Business Law

1. It is observed that there are frequent changes carried out in Total Expense Ratio (TER) and such changes are not prominently disclosed to investors. In order to bring uniformity in disclosure of actual TER charged to mutual fund schemes and to enable the investor to take informed decision, the following has been decided:

a. AMCs shall prominently disclose on a daily basis, the TER of all schemes under a separate head –“Total Expense Ratio of Mutual Fund Schemes”on their website in downloadable spreadsheet format as per Annexure A.

b. Any change in the base TER (i.e. TER excluding additional expenses provided in Regulation 52(6A)(b) and 52(6A)(c) of SEBI (Mutual Funds) Regulations, 1996) in comparison to previous base TER charged to any scheme shall be communicated to investors of the scheme through notice via email or SMS at least three working days prior to effecting such change. (For example, if changed TER is to be effective from January 8, 2018, then notice shall be given latest by January 2, 2018, considering at least three working days prior to effective date). Further, the notice of change in base TER shall be updated in the aforesaid section of website at least three working days prior to effecting such change.

However, any decrease in TER due to decrease in applicable limits as prescribed in Regulation 52 (6) (i.e. due to increase in daily net assets of the scheme) would not require issuance of any prior notice to the investors. Further, such decrease in TER shall be immediately communicated to investors of the scheme through email or SMS and uploaded on the website in terms of clause (a) above.

c. The above change in the base TER in comparison to previous base TER charged to the scheme shall be intimated to the Board of Directors of AMC along with the rationale recorded in writing.

d. The changes in TER shall also be placed before the Trustees on quarterly basis along with rationale for such changes.

2. SEBI circular SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008, and SEBI Circular CIR/IMD/DF/7/2013 dated April 23, 2013, inter- alia, have prescribed the formats for Scheme Information Document and Placement Memorandum respectively, wherein, the following is mentioned under the head “ANNUAL SCHEME RECURRING EXPENSES”:

“The mutual fund would update the current expense ratios on the website within two working days mentioning the effective date of the change.”

In partial modification to the aforesaid circulars the above provision has been substituted by the following:

“The mutual fund would update the current expense ratios on the website at least three working days prior to the effective date of the change. Additionally, AMCs shall provide the exact web link of the heads under which TER is disclosed in their website.”

 3. This circular shall be applicable– (i) immediately for new schemes to be launched on or after the date of this circular and (ii) for all the existing schemes with effect from March 1, 2018.

4. This circular is issued in exercise of the power conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with the provision 77 of SEBI (Mutual Funds) Regulation, 1996 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Securities and Exchange Board of India

 [SEBI/HO/IMD/DF2/CIR/P/2018/18]

Legislation UpdatesNotifications

Circular on Mutual Funds

[SEBI/HO/IMD/DF2/CIR/P/2017/35  dated April 28, 2017]

1.Please  refer  to SEBI  Circular  No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated 18 March 2016.

2.In partial modification of the above mentioned circular, para C of the circular pertaining to disclosure of executive remuneration shall read as under:

“With the  underlying objective to promote transparency in remuneration policies so that executive remuneration is aligned with the interest of investors, MFs/AMCs shall make the  following disclosures pertaining to a financial year on the MF/AMC website under a separate head–’Remuneration‘:

1. Name, designation and remuneration of Chief Executive Officer (CEO), Chief  Investment  Officer  (CIO) and Chief Operations Officer (COO) or their  corresponding equivalent by whatever name called.

2. Name, designation and remuneration received by top ten employees in terms of remuneration drawn for that financial year.

3. Name,  designation  and  remuneration of  every  employee of  MF/AMC whose :

a. Annual remuneration was equal to or above one crore and two lakh rupees for that financial year.

b. Monthly remuneration in the aggregate was not less than eight lakh and fifty thousand rupees per month, if the employee is employed for a part of that financial year.

4. The  ratio  of  CEO’s  remuneration  to  median  remuneration  of  MF/AMC employees.

5. MF’s total AAUM, debt AAUM and equity AAUM and rate of growth over last three years. For  this  purpose,  remuneration  shall  mean  remuneration  as  defined  in clause  (78)  of section  2 of the Companies Act, 2013.

The AMCs/MFs shall disclose this information within one month  from  the  end  of  the  respective financial year (effective from FY 2016-17).”

3. This   circular   is   issued   in   exercise   of   the   powers   conferred   under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with the provision of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996 to  protect  the  interests  of  investors  in  securities  and  to  promote  the development of, and to regulate the securities market.

Securities and Exchange Board of India