an offence under the Fugitive Economic Offenders Act, 2018 (17 of 2018); (n) "equity oriented schemes" means a scheme other than an index fund scheme or an exchange traded fund, where, the scheme invests a minimum of sixty-five per cent of its net assets in equity and equity related instruments; (o) "equity related instruments" include convertible debentures, convertible preference shares, warrants carrying the right to obtain equity shares, equity derivatives, units of Real Estate Investment Trust and such other instrument as may be specified by the Board; (p) "exchange traded fund" means a mutual fund scheme that invests in securities in the same proportion of an index of securities in the manner specified by the Board and whose units are mandatorily listed and traded on a stock exchange platform; (q) 'exit load' means the charge or fee levied by the mutual fund at the time of redemption or repurchase of units; (r) "fraud" means a fraud as defined in clause (c) of sub-regulat....
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....bank deposits with Scheduled Commercial Banks, money market instruments, Government Securities, Treasury bills, Repo on Government securities and any other instruments as specified by the Board; (ee) "market abuse" includes manipulative, fraudulent and unfair trade practices which may contravene Section 12A of the Act or any of the provisions of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 or the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015; (ff) "money market instruments" includes commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity up to one year, call or notice money, certificate of deposit, usance bills, and any other like instruments as specified by the Reserve Bank of India; (gg) "mutual fund" means a fund established in the form of a trust granted registration under regulation 3 and which raises monies through the sale of units to the public under one or more schemes for investing in securities, money market instruments, gold or gold related instruments, ....
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....ange Board of India (Real Estate Investment Trusts) Regulations, 2014; (qq) "relative" means a person as defined in section 2(77) of the Companies Act, 2013 (18 of 2013); (rr) "scheme" means a scheme of a mutual fund launched under Chapter V; (ss) "schedule" means any of the schedules annexed to these regulations; (tt) "securities laws" means the Act, the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Depositories Act, 1996 (22 of 1996) and the provision of any other law to the extent it is administered by the Board and the relevant rules and regulations made thereunder; (uu) "silver exchange traded fund scheme" shall mean a mutual fund scheme that invests primarily in silver or silver related instruments; (vv) "silver related instrument" shall mean an instrument as may be specified by the Board, which has silver as the underlying product; (ww) "Specialized Investment Fund" means a mutual fund as defined under clause (gg) of sub-regulation (1) of regulation 2 of these regulations and subject to such other conditions as specified under these regulations; (xx) "sponsor" means any person who, acting....
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.... fund and fees The application for registration of a mutual fund shall be made in the following manner: (a) A sponsor shall submit to the Board an application for mutual fund registration in the format as specified by the Board from time to time, along with a non-refundable fee as specified in the First Schedule. (b) An application which is incomplete in any respect shall be liable to be rejected. Before rejecting any such application, the applicant shall be given an opportunity to complete such formalities within such time as may be specified by the Board. (c) The Board may direct the sponsor to provide such additional information or clarifications as it deems requisite. (d) The Board may, upon receipt of all information, decide on the application. (e) The Board may register the mutual fund and issue a certificate of registration if it is satisfied that the applicant complies with the eligibility criteria and other requirements provided in these regulation and upon the applicant paying the registration fee as specified in First Schedule. (f) If the sponsor does not satisfy the eligibility criteria mentioned in regulation 5 o....
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....of relevant experience. Appoint Chief Executive Officer, Chief Operating Officer, Chief Risk Officer, Chief Compliance Officer and Chief Investment Officer in the asset management company with total combined experience in the relevant field of at least thirty years and each of them shall have a minimum of 3 years of relevant experience. (b) Profitability Net profit in financial services business after providing for depreciation, interest and tax in each of the immediately preceding five years and; Average net annual profit of at least rupees ten crore, after depreciation, interest and tax, from financial services business during the immediately preceding five years. No profitability criteria for granting of a certificate of registration under this route. (c) Net worth of sponsor Positive net worth in each of the preceding five years. Not Applicable (d) Positive Liquid Net worth Positive liquid net worth is more than the proposed capital contribution of the sponsor in the asset management company. (e) Net worth of asset management company The sponsor shall ensure that the net worth of asset manag....
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.... specified by the Board. (2) Fit and proper requirement for sponsor and mutual fund Applicant and mutual fund shall comply with the fit and proper criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. (3) Minimum holding of sponsor in an asset management company The sponsor shall contribute at least 40% to the net worth of the asset management company: Provided that any person who holds 40% or more of the net worth of an asset management company shall be deemed to be a sponsor and shall be required to fulfill the eligibility criteria specified in this regulation. (4) Fit and proper requirement for sponsor, its directors or the key personnel to be employed by the mutual fund and/or asset management company The sponsor or any of its directors or the key personnel to be employed by the mutual fund and asset management company should not have been guilty of fraud or been convicted of an offence involving moral turpitude or been found guilty of any economic offence. (5) Appointment of trustees Appointment of trustees to act as trustees for the mutual fund shall be in accordance with the ....
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.... acquirer shall comply with sub-regulation (1) within a period of one year of coming into force of such an arrangement. (3) The restriction on holding shares or voting rights or representation on the Board provided in sub regulation (1) shall not apply to: (a) an existing sponsor of mutual fund that transfers its eligible passive schemes of mutual fund to a mutual fund lite belonging to a group entity of the same sponsor, subject to conditions as specified by the Board; and (b) an existing shareholder holding ten per cent or more shareholding or voting rights in an existing asset management company of the mutual fund and holding ten per cent or more shareholding or voting rights in a mutual fund lite asset management company belonging to a group entity of the same sponsor. 7. Disassociation of sponsor from asset management company and the mutual fund (1) A sponsor may disassociate from the asset management company and the mutual fund subject to the approval of the Board and in the manner specified by the Board. (2) Where the sponsor disassociates under sub-regulation (1),- (a) the existing asset management company of the mutual fund may act as....
