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Master Circular for Mutual Funds - SEBI - SEBI/HO/IMD/DF5/CIR/P/2018/109

Extract

..... compilation of all the existing/applicable circulars issued by Investment Management Department of SEBI to Mutual Funds. Efforts have been made to incorporate certain applicable provisions of existing circulars (as on date ) issued by other Departments/Divisions of SEBI relevant to Mutual Funds. INDEX ABBREVIATIONS ....................................... 5 CHAPTER 1 .......................................... 7 OFFER DOCUMENT FOR SCHEMES ......................... 7 CHAPTER 2 ......................................... 22 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN................................. 22 CHAPTER 3 ......................................... 33 NEW PRODUCTS ...................................... 33 CHAPTER 4 ......................................... 42 RISK MANAGEMENT SYSTEM ............................ 42 CHAPTER 5 ......................................... 47 DISCLOSURES & REPORTING NORMS ...................... 47 CHAPTER 6 ......................................... 64 GOVERNANCE NORMS ................................. 64 CHAPTER 7 ......................................... 94 SECONDARY MARKET ISSUES ........................... 94 CHAPTER 8 ..... .....

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Master Circular for Mutual Funds - SEBI

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..... Cumulative Report MCR Monthly Average Assets Under Management MAAUM Multilateral Memorandum of Understanding MMOU National Stock Exchange NSE Net Asset Value NAV New Fund Offer NFO Non Performing Assets NPA(s) Permanent Account Number PAN Prevention of Money Laundering Act PMLA Qualified Foreign Investor QFI Regulation Reg. Rajiv Gandhi Equity Savings Scheme RGESS 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 Unit Confirmation Receipt UCR CHAPTER 1 OFFER DOCUMENT FOR SCHEMES 1.1 Filing of Offer Document with the Board SEBI Circular No. SEBI/IMD/CIR No.5/ 126096/08 dated May 23,2008 and SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009 1.1.1 The Offer Document shall have two parts i.e. Scheme Information Document (SID) and Statement of Additional Information (SAI). SID shall incorporate all information pertaining to a particular scheme. SAI shall incorporate all st .....

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Master Circular for Mutual Funds - SEBI

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..... ptember 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 seven SEBI Circular No - SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016 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 uploaded on SEBI website is current and relevant and matches exactly with the contents of the hard copy and that the AMC is fully responsible for the contents of the soft copy of SID. The soft copy of SID should also be uploaded on AMFI website two working days prior to launch of the scheme SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009. Failure to submit the printed SID to the Board before it is issued for circulation shall invite penalties under the Mutual Funds Regulations SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997. b. In case of any difference, in nature of material alteration of the .....

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Master Circular for Mutual Funds - SEBI

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..... oft 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 responsible for the contents of the soft copy of the SID SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009. 1.2.2 Updation of SAI 1.2.2.1 A printed copy of SAI shall be made available to the investor(s) on request. SAI shall be updated within 3 months from end of financial year and filed with SEBI. 1.2.2.2 Any material changes in the SAI shall be made on an ongoing basis by way of updation on the Mutual Fund and AMFI website. SEBI shall be intimated of the changes made in the SAI within 7 days. The effective date for such changes shall be mentioned in the updated SAI. 1.2.2.3 A soft copy of updated SAI shall be filed with SEBI in PDF format along with printed copy of the same. AMC shall also submit an undertaking to SEBI while filing the soft copy that information contained in the soft copy of SAI to b .....

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Master Circular for Mutual Funds - SEBI

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..... .2.1 Mutual Funds shall prepare KIM in the prescribed formatFor format of KIM please refer to the section 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 shall be filed with SEBI. 1.6.3.2 In case of changes in the SID other than changes in fundamental attribute in terms of Reg 18 (15A), the addendum circulated to all the distributors/brokers/investor Service Centre (ISC) shall be attached to KIM till the KIM is updated. 1.6.3.3 In case any information in SID is amended more than once, the latest applicable addendum shall be a part of KIM (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). 1.7 Easy Availability of Offer Document 1.7.1 Trustees and AMCs shall ensure that the SID of the schemes and SAI are readily available with all the distributors/ISCs and confirm the same to SEBI in the half yearly trustee report. 1.8 Selection of BenchmarksSEBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000, SEBI Circular No. MFD/CIR/16/400 .....

