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In order to bring about uniform processes across Asset Management Companies (AMCs) in respect of investments made in the name of a minor through a guardian and to enable the efficient transmission of units the following has been decided:

1. Process for Investments made in the name of a Minor through a Guardian

a. Payment for investment by means of Cheque, Demand Draft or any other mode shall be accepted from the bank account of the minor or from a joint account of the minor with the guardian only. For existing folios, the AMCs shall insist upon a Change of Pay-out Bank mandate before redemption is processed.

b. Upon the minor attaining the status of major, the minor in whose name the investment was made, shall be required to provide all the KYC details, updated bank account details including cancelled original cheque leaf of the new account. No further transactions shall be allowed till the status of the minor is changed to major.

c. AMCs shall build a system control at the account set up stage of Systematic Investment Plan (SIP), Systematic Transfer Plan (STP) and Systematic Withdrawal Plan (SWP) on the basis of which, the standing instruction is suspended when the minor attains majority, till the status is changed to major.

2. Process for transmission of Units

a. In order to improve the processing turnaround time for transmission requests, AMCs shall implement image-based processing wherever the claimant is a nominee or a joint holder in the investor folio.

b. AMCs shall have a dedicated, Central Help Desk and a webpage carrying relevant information and instructions in order to provide assistance on the transmission process.

c. AMCs shall adopt a common Transmission Request Form (common fields) and NOC form. All such forms and formats shall be made available on the website of the AMCs, RTAs and AMFI.

d. AMCs shall implement a common set of document requirements for transmission of units to the claimant who are nominees or joint holders in the investor account.

e. AMCs shall implement a uniform process for the treatment of unclaimed funds to be transferred to the claimant including the unclaimed dividends.

f. AMCs shall not accept requests for redemption from a claimant pending completion of the transmission of units in his / her favour.

g. The Stamp duty payable by the claimant with respect to the indemnity bond and affidavit, shall be in accordance with the stamp duty prescribed by law.

AMCs and AMFI shall promote the importance of nomination as a part of its investor education and awareness programmes.
  1. To ensure uniformity across the industry, AMFI is advised to prescribe the forms and formats referred in point 2 (c), common set of documents referred in point 2 (d) and uniform process for treatment of unclaimed funds referred in point 2 (e), within 30 days from date of issuance of this circular and shall mandatorily be followed by all Mutual Funds/AMCs.
  2. 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 Regulation 77 of the Securities and Exchange Board of India (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 Exchange Board of India

[Circular dt.24-12-2019]

Amendments to existing lawsLegislation Updates

In exercise of powers conferred by Section 30 r/w clause (c) of sub-section (2) of Section 11 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board has amended the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2018, w.e.f. 13-03-2018.

1. In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 –

A) after Regulation 7A and before Regulation 8, the following regulation shall be inserted, namely, –

Norms for Shareholding and Governance in Mutual Funds

7B. (1) No sponsor of a mutual fund, its associate or group company including the asset management company of the fund, through the schemes of the mutual fund or otherwise, individually or collectively, directly or indirectly, have –

(a) 10% or more of the share-holding or voting rights in the asset management company or the trustee company of any other mutual fund; or

(b) representation on the board of the asset management company or the trustee company of any other mutual fund.

(2) Any shareholder holding 10% or more of the share-holding or voting rights in the asset management company or the trustee company of a mutual fund, shall not have, directly or indirectly, –

(a) 10% or more of the share-holding or voting rights in the asset management company or the trustee company of any other mutual fund; or

(b) representation on the board of the asset management company or the trustee company of any other mutual fund.

(3) Any person not in conformity with the sub-regulations (1) and (2) of this regulation, as on the date of the coming into force of this regulation shall comply with sub-regulations (1) and (2) within a period of one year from the date of the coming into force of this regulation.”

B) in the Seventh Schedule, to clause 2, the following proviso shall be inserted, namely,-

“Provided, investment in the asset management company or the trustee company of a mutual fund shall be governed by clause (a), of sub-regulation (1), of regulation 7B.”

[Notification No. SEBI/LAD-NRO/GN/2018/02]

Footnote:

1. The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the Principal Regulations, were published in the Gazette of India on December 9, 1996 vide S.O. No. 856 (E).