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....2) The chairperson of the board of directors of the trustee company shall be an independent director. (3) The directors of the trustee company of a mutual fund can act as a trustee of any other trust (except mutual fund trust) only if the object of the trust is not in conflict with the object of the mutual fund. (4) A person shall be eligible to be appointed as a trustee only if that person - (a) complies with fit and proper person criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008; (b) is not a director (including independent director), officer or employee of an asset management company; (c) is not trustee of any other mutual fund; and (d) furnishes all such information as may be sought by the Board. (5) At least two-thirds of the board of directors of a trustee company shall comprise of independent directors, who are not associates of the sponsor or the asset management company or the trustee company 12. Rights and obligations of the trustees (1) Appointment and termination of asset management company (a) The trustee company, with prior approval from the Boa....
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....d such measures shall include: (a) conducting a quarterly review of reports submitted by the asset management company on transactions between the mutual fund and the asset management company or its associates; (b) ensuring that the asset management company does not grant unfair advantage to its associates or engage in transactions that may prejudice the interests of unitholders; (c) ensuring that the asset management company manages each mutual fund scheme independently of its other business activities, and adopts safeguards to ensure fair and equitable treatment of investors across all schemes, without compromising the interests of one scheme for another or for its other businesses; and (d) approving broker empanelment policy of the asset management company and ensuring that brokers are empaneled after requisite due diligence, and that broker transactions are monitored to avoid undue concentration of business or unfair advantage to any associate or group entity. (3) Regulatory compliance and trustee responsibilities (a) The trustees shall have the right to request for any information from the asset management company that they deem n....
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....sed to protect unitholders' interests. (g) The independent trustees, i.e. trustees not associated with the sponsors, shall review and give their comments on the reports received from asset management company on investments in securities of group companies of the sponsor. (5) Additional trustee oversight (a) The trustees shall review the asset management company's net worth quarterly to ensure compliance with clause (e) of sub-regulation (1) of regulation 5. (b) The trustees shall ensure there is no conflict of interest in how the asset management company deploys its net worth and the interests of unitholders. (c) The trustees shall periodically review service contracts related to custody arrangements and ensure they serve the unitholders' interests. (d) The trustees shall review the details of securities transactions filed by directors of the asset management company on a quarterly basis. (e) The trustees shall exercise due diligence as under: General Due Diligence: (i) The trustees shall be discerning in the appointment of the directors on the Board of the asset management company. (ii) The....
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.... securities transactions involving associates to the extent such transactions are permitted; (iv) selecting and nominating individuals to fill independent directors' vacancies; (v) ensuing code of ethics designed prevents fraudulent, deceptive or manipulative practices by insiders in connection with personal securities transactions; (vi) the reasonableness of fees paid to sponsors, asset management company and any others for services provided; and (vii) any service contract with the associates of the asset management company. (g) The trustees shall not be held liable for acts done in good faith if they have exercised adequate due diligence. (6) The trustees shall also exercise due diligence on such matters as may be specified by the Board. 13. Appointment of custodian (1) The trustees shall appoint a custodian for the mutual fund and enter into a custodian agreement and send intimation to the Board within fifteen calendar days of such appointment. (2) The trustees shall maintain oversight of the activities of the custodian in relation to the mutual fund. (3) Custodian appointed shall carry out the custodial services for th....
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.... (1) Track record and reputation (a) If the applicant is an existing asset management company, it shall have a general reputation for fairness in transactions, demonstrable integrity and shall comply with the profitability and networth requirements specified under sub-regulation (1) of regulation 5 and sub-regulation (1) of regulation 57. (b) The asset management company shall comply with fit and proper person criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. (2) Director and key personnel qualifications (a) The directors of the asset management company must be individuals possessing adequate professional experience in finance and financial services related fields. (b) The persons so appointed as director and/ or key personnel shall also be fit and proper persons in accordance with the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. (c) The board of directors of asset management company must comprise at least fifty per cent directors, who are not associates of the sponsor, or any of its subsidiaries, ....
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....rding the proposed change is dispatched to unitholders; (iii) details specified by the Board in this regard are appropriately displayed on the website of asset management company; and (iv) the unitholders are given an option to exit from the schemes of the mutual fund managed by the asset management company at the prevailing Net Asset Value without incurring any exit load. 18. Appointment of an asset management company The sponsor, or the trustee if so authorised by the trust deed, shall appoint an asset management company approved by the Board under regulation 16(4). 19. Termination of an asset management company (1) The appointment of an asset management company may be terminated,- (a) by the trustee company with the approval of majority of its board of directors; (b) on request of the asset management company; (c) on the directions of the Board; or (d) by a resolution passed by at least seventy-five per cent of the unit holders. (2) Any change in the appointment of the asset management company including termination of appointment of existing asset management company and appointment of new asset management compa....
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....multaneous buy and sell in the same equity security only through market mechanism and a written trade order management system; and (viii) it ensures independence to key personnel handling the relevant conflict of interest is provided through removal of direct link between remuneration to relevant asset management company personnel and revenues generated by that activity: Provided further that the asset management company may, itself or through its subsidiaries, undertake portfolio management services and advisory services for other than broad based fund till further directions, as may be specified by the Board, subject to compliance with the following additional conditions:- (i) it satisfies the Board that key personnel of the asset management company, the system, back office, bank and securities accounts are segregated activity wise and there exist system to prohibit access to inside information of various activities; and (ii) it meets with the capital adequacy requirements, if any, separately for each of such activities and obtain separate approval, if necessary under the relevant regulations: Provided further that an asset management ....