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Master Circular for Mutual Funds - SEBI

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..... ase of ELSS schemes shall continue to be governed by guidelines issued by Government of India. 1.9.3 The maximum period for which initial offering of Mutual Fund scheme eligible under RGESS shall be open for subscription shall be thirty days SEBI Circular No. CIR/IMD/DF/02/2013 dated February 6, 2013. 1.9.4 Mutual Funds/AMCs are allowed to deploy the NFO proceeds in CBLO SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016. will be applicable for NFOs launched on or after April 1, 2016 before the closure of NFO period. However, AMCs shall not charge any investment management and advisory fees on funds deployed in CBLOs during the NFO period. The appreciation received from investment in CBLO shall be passed on to investors. Further, in case the minimum subscription amount is not garnered by the scheme during the NFO period, the interest earned upon investment of NFO proceeds in CBLO shall be returned to investors, in proportion of their investments, along-with the refund of the subscription amount. 1.9.5 The mutual fund should allot units/refund of money and dispatch statements of accounts within five business days from the closure of the NFO and all the schemes (exc .....

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Master Circular for Mutual Funds - SEBI

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..... ts which impact the functioning of exchanges or the regular course of transactions. Such unexpected events could also be related to political,economic, military, monetary or other emergencies. 1.10.3.1.3 Operational Issues - when exceptional circumstances are caused by force majeure, unpredictable operational problems and technical failures (e.g. a black out). Such cases can only be considered if they are reasonably unpredictable and occur in spite of appropriate diligence of third parties, adequate and effective disaster recovery procedures and systems. 1.10.3.2 Restrictions on redemption may be imposed for a specified period of time not exceeding 10 working days in any 90 days period. 1.10.3.3 Any imposition of restriction would require specific approval of Board of AMCs and Trustees and the same should be informed to SEBI immediately. 1.10.3.4 When restriction on redemption is imposed, the following procedure shall be applied: 1.10.3.4.1 No redemption requests upto INR 2 lakh shall be subject to such restriction. 1.10.3.4.2 When redemption requests are above INR 2 lakh, AMCs shall redeem the first INR 2 lakh without such restriction and remaining part over and above INR 2 lakh s .....

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Master Circular for Mutual Funds - SEBI

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..... oard 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 section 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 section 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 observations as communicated by the Board in terms of Regulation 29(3) of the Mutual Funds Regulations have been incorporated therein and final copies of the same have been .....

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Master Circular for Mutual Funds - SEBI

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..... f 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 date of closure of the exit option SEBI Circular No- SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009. 2.2.2.5 Merger or consolidation shall not be seen as change in fundamental attribute of the surviving scheme if the following conditions are met SEBI Circular No- Cir / IMD / DF / 15/ 2010 dated October 22, 2010: a. Fundamental at .....

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Master Circular for Mutual Funds - SEBI

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..... 2.5 Direct Plan SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 2.5.1 Mutual funds/AMCs shall provide a separate plan for direct investments, i.e., investments not routed through a distributor, in existing as well as new schemes. 2.5.2 Such separate plan shall have a lower expense ratio excluding distribution expenses, commission, etc., and no commission shall be paid from such plans. The plan shall also have a separate NAV. PART IV - CATEGORIZATION AND RATIONALIZATION OF MUTUAL FUND SCHEMES SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 06, 2017 It is desirable that different schemes launched by a Mutual Fund are clearly distinct in terms of asset allocation, investment strategy etc. Further, there is a need to bring in uniformity in the characteristics of similar type of schemes launched by different Mutual Funds. This would ensure that an investor of Mutual Funds is able to evaluate the different options available, before taking an informed decision to invest in a scheme. In order to bring the desired uniformity in the practice, across Mutual Funds and to standardize the scheme categories and characteristics of each category, it has been decided to .....

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Master Circular for Mutual Funds - SEBI

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..... he AMFI website and the same would be updated every six months based on the data as on the end of June and December of each year. The data shall be available on the AMFI website within 5 calendar days from the end of the 6 months period. iv. While preparing the single consolidated list of stocks, average full market capitalization of the previous six month of the stocks shall be considered SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/126 dated December 04, 2017. 2.7.3 Subsequent to any updation in the list, Mutual Funds would have to rebalance their portfolios (if required) in line with updated list, within a period of one month. 2.8 Process to be followed for categorization and rationalization of schemes: 2.8.1 Only one scheme per category would be permitted, except: i. Index Funds/ ETFs replicating/ tracking different indices; ii. Fund of Funds having different underlying schemes; and iii. Sectoral/ thematic funds investing in different sectors/ themes CHAPTER 3 NEW PRODUCTS 3.1 Fund of Funds Scheme SEBI Circular No. MFD/CIR. No.04/11488/2003 dated June 12, 2003. 3.1.1 The SID and the advertisements pertaining to Fund of Funds Scheme Regulation 2(ma) of the Mutual Funds Regulatio .....