2. The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 were subsequently amended–

(1) on 15-04-1997, vide S.O. No.327 (E).

(2) on 12-01-1998, vide S.O. No.32 (E).

(3) on 08-12-1999, vide S.O. No.1223 (E).

(4) on 14-03-2000, vide S.O. No.235 (E).

(5) on 28-03-2000, vide S.O. No.278 (E).

(6) on 22-05-2000, vide S.O. No.484 (E).

(7) on 23-01-2001, vide S.O. No.69 (E).

(8) on 29-05-2001, vide S.O. No.476 (E).

(9) on 23-07-2001, vide S.O. No.698 (E).

(10) on 20-02-2002, vide S.O. No.219 (E).

(11) on 11-06-2002, vide S.O. No.625 (E).

(12) on 30-07-2002, vide S.O. No.809 (E).

(13) on 09-09-2002, vide S.O. No.956 (E).

(14) on 27-09-2002, vide S.O. No.1045 (E).

(15) on 29-05-2003, vide S.O. No. 632 (E).

(16) on 12-01-2004, vide F.No. SEBI/LAD/DOP/4/2004.

(17) on 10-03-2004, vide S.O. No. 398 (E).

(18) on 12-01-2006, vide S.O. No. 38 (E).

(19) on 22-05-2006, vide S.O. No. 783 (E).

(20) on 03-08-2006, vide S.O. No. 1254 (E).

(21) on 27-12-2006, vide F. No. SEBI/LAD/DOP/82534/2006.

(22) on 27-12-2006, vide F. No. SEBI/LAD/DOP/83065/2006.

(23) on 28-05-2007, vide F. No. 11/LC/GN/2007/2518.

(24) on 31-10-2007, vide F. No. 11/LC/GN/2007/4646.

(25) on 31-03-2008, vide F. No. 11/LC/GN/2008/21669.

(26) on 16-04-2008, vide F. No. LADNRO/ GN/2008/03/123042.

(27) on 22-05-2008, vide No. LADNRO/GN/2008/09/126202.

(28) on 29-09-2008, vide No. LADNRO/ GN/2008/24/139426.

(29) on 08-04-2009, vide No. LAD-NRO/GN/2009-10/01/159601.

(30) on 05-06-2009, vide No. LAD- NRO/GN/2009-10/07/165404.

(31) on 29-07-2010, vide No. LAD-NRO/GN/2010-11/13/13945.

(32) on 30-08-2011, vide No. LAD-NRO/GN/2011-12/27668.

(33) on 21-02-2012, vide No. LAD-NRO/GN/2011-12/38/4290.

(34) on 26-09-2012, vide No. LAD-NRO/GN/2012-13/17/21502.

(35) on 16-04-2013, vide No. LAD-NRO/GN/2013-14/03/5652.

(36) on 19-06-2013, vide No. LAD-NRO/GN/2013-14/12/6108.

(37) on 19-08-2013, vide No. LAD-NRO/GN/2013-14/18/6384.

(38) on 06-05-2014, vide No. LAD-NRO/GN/2014-15/01/1039.

(39) on 23-05-2014, vide No. LAD-NRO/GN/2014-15/03/1089.

(40) on 30-12-2014, vide No. LAD-NRO/GN/2014-15/19/1973.

(41) on 15-05-2015, No. NROOIAE/GN/2015-16/005.

(42) on 12-02-2016, vide No. SEBI/LAD-NRO/GN/2015-16/034.

(43) on 15-02-2017, vide No. SEBI/LAD/NRO/GN/2016-17/031.

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

Hot Off The PressNews

The Securities and Exchange Board of India (SEBI) is mandated to protect the interests of investors in securities, and to promote the development of and to regulate the securities market. In pursuance of the same, SEBI has framed Regulations for the securities market, inter alia, to ensure that the interest of the investors is protected by way of disclosures, transparency and fair treatment to investors.