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....ulations, prior in-principle approval from the recognized stock exchange(s) where units are proposed to be listed, in the manner specified by such exchange(s). (3) Remuneration and Investment (a) The asset management company shall invest such amounts in such schemes of the mutual fund, based on the risks associated with the schemes, as may be specified by the Board. (b) The asset management company shall invest a percentage of the remuneration of employees in units of mutual fund schemes based on the designation or roles, as specified by the Board. (c) The asset management company shall not invest in any of its scheme other than as provided in clause (a) unless full disclosure of its intention to invest has been made in the offer documents. (d) The asset management company shall not charge any fees on its own investments in a scheme of a mutual fund managed by it. (4) Responsibility of key personnel and employees: (a) The Chief Executive Officer (whatever be the designation) of the asset management company shall ensure that: (i) the mutual fund complies with all the provisions of these regulations and related guidelines an....
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....i) The asset management company shall ensure that the purchase or sale of securities through any stock broker that is an associate of the sponsor does not, on average, exceed five percent of the aggregate value of securities purchased or sold by the mutual fund across all its schemes. (ii) The asset management company may undertake purchase or sale of securities through a stock broker which is not an associate of the sponsor in excess of five percent of the aggregate value of securities transacted by the mutual fund across all its schemes, provided that the justification for exceeding the limit is recorded in writing and reported to the trustees on a quarterly basis. Explanation: The limits specified in clauses (i) and (ii) shall apply for each block of three months and shall exclude transactions relating to the sale and distribution of units issued by the mutual fund. (b) Transactions with associates/sponsor: (i) Where an asset management company proposes to utilise the services of the sponsor or any of its associates, employees or their relatives, for the purpose of any securities transaction, distribution and sale of securities, the proposed e....
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.... details of their securities transactions on a quarterly basis, in the manner specified by the Board. (iii) The asset management company shall file with trustees the details of transactions in securities by its key personnel in their own name or in the name of the asset management company, and shall report to the Board, as required. (c) Board of Directors' Oversight: The board of directors of the asset management company shall ensure that - a. the asset management company has been diligent in empaneling brokers, monitoring securities transactions with brokers, and avoiding undue concentration of business with specific brokers; b. the asset management company has not given any undue or unfair advantage to any associate or dealt with any associate in any manner detrimental to the interest of unit holders; c. the transactions entered into by the asset management company align with these regulations, investment objective and asset allocation of the respective schemes; d. mutual fund transactions align with the provisions of the trust deed; e. the net worth of the asset management company is reviewed quarterly to en....
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....s of regulatory or legal requirements or governance vulnerability; and b. establishes procedure to ensure adequate protection of whistle blowers. (d) Investor grievance and protection: (i) The asset management company shall constitute a Unit Holder Protection Committee in the form and manner and with a mandate as specified by the Board. (ii) Asset management company shall ensure compliance with the Investor Charter specified by the Board. (9) Scheme management and valuation: (a) Registrars and share transfer agents (i) Registrars and share transfer agents appointed by the asset management company shall be registered with the Board. (ii) If the work relating to the transfer of units is processed in-house, the charges at competitive market rates may be debited to the scheme and for rates higher than the competitive market rates, prior approval of the trustees shall be obtained and reasons for charging higher rates shall be disclosed in the annual accounts. (b) Valuation and Disclosure (i) The asset management company shall compute and carry out valuation of investments made by its scheme(s) in accorda....
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....ompany. (b) Continuing Liability Notwithstanding any contract, agreement or termination, the asset management company or its directors or other officers shall not be absolved of liability to the mutual fund for their acts of commission or omission, while holding such position or office. 23. Meeting of the board of directors of the trustee company and the board of directors of the asset management company The board of directors of the trustee company and the asset management company, including their respective committees, shall hold meetings at least as often as specified by the Board, and may hold additional meetings as necessary. CHAPTER V SCHEMES OF MUTUAL FUND 24. Filing of offer document (1) An asset management company may launch a scheme: (i) after approval of the trustees; and (ii) on receipt of Board's final observations on the offer document filed with the Board. (2) The Board may issue observations, if any, within 21 working days from the date of filing of the offer document. (3) While filing the offer document under sub-regulation (1), the mutual fund shall pay to the Board the minimum filing fee specified in the....
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....ment material The advertisements by the asset management company shall be in conformity with the Advertisement Code as specified in the Fifth Schedule. 29. Listing and delisting of mutual fund schemes (1) Prior to the listing of units of any scheme of mutual fund on the recognised stock exchange(s), the asset management company of such mutual fund shall enter into an agreement with such exchange(s). (2) Every scheme wherein daily investment and redemptions from the scheme is not available, and such other schemes as specified by the Board, shall be listed on a recognised stock exchange in the manner as may be specified by the Board from time to time. (3) Every exchange traded fund shall be listed on a recognised stock exchange. (4) The units of mutual fund schemes that have ceased to exist shall be delisted from recognised stock exchange(s) in accordance with the guidelines as may be specified by the Board from time to time. 30. Repurchase of units of close ended schemes (1) The units of a close ended scheme launched on or after the commencement of the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2009 shall not be repurchased....
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....est from a unitholder for change in the mode of holding of mutual fund units, the asset management company shall credit mutual fund units to unit holders' account, in the mode of holding specified by investor, within such period as may be specified by the Board from time to time. 34. Consolidated account statement (1) The asset management company shall ensure that the consolidated account statement is issued for each calendar month, as per the timeline specified by the Board from time to time, detailing all the transactions and holding at the end of the month, including distribution commission paid to its distributor, across all schemes of all mutual funds, to every investor in whose folio any transaction has taken place during that month. (2) In respect of investors in whose folios no transaction has taken place during the preceding six-month period ending in September or March, a consolidated account statement shall be issued on half yearly basis as per the timeline specified by the Board from time to time. (3) The asset management company shall identify common investor across mutual funds by their Permanent Account Number for the purposes of issuing the consolidated ....