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Master Circular for Mutual Funds - SEBI

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..... n GDS of Banks and GMS , mutual funds shall put in place a written policy with regard to investment in GDS and GMS with due approval from the Board of the Asset Management Company and the Trustees. The policy should have provision to make it necessary for the mutual funds to obtain prior approval of their trustees for each investment proposal in GDS and GMS. The policy shall be reviewed by mutual funds, at least once a year. c. Certificates issued in respect of investments made by Gold ETFs in GDS of Banks and GMS can be held by the mutual funds in dematerialized or physical form SEBI Circular No. CIR/IMD/DF/16/2013 dated October 18, 2013. 3.2.1.4 Existing investments by Gold ETFs of Mutual Funds under the GDS will be allowed to run till maturity unless these are withdrawn prematurely. 3.2.2 Valuation: 3.2.2.1 Gold shall be valued based on the methodology provided in Clause 3A of, Schedule Eight of the Mutual Funds Regulations SEBI Circular No. SEBI/IMD/CIR No.14/84243/07 dated January 15, 2007 read with Gazette Notification F. No. SEBI/LAD/DoP/82534/2006 dated December 20, 2006. 3.2.3 Determination of Net Asset Value SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 200 .....

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Master Circular for Mutual Funds - SEBI

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..... y monitor the portfolio structure of the scheme and report the same in the Half Yearly Trustee Reports For format of Half Yearly Trustee Report please refer section on Formats to the Board. The AMC(s) shall also report on the same in its bimonthly (CTR(s) For format of bimonthly CTR please refer section on Formats to the Board. 3.3.4 It shall also be ensured that the debt component of the portfolio structure has the highest investment grade rating. 3.4 Real Estate Mutual Funds SEBI Circular No - SEBI/IMD/CIR No.4/124477/08 May 2,2008: 3.4.1 A real estate mutual fund schemeRegulation 49 A(a)(i) of SEBI (Mutual Fund) Regulations, 1996 can invest in real estate assets in the cities mentioned in: 3.4.1.1 List of Million Plus Urban Agglomerations/Cities; or 3.4.1.2 List of Million Plus Cities 3.4.2 Such list appears in Census Statistics of India (2001) at www.censusindia.gov.in. A printout of cities which appear in the foresaid categories taken from the said website is attached for ready reference at Annexure 4. 3.5 Rajiv Gandhi Equity Savings Scheme SEBI Circular No. CIR/MRD/DP/32/2012 dated December 6, 2012, 2012 3.5.1 As announced in the Union Budget 2012-13, the Finance Act 2012 has .....

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Master Circular for Mutual Funds - SEBI

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..... -in and for generating reports mandated vide MoF notification on RGESS. On receipt of such request from depositories, stock exchanges shall provide the details to depositories on an immediate basis. It shall also be ensured that a uniform file structure is used by stock exchanges and depositories for such intimation of transaction details. e. With regard to the securities held in the RGESS designated account, treatment of the corporate actions shall be given in the prescribed format Please refer to section on Formats for requisite formats. 3.5.5 Mutual Funds / AMCs shall communicate list of RGESS eligible MF schemes / ETFs to the stock exchanges. 3.5.6 Mutual Funds / AMCs are directed to create wide publicity of the scheme among the investors, including displaying details on their website. 3.6 Infrastructure Debt Schemes SEBI Circular No. CIR/IMD/DF/7/2013 dated April 23, 2013 3.6.1 Placement Memorandum: 3.6.1.1 Private Placement to less than 50 investors has been permitted as an alternative to New Fund Offer to the public, in case of Infrastructure Debt Funds (IDF). In case of private placement, the mutual funds would have to file a Placement Memorandum with SEBI instead of a Sche .....

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Master Circular for Mutual Funds - SEBI

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..... he Risk Management practices covered in the Operating Manual are under three categories as detailed below: 4.2.1 Existing Industry Practices: 4.2.1.1 Under each head of risk, the Manual covers the exemplary practices followed by some / most of Mutual Funds in India. However, the extent and degree of observance of these practices differs among the Mutual Funds. Mutual Funds shall accordingly develop their systems and follow these practices. 4.2.2 Practices to be followed on Mandatory Basis: 4.2.2.1 Mutual Funds shall follow the practices which have been indicated as mandatory in the operating manual. These are Risk Management function that shall be 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 Identific .....