In exercise of the powers conferred by Section 30, read with clause (c) of sub-section (2) of section 11 of the SEBI Act, 1992, SEBI has framed the SEBI (Mutual Funds) Regulations, 1996 and Circulars issued thereunder. In terms of these regulations, inter-alia, the following requirements have been laid down for mutual funds (MFs):

i. Segregation of accounts – Trustees of Mutual Funds and asset management companies (AMCs) are required to ensure scheme-wise segregation of bank accounts and securities accounts. An AMC needs to separately maintain proper and separate books of account, records and documents for each scheme so as to explain its transactions and to disclose, at any point of time, the financial position of each scheme and in particular, give a true and fair view of the state of affairs of the fund.

ii. Appointment of Custodian – The Mutual Fund is mandated to appoint a Custodian to keep custody of securities and other assets held by the Fund.

iii. Disclosures in Offer Document – The offer document is required to contain disclosures with respect to asset allocation, investment strategies, associated risks etc. to enable investors to make informed investment decisions.

iv. Due Diligence – The Board of the AMC is required to have in place a mechanism to verify that due diligence is being exercised while making investment decisions, particularly in cases of investment in unlisted and privately placed securities, unrated debt securities, Non-Performing Assets (NPAs), transactions in which associates are involved and instances in which the performance of the scheme/ schemes is poor. Further, AMCs are required to report compliance with these requirements in their periodical reports to the Trustees and the Trustees shall report the same to SEBI in the Half Yearly Trustee Reports. Trustees also check compliance with these guidelines through independent auditors or internal and/or statutory auditors or other systems developed by them.

v. Portfolio Disclosures – SEBI has mandated Mutual Funds/AMCs to disclose the portfolio of all schemes on a monthly basis on their website as well as publish the same in newspapers on a half yearly basis.

In addition, in order to curb irregularities in Mutual Funds, periodic inspections of Mutual Funds are undertaken by SEBI-appointed auditors. Besides, theme-based inspections are also undertaken to examine specific issues in the operations of Mutual Funds. Pursuant to these inspections, in case of any non-compliance with the Regulations, SEBI takes action as deemed fit and appropriate.

The work of collecting funds under mutual funds has not been entrusted to public sector banks. In terms of the SEBI (Mutual Funds) Regulations, 1996, any entity, including public sector banks (PSBs), private companies, etc. which satisfies the eligibility criteria can obtain registration from SEBI and set up a Mutual Fund. Accordingly, public sector banks fulfilling the criteria so prescribed by SEBI, may apply to SEBI for registration and thereby undertake such activities. Currently, the following seven public sector banks are sponsors of Mutual Funds:

Sl. No Name of the Mutual Funds Name of PSB who is sponsor to MF
1 Baroda Pioneer Mutual Fund Bank of Baroda
2 BOI Axa Mutual Fund Bank of India
3 Canara Robeco Mutual Fund Canara Bank
4 IDBI Mutual Fund IDBI Bank
5 Principal PNB Mutual Fund Punjab National Bank
6 SBI Mutual Fund State Bank of India
7 Union Mutual Fund Union Bank

Source: SEBI

Mutual Funds are mandated to provide regular plans (investments routed through Mutual Fund distributors) and direct plans (investments directly with Mutual Funds) for all their schemes. For selling mutual fund schemes and garnering funds, Mutual Funds can empanel distributors. Currently, Mutual Fund distributors are required to obtain an Association of Mutual Funds of India (AMFI) Registration Number (ARN) before selling any Mutual Fund product. Currently, the following twenty six public sector banks hold ARN and are empanelled as distributors:

Sl. No. Bank Name
1 IDBI Bank Ltd
2 State Bank of Hyderabad
3 State Bank of India
4 Vijaya Bank
5 State Bank of Travancore
6 Indian Bank
7 State Bank of Bikaner & Jaipur
8 Allahabad Bank
9 State Bank of Patiala
10 Corporation Bank
11 UCO Bank
12 Andhra Bank
13 Indian Overseas Bank
14 Punjab & Sind Bank
15 Dena Bank
16 United Bank of India
17 Oriental Bank of Commerce
18 Bank Of Baroda
19 Syndicate Bank
20 Central Bank of India
21 Bank of Maharashtra
22 Union Bank of India
23 Bank of India
24 Punjab National Bank
25 State Bank of Mysore
26 Canara Bank

Source: SEBI

Ministry of Finance