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....esults of such voting within forty-five calendar days from the date of publication of notice under sub-regulation (3). (5) Where the trustees fail to obtain the consent of the unitholders under sub-regulation (4), the scheme shall be reopened for business activities with effect from the second business day following the publication of results of the voting. 37. Effect of winding up On and from the date of the publication of notice under clause (b) of sub-regulation (3) of regulation 36, the trustees or the asset management company, as the case may be, shall: (a) cease to carry on any business activities in respect of the scheme being wound up; (b) cease to create or cancel units of the scheme; (c) cease to issue or redeem units of the scheme; and (d) list the units of mutual fund scheme under winding up on a recognised stock exchange. 38. Procedure and manner of winding up of schemes (1) Winding up of a scheme under sub-regulation (2) of regulation 36, after compliance with sub-regulation (3) of regulation 36 and sub-regulation (4) of regulation 36, shall be carried out in accordance with the following: (a) the trustees sh....
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....all measures for winding up of the scheme have been complied with, the Board shall record and communicate to trustees that the scheme ceases to exist. CHAPTER VII INVESTMENT BY MUTUAL FUND SCHEMES AND ASSET MANAGEMENT COMPANIES 39. Investment by Mutual Fund Schemes (1) Subject to the investment objective of the relevant mutual fund scheme and provisions of these regulations, the asset management company shall invest funds of a mutual fund scheme only in the following: (a) securities; (b) money market instruments; (c) privately placed debentures; (d) securitised debt instruments, which are either asset backed or mortgage backed securities; (e) gold or gold-related instruments; (f) silver or silver-related instruments; and (g) any other asset or instrument as may be specified by the Board from time to time. (2) The Board may specify conditions for investment of the funds collected under mutual fund schemes or Specialized Investment Fund. 40. Investment by mutual fund and asset management companies in Corporate Debt Market Development Fund (1) The mutual fund shall invest such percentage of net assets ....
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....s as specified by the Board from time to time. 42. Borrowing and Lending by Mutual Funds (1) The mutual fund shall not borrow except to meet temporary liquidity needs for the purpose of repurchase or redemption of units or payment of interest or Income Distribution cum Capital Withdrawal payout to the unitholders or for settlement of trades by equity oriented index funds and equity oriented exchange traded funds on account of under execution of sell trades on the stock exchange in the manner as may be specified by the board from time to time. The borrowing specified above shall be subject to - (a) such borrowing not exceeding twenty per cent of the net assets of the scheme; and (b) duration of such borrowing not exceeding a period of six months. (2) The limit specified at clause (a) of sub-regulation (1) shall not be applicable for intraday borrowing subject to such conditions as may be specified by the board. (3) Save as otherwise expressly provided under these regulations, the mutual fund shall not advance any loans for any purpose. (4) The mutual fund may lend and borrow securities in accordance with the framework relating to short selling and se....
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....uch delay. (3) In addition to the refund with interest as referred under sub-regulation (2), asset management company may be liable for action by the Board as deemed fit, for failure to comply with the sub-regulation (1). (4) The physical dispatch of redemption or repurchase proceeds or Income Distribution cum Capital Withdrawal payments or application money shall be carried out only in exceptional circumstances and the asset management companies shall be required to maintain records along with reasons for all such physical dispatches. CHAPTER IX SPECIALIZED INVESTMENT FUND 47. Applicability (1) The provisions of this chapter shall apply to a Specialized Investment Fund. (2) Unless the context otherwise requires, all other provisions of these regulations and the guidelines and circulars issued thereunder shall apply to a Specialized Investment Fund, its investment strategies, trustees and asset management companies in relation to such investment strategies, except where specific provisions are made in relation thereto under this Chapter. 48. Approval requirements (1) A mutual fund registered under clause (e) of regulation 3 may be granted an approval to l....
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....in a clear differentiation between the offerings of the Specialized Investment Fund and that of a mutual fund. (2) The asset management company shall comply with the provisions relating to branding, advertising, standard disclaimers, guidelines on usage of sponsor or asset management company or mutual fund's brand name and maintenance of a separate website, as may be specified by the Board from time to time. 54. Duties of trustees The trustees shall ensure that: (a) the asset management company has the necessary expertise, internal control systems and risk management mechanism to invest in and manage investments; (b) the asset management company complies with such other requirements related to risk management, investor protection, disclosures and reporting, as may be specified by the Board from time to time; and (c) all activities of the Specialized Investment Fund are in accordance with the provisions of these regulations. 55. Disclosures in offer document and other disclosures (1) The offer documents of the Specialized Investment Fund shall contain adequate disclosures for investors to make informed investment decisions, highlighting the ....
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....n, interest and tax during the immediately preceding five years of at least rupees five crore. No profitability criteria for granting a certificate of registration under this route (c) Net worth of sponsor Positive net worth in each of the preceding five years Not applicable (d) Liquid Net worth of sponsor Positive liquid net worth is more than the proposed capital contribution of the sponsor in the MF Lite asset management company (e) Net worth of MF Lite Asset Management Company The sponsor shall ensure that the net worth of MF Lite AMC shall be at least thirty-five crores, deployed in assets as may be specified by the Board, at all times: Provided that if MF Lite AMC has profits for five consecutive years, the net worth of MF Lite AMC shall be maintained at more than rupees twenty-five crore (Rs. 25 crores). If the total assets under management of the MF Lite asset management company exceeds the thresholds specified by the Board, the MF Lite asset management company shall abide by the net worth requirements specified under Route 1 in Chapter II of these Regulations. The sponsor shall ensure maintaining the n....
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....r this route. A pooled investment vehicle including a private equity fund may sponsor MF Lite by complying with conditions under this alternate route and such other conditions as may be specified by the Board from time to time. (2) Fit and proper Applicant, mutual fund lite and trustees shall comply with the fit and proper criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. (3) Minimum holding of sponsor in an MF Lite Asset Management Company The sponsor shall contribute at least 40% to the net worth of the MF Lite asset management company: Provided that any person who holds 40% or more of the net worth of an asset management company shall be deemed to be a sponsor and will be required to fulfill the eligibility criteria specified in these regulations. (4) Fit and proper requirement for sponsor, its directors or the key personnel to be employed by the mutual fund lite and/or mutual fund lite asset management company The sponsor or any of its directors or the key personnel to be employed by th....
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....ecified by the Board, duly registered under the provisions of the Registration Act, 1908 (16 of 1908), executed by the mutual fund lite asset management company in favor of the trustees named in such an instrument. 61. Appointment of trustee (1) A debenture trustee may be appointed as a trustee of more than one mutual fund lite. (2) The trustee of a mutual fund lite shall be an independent entity and not an associate of the sponsor or manager of the concerned mutual fund lite asset management company. (3) No debenture trustee shall be eligible to be appointed as a trustee under this Chapter unless it meets the criteria for a fit and proper person specified under the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993. (4) The trustee shall have satisfactory wherewithal with respect to infrastructure, personnel, systems etc. as may be required for the proper discharge of its duties under these regulations. 62. Rights and obligations of the trustees (1) Appointment and termination of asset management company (a) The trustees, with prior approval from the Board, shall appoint MF Lite asset management company and shall enter into ....
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.... (a) The trustees shall have the right to request for any information from the mutual fund lite asset management company that they deem necessary. (b) The trustees shall be accountable for and be the custodian of the funds and property of the respective mutual fund lite schemes and shall hold the same in trust for the benefit of unitholders in accordance with this chapter and the provisions of trust deed. (4) Trustee oversight for investor interests (a) The trustees shall abide by the Code of Conduct as specified in PART-A of the Fourth Schedule. (b) The trustees shall obtain unitholder consent: (i) when required by the Board in the interest of the unitholders; (ii) on the requisition of three-fourths of the unitholders of any mutual fund lite scheme; or (iii) when the majority of the trustees decide to wind up a scheme in terms of clause (a) of sub-regulation (2) of regulation 36 or prematurely redeem the units of a close ended scheme. (c) The trustees shall request details of securities transactions by key personnel of the mutual fund lite asset management company, whether made in their own name or in the name ....
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....e board of directors of the mutual fund lite asset management company shall ensure before the launch of any scheme that the mutual fund lite asset management company has- (i) established systems for its back office, dealing room and accounting; (ii) appointed all key personnel specified by the Board, including fund manager(s) for the scheme(s) and submitted their bio-data which shall contain the educational qualifications and securities market experience to the trustees, within fifteen calendar days of their appointment; (iii) appointed auditors to audit its accounts; (iv) appointed a compliance officer who shall be responsible for monitoring compliance with the Act, rules, regulations, notifications, guidelines, instructions, etc., issued by the Board or the Central Government and for addressing investors grievances; (v) appointed a registrar to an issue and share transfer agent registered under the Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 2025 and established parameters for their supervision; (vi) prepared a compliance manual and designed internal control mechanisms....
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....al fund lite across all its schemes. (ii) A mutual fund lite asset management company shall ensure that purchase or sale of securities through a stock broker which is not an associate of the sponsor in excess of twenty five per cent of the aggregate value of purchases and sale of securities transacted by the mutual fund lite across all its schemes is undertaken only if mutual fund lite asset management company has recorded in writing the justification for exceeding the limit of twenty five per cent, and reports of all such investments are sent to the trustees on a quarterly basis. Explanation: The limits specified in clauses (i) and (ii) shall apply to each block of three months and shall exclude transactions relating to the sale and distribution of units issued by the mutual fund lite and such other transactions as may be specified by the Board. (6) Investment concentration disclosure: In case any company has invested more than five per cent of the net asset value of a scheme, the investment made by that scheme or by any other scheme of the same mutual fund lite in that company or its subsidiaries shall be brought to the notice of the trustees by the mutual....
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.... the respective schemes; d. mutual fund lite transactions align with the provisions of the trust deed; e. the mutual fund lite asset management company has been managing the mutual fund lite schemes independently of other activities and have taken adequate steps to ensure that the interest of investors of one scheme are not being compromised with those of any other scheme or of other activities of the mutual fund lite asset management company; f. the net worth of the mutual fund lite asset management company is reviewed quarterly to ensure continuous compliance with the threshold provided in clause (e) of sub-regulation (1) of regulation (57); g. all service contracts including for custody arrangements of the assets and transfer agency of the securities are executed in the interest of the unit holders and test checks of service contracts are arranged; h. there is no conflict of interest between the deployment of the mutual fund lite asset management company's net worth and the interest of the unit holders; i. investor complaints are periodically reviewed and redressed; j. all service providers hold appropriate registrat....
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..... (d) Investor grievance and protection: The mutual fund lite asset management company shall constitute a Unit Holder Protection Committee in the form and manner and with a mandate as specified by the Board. (9) Scheme management and valuation: (a) Registrars and share transfer agents (i) registrars and share transfer agents appointed by the mutual fund lite asset management company shall be registered with the Board. (ii) If the work relating to the transfer of units is processed in-house, the charges at competitive market rates may be debited to the scheme and for rates higher than the competitive market rates, prior approval of the trustees shall be obtained and reasons for charging higher rates shall be disclosed in the annual accounts. (b) Valuation and Disclosure (i) The mutual fund lite asset management company shall compute and carry out valuation of investments made by its scheme(s) in accordance with the investment valuation norms specified in Seventh Schedule of these regulations, and shall publish the same. (ii) The mutual fund lite asset management company and the sponsor of the mutual fund lite....
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....the schemes and shall not allow the mutual fund lite asset management company to float new schemes. (b) The independent directors of the mutual fund lite asset management company shall pay specific attention to the following, as may be applicable, namely: - (i) the Investment Management Agreement and the compensation paid under the agreement; (ii) service contracts with associates and whether the mutual fund lite asset management company has charged higher fees than outside contractors for the same services; (iii) selections of the mutual fund lite asset management company's independent directors; (iv) securities transactions involving associates to the extent such transactions are permitted; (v) selecting and nominating individuals to fill independent directors' vacancies; (vi) code of ethics must be designed to prevent fraudulent, deceptive or manipulative practices by insiders in connection with personal securities transactions; (vii) the reasonableness of fees paid to sponsors, mutual fund lite asset management company and any others for services provided; and (viii) any service contract with the a....
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....personnel handling the relevant conflict of interest is provided through removal of direct link between remuneration to relevant asset management company personnel and revenues generated by that activity. 65. Procedure for launching of mutual fund lite schemes No mutual fund lite scheme shall be launched by the mutual fund lite asset management company unless such mutual fund lite scheme is approved by the board of directors of the mutual fund lite asset management company and a copy of the offer document has been filed with the Board. CHAPTER XI EXPENSES CHARGED TO MUTUAL FUND INVESTORS 66. Fees and expenses of mutual fund schemes (1) All expenses of mutual fund schemes should be clearly identified and shall be paid from the scheme. The expenses shall be subject to the base expense limits, brokerage limits, transaction cost and statutory levy permissible under these regulations. (2) Any expenditure in excess of the base limits specified in these regulations shall be borne by the asset management company or the trustees or sponsors. If any expense of the scheme is borne by asset management company or by the trustee or sponsors, the same shall be done only after....
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....eme(s) 1.00% (ii) Other than equity oriented schemes(s) 0.80% (b) Open Ended Schemes Sr. No Scheme Category Maximum Base Expense ratio as per cent of the daily net assets Index fund scheme or exchange traded fund (i) Index fund scheme or exchange traded fund 0.90% Fund of Funds (ii) Expense ratio of Fund of Funds investing in liquid schemes, index fund scheme and exchange traded funds (including weighted average of the expense ratio levied by the underlying scheme(s)) 0.90% (iii) Expense ratio of Fund of Funds, other than fund of funds mentioned at sub-regulation 7(b)(ii), investing a minimum of sixty-five per cent of assets under management in equity oriented schemes as per scheme information document (including weighted average expense ratio levied by the underlying scheme(s) 2.10 % (iv) Expense ratio of Fund of Funds not covered at sub-regulation 7(b)(ii) and 7(b)(iii) above (including weighted average expense ratio levied by the underlying scheme(s)) 1.85 % (c) Open ended schemes other than the schemes specified under regulation 66 (7)(b) Assets under management Slab (In Rs. crore) ....
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....e, as mentioned under definition of 'Total expense ratio', shall be total of expense charged within the base limit specified under sub-regulation 7 of regulation 66, brokerage cost permitted under sub-regulation 9 of regulation 66, transaction cost incurred for the purpose of execution of trade as referred under sub-regulation 10 of regulation 66, and statutory levies charged to the investors. (2) No charges other than the base expense ratio, brokerage cost, transaction cost, statutory levy and exit load including levies as may be specified by the Board, shall be charged to the investors. CHAPTER XII ANNUAL REPORT OF MUTUAL FUND SCHEMES 68. Annual report of mutual fund schemes Every mutual fund or the asset management company shall prepare in respect of each financial year, an annual report of the schemes as specified in the Ninth Schedule and such other requirements as specified by the Board from time to time. 69. Auditor's report (1) Every mutual fund shall have the annual statement of accounts audited by an auditor who is not associated with the auditor of the asset management company. Explanation: For the purposes of this sub-regulation and regulation 79....
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.... fund and asset management company shall, within one month from the close of each half-year ending on 31st March and 30th September, host the unaudited financial results of their schemes on their website. (b) The financial results referred to in clause (a) shall be in the format specified by the Board from time to time and shall include such additional details as are necessary to give a true and fair view of operations of the mutual fund. (c) Written communication (including digital modes such as email/SMS etc.) shall be sent to unitholders by the asset management company about the availability of financial results referred to in clause (a). (3) Disclosure of portfolio statement: An asset management company shall send to all unitholders a complete statement of its scheme portfolio in the manner as specified by the Board from time to time. (4) Disclosure of total expense ratio: The total expense ratio of mutual fund schemes shall be disclosed to the investors in manner and format specified by the Board from time to time. (5) Disclosure of net asset value: The Net Asset Value of the scheme shall be calculated on daily basis and disclosed in the manner speci....
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....red in accordance with Indian Accounting Standards (IND AS), as notified by the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time. (4) Where an inconsistency arises between the IND AS and these regulations or guidelines issued thereunder, the asset management companies shall follow the requirements specified under these regulations. (5) Every asset management company shall maintain and preserve its books of account, records and documents for a minimum period of eight years. (6) The asset management company shall follow the accounting policies and standards as specified in Eighth Schedule and as specified by the Board from time to time, in a fair and true manner so as to provide: (a) appropriate details of the scheme-wise disposition of the assets of the fund at the relevant accounting date; (b) performance of the scheme during that period; and (c) information on distribution or accumulation of income accruing to the unitholders. 73. Financial year (1) The financial year for all the schemes shall end on March 31st of each year. (2) For a new scheme commenced during a financial year, the disclosure and repor....
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.... a. produce to the inspecting officer such books, accounts, records, including electronic records such as emails, applications and software used with respect to affairs of the mutual funds, and other documents as are in their custody or control and which are relevant or necessary for the purposes of investigation or inspection; and b. furnish such statements, documents, information or other material relating to their activities which are relevant or necessary for the purposes of investigation or inspection. (ii) All documents and information under clause (i) shall be provided within a reasonable period as specified by the inspecting officer. (b) Access to premises and records: (i) The mutual fund, trustees or asset management company shall grant the inspecting officer reasonable access to: a. any premises occupied by them or by any other person on their behalf; b. extend reasonable facilities for examining any books, records, documents and computer data in their possession or the possession of such other person which are relevant or necessary for the purposes of investigation or inspection; and c. provide copie....
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....tion in case of default An asset management company, mutual fund, trustee or sponsor which contravenes any of the provisions of the Act, rules or regulations framed thereunder or circulars and guidelines issued thereunder including: (a) failure to furnish any information or furnishes wrong information relating to its activity as a mutual fund as required under these regulations; (b) failure to furnish any returns as required under these regulations; (c) non co-operation in any inquiry or inspection conducted by the Board; (d) failure to comply with any directions of the Board issued under the provisions of the Act or these regulations; (e) failure to resolve the complaints of the investors or fails to give a satisfactory reply to the Board in this behalf; (f) indulge in unfair trade practices and/or insider trading in securities. Explanation: For the purposes of this clause "unfair trade practices" has the same meaning as in the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations 2003; For the purpose of this clause "insider ....
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....using the SEBI Payment Gateway or any other mode as may be specified by the Board from time to time. 83. Relaxation from regulations for furthering innovation: (1) The Board may exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets. (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. Explanation. - For the purposes of these regulations, "regulatory sandbox" means a live testing environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the securities market, subject to such conditions as may be specified by the Board. CHAPTER XVIII MISCELLANEOUS 84. Power of the Board to issue ....
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....ode as may be specified by the Board from time to time. Sr. No. Particulars Fees/Charges* 1 Application fees payable by mutual funds Rupees five lakhs 2 Registration fees payable by mutual funds Rupees twenty five lakhs 3 Annual fees payable by mutual funds on Average Asset Under Management (AAUM) up to rupees 10,000 crore as on 31st March# 0.0015 per cent of the AAUM 4 Annual fees payable by mutual funds on part of AAUM as on 31st March of above rupees 10,000 crore# 0.0010 per cent of the portion of AAUM in excess of rupees 10,000 crore. 5 Filing fees for offer documents and placement memoranda 0.005 per cent of the amount raised in the new fund offer or by way of private placement, as the case may be, subject to a minimum of rupees two lakhs and a maximum of rupees fifty lakhs. #subject to a minimum of Rupees 2,50,000 and a maximum of Rupees 1,00,00,000 *The fees/charges mentioned above are excluding GST SECOND SCHEDULE Securities and Exchange Board of India (Mutual Funds) Regulations, 2026 [Regulation 10(1)] CONTENTS OF THE TRUST DEED (1) The trust deed shall have a clause that trustees shall be responsib....
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....into their custody, or under their control all the property of the schemes of the mutual fund and hold it in trust for the unitholders. (c) The trustees shall be responsible to provide or cause to provide information to unitholders and Board as may be specified by the Board. (d) The trustees shall be responsible to supervise the collection of any income due to be paid to the scheme and for claiming any repayment of tax and holding any income received in trust for the unitholders in accordance with the trust deed and Regulations. (e) A trustee shall be responsible to furnish to the trustee company particulars of interest which he may have in any other company, or institution or financial intermediary or any corporate body by virtue of his position as director, partner or with which he may be associated in any other capacity. (11) The trust deed shall specifically forbid mutual funds from: (a) acquisition of any asset out of the trust property which involves the assumption of any liability which is unlimited or shall not result in encumbrance of the trust property in any way; and (b) making or guaranteeing loans or taking up any activit....
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....o resolution of claims or disputes of investors in terms of regulation 71. (e) making or guaranteeing loans or taking up any activity which is in contravention of the Regulations. (4) The Investment Management Agreement shall have a clause empowering trustees to dismiss the asset management company under the specific events, with the prior approval of the Board and in accordance with the Regulations. FOURTH SCHEDULE Securities and Exchange Board of India (Mutual Funds) Regulations, 2026 [Regulations 12(3)(b), 12(4)(a), 22(8)(a)(ii), 62(4)(a), 63(8)(a)(iii), 81(g)] CODE OF CONDUCT PART - A For the asset management company and trustees (1) The trustees and the asset management company shall maintain high standards of integrity and fairness in all their dealings and in the conduct of their business. (2) Mutual funds schemes should not be organised, operated, managed or the portfolio of securities should not be selected, in the interest of sponsors, directors of asset management companies, directors of Trustee Company and their associates. (3) Mutual funds schemes should be organised, operated, managed and the portfolio of securities should be sel....
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....cluding long or short position in the said security has been made, while rendering such advice. (b) in case an employee of the sponsor, the trustees or the asset management company is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice. PART - B [Regulations 22(4)(a)(iv), 22(4)(b)(ii), 22(4)(c)(ii), 63(4)(a)(iv), 63(4)(b), 63(4)(c) and 81(g)] For the Fund Managers and Dealers (1) General: Dealers and Fund Managers shall: (a) ensure that investments are made in the interest of the unit holders; (b) strive for highest ethical and professional standards to enhance the reputation of the markets; (c) act honestly in dealings with other market participants; (d) act fairly and deal with market participants in a consistent and transparent manner; (e) act with integrity, particularly avoid questionable practices and behaviour; (f) abide by the Act, Rules, Regulations, Guidelines and Circulars governing the securities market and keep themselves up-to-date with the la....
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....n committee of the asset management company. Any material deviation in valuation, as defined by the asset management company, shall also be highlighted to the valuation agencies and valuation committee of the asset management company. (e) on their discretion may share views on market colour, general state of market or trends without disclosing confidential information; (f) not disclose any material non-public information that could affect the value of an investment to external parties and shall not act or cause others to act on such information; and (g) not intentionally disseminate false or misleading information with respect to the price or market for a security. (3) Execution Standards: (a) Fund Managers shall: (i) have an appropriate and adequate basis for investment decision and shall be responsible for investment in the funds managed by them; (ii) record in writing, the decision of buying or selling specific securities together with the detailed justifications for such decisions; (iii) not indulge in any act or practice which results in artificial window dressing of the NAV; and (iv) not indulge in any....
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....uding to meet periodic liquidity or to avoid month end disclosure. FIFTH SCHEDULE Securities and Exchange Board of India (Mutual Funds) Regulations, 2026 [Regulation 28] ADVERTISEMENT CODE (a) Advertisements shall be accurate, true, fair, clear, complete, unambiguous and concise and shall not be misleading. (b) Advertisements shall not contain statements which are false, misleading, biased or deceptive, based on assumption/projections and shall not contain any testimonials or any ranking based on any criteria. (c) Advertisements shall not be so designed as likely to be misunderstood or likely to disguise the significance of any statement. Advertisements shall not contain statements which directly or by implication or by omission may mislead the investor. (d) Advertisements shall not carry any slogan that is exaggerated or unwarranted or slogan that is inconsistent with or unrelated to the nature and risk and return profile of the product. (e) No celebrities shall form part of the advertisement. (f) Advertisements shall not be so framed as to exploit the lack of experience or knowledge of the investors. Extensive use of technical or legal terminology or....
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....und of funds scheme shall not invest in any other fund of funds scheme; and b. a fund of funds scheme shall not invest its assets other than in schemes of mutual funds, except to the extent of funds required for meeting the liquidity requirements for the purpose of repurchases or redemptions, as disclosed in the offer document of fund of funds scheme. 6. Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relevant securities and in all cases of sale, deliver the securities: Provided that a mutual fund may engage in short selling of securities in accordance with the framework relating to short selling and securities lending and borrowing specified by the Board: Provided further that a mutual fund may enter into derivatives transactions in a recognized stock exchange, subject to the framework specified by the Board. Provided further that sale of government security already contracted for purchase shall be permitted in accordance with the guidelines issued by the Reserve Bank of India in this regard. 7. Every mutual fund shall get the securities purchased or transferred in the name of ....
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....ocedures (at least once in a Financial Year) by the asset management company; and iv. means to address conflict of interest. (e) The asset management company shall also have policies and procedures to detect and prevent incorrect valuation. (f) The valuation policies and procedures shall be regularly reviewed (at least once in a Financial Year) by an independent auditor to seek to ensure their continued appropriateness. (g) The Board of Trustee and the Board of asset management company shall be updated on findings of periodic review of valuation policies and procedures by asset management company and auditor, as mentioned in these regulations. (h) The valuation policy and procedures (with regard to valuation of each category of securities/assets where the scheme will invest, situation where these methods will be used, process and methodology and impact of implementation of these methods, if any) approved by the Board of the asset management company shall be disclosed in Statement of Additional Information, on the website of the asset management company and at any other place where the Board may specify, to ensure transparency of valuatio....
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....rest due date up to the date of purchase must not be treated as a cost of purchase but must be debited to Interest Recoverable Account. Similarly, interest received at the time of sale for the period from the last interest due date upto the date of sale must not be treated as an addition to sale value but must be credited to Interest Recoverable Account. (d) In determining the holding cost of investments and the gains or loss on sale of investments, the "weighted average cost" method must be followed. (e) Transactions for purchase or sale of investments should be recognised as of the trade date and not as of the settlement date, so that the effect of all investments traded during a financial year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the stock market, for example, acquisitions through private placement or purchases or sales through private treaty, the transaction should be recorded in the event of a purchase, as of the date on which the scheme obtains an enforceable obligation to pay the price or, in the event of a sale, when the scheme obtains an enforceable right to collect the proceeds of sale....
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....are attributable to acquisition/ sale of investments. (k) Non-traded investments shall be valued in good faith in accordance with the norms specified in the Seventh Schedule. NINTH SCHEDULE Securities and Exchange Board of India (Mutual Funds) Regulations, 2026 [Regulation 68] ANNUAL REPORT 1. Annual Report The annual report shall contain- (i) Report of the trustee company on the operations of the various schemes of the fund and the fund as a whole during the year and the future outlook of the fund; (ii) Balance Sheet and Revenue Account in accordance with paras 2, 3 and 4, respectively of this Schedule; (iii) Auditor's Report in accordance with paragraph 5 of this Schedule; (iv) Brief statement of the trustee company on the following aspects, namely:- (a) Liabilities and responsibilities of the trustees and the Settlor; (b) Investment objective of each scheme; (c) Basis and policy of investment underlying the scheme; (d) As the scheme invest in scrips or securities whose value can fluctuate, a statement on the following lines shall be provided: "The price and redemption value of t....
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....all be disclosed together with the percentage thereof in relation to the total investment within the classification; c. a full list of investments of the scheme shall be made available for inspection with the asset management company; d. the basis on which management fees have been paid to the asset management company and the computation thereof; e. if brokerage, distribution commission, custodial fees or any other payment for services are paid to or payable to any entity in which the asset management company or its major shareholders have a substantial interest (being not less than 10% of the equity capital), the amounts debited to the revenue account or amounts treated as cost of investments in respect of such services shall be separately disclosed together with details of the interest of the asset management company or its major shareholders; f. aggregate value of purchases and sales of investments during the year and expressed as a percentage of average net asset; g. In case of securities, excluding debt securities, where the non-traded investments which have been valued "in good faith" exceed 5% of the net assets at the end of the y....
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....fied by the Board. (ii) If profit on sale of investments shown in the Revenue Account includes profit/loss on inter scheme transfer of investments within the same mutual fund the aggregate of such profit recognised as realised, shall be disclosed separately without being clubbed with the profit/loss on sale of investments to third parties. (iii) The following disclosures shall also be made in the revenue account: (a) provision for aggregate value of doubtful deposits, debts and outstanding and accrued income; (b) profit or loss in sale and redemption of investment may be shown on a gross basis; (c) custodian and registrar fees; and (d) total income and expenditure expressed as a percentage of average net assets, calculated on a daily basis. 5. Auditor's Report (i) All mutual funds shall be required to get their accounts audited in terms of a provision of the trust deeds. (ii) The auditor shall report to the trustee company and not to the unit holders. (iii) The Auditor's Report shall form a part of the Annual Report. (iv) The auditor shall state whether: 1) he has obtained all info....