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Master Circular for Mutual Funds - SEBI

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..... tested on the following risk parameters, among others deemed necessary by the AMC: a) Interest rate risk; b) Credit risk; c) Liquidity & Redemption risk. 4.4.2.4 While conducting stress test, it will be required to evaluate impact of the various risk parameters on the scheme and its Net Asset Value (NAV). The parameters used and the methodology adopted for conducting stress test on such type of scheme, should be detailed in the stress testing policy, which is required to be approved by the Board of AMC. 4.4.2.5 Further, in the event of stress test revealing any vulnerability or early warning signal, it would be required to bring it to the notice of the Trustees and take corrective action as deemed necessary, to reinforce their robustness. Each AMC should also be required to have documented guidelines, to deal with the adverse situation effectively. 4.4.2.6 Such stress-testing policy shall be reviewed by the Board of AMC and Trustees, at least on an annual basis, in light of the evolving market scenarios and should cover the following aspects: i. Adequacy of the documentation for various elements of the stress testing framework ii. Scope of coverage of the stress testing policy .....

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Master Circular for Mutual Funds - SEBI

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..... ease refer to section on Formats for requisite Formats shall be same as that of half yearly portfolio disclosures. The format SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000, SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001, SEBI Circular No. MFD/CIR/14/18337/2002 dated September 19, 2002, SEBI Circular No. IMD/CIR 8/132968/2008 dated July 24, 2008 for disclosure for monthly and half yearly portfolio is placed at format section. 5.1.3. Mutual funds/AMCs may disclose additional information (such as ratios, etc.) subject to compliance with the Advertisement Code. 5.1.4. The format for disclosure for monthly and half yearly portfolio is placed at format section. 5.2 Disclosure of derivatives in Half Yearly Portfolios SEBI Circular Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010 5.2.1 A format For formats on disclosure of derivatives, please refer to the section 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. 5.2.2 Further, while listing net assets, the margin amounts paid should be reported separately under cas .....

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Master Circular for Mutual Funds - SEBI

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..... n. Further, a period of 15 days from the date of issuances of the second communication may be given to unitholders to exercise their option of ‘opt-in’ or ‘opt-out’. 5.4.5 Mutual Funds/ AMCs shall publish an advertisement every year disclosing the hosting of the scheme wise annual report on their respective website and on the website of AMFI and the modes such as SMS, telephone, email or written request (letter), etc. through which unitholders can submit a request for a physical or electronic copy of the scheme wise annual report or abridged summary thereof. Such advertisement shall be published in the all India edition of at least two daily newspapers, one each in English and Hindi. 5.4.6 Mutual Funds/ AMCs shall provide a physical copy of the abridged summary of the Annual Report, without charging any cost, on specific request received from a unitholder. 5.4.7 The ‘opt-in’ facility to receive physical copy of the scheme-wise annual report or abridged summary thereof shall be provided in the application form for new subscribers. 5.4.8 These websites should also be linked with AMFI website so that the investors and analyst(s) can access the annua .....

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Master Circular for Mutual Funds - SEBI

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..... n the above parameters shall also be disclosed on AMFI website. The above shall be disclosed as per the format For formats, please refer to chapter on Formats. 5.6.4 AMCs shall disclose the above on their website (in spreadsheet format) and forward to AMFI within 7 working days from the end of the month. AMFI in turn shall disclose the consolidated data in this regard on its website (in spreadsheet format). 5.7 Commission disclosure SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011 5.7.1 Mutual Funds / AMCs shall disclose on their respective websites the total commission and expenses paid to distributors who satisfy one or more of the following conditions with respect to non-institutional (retail and HNI) investors:- 5.7.1.1 Multiple point of presence (More than 20 locations) 5.7.1.2 AUM raised over ₹ 100 crore across industry in the non institutional category but including high networth individuals (HNIs). 5.7.1.3 Commission received of over ₹ 1 crore p.a. across industry 5.7.1.4 Commission received of over ₹ 50 lakh from a single Mutual Fund/AMC. 5.7.2 Mutual Fund / AMCs shall, in addition to the total commission and expenses paid to distributors, make a .....

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Master Circular for Mutual Funds - SEBI

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..... cheme’s AUM, investment objective, expense ratios, portfolio details, scheme’s past performance, among others. Such information shall be provided in a comparable, downloadable (spreadsheet) and machine readable format. 5.9 Annual report of the AMC MFD/CIR/9/120/2000 dated November 24, 2000 5.9.1 Annual report containing accounts of the asset management companies should be displayed on the website of the mutual funds. It should also be mentioned in the annual report of the mutual fund schemes that the unitholders, if they so desire, may request for a copy of the annual report of the asset management company. 5.10 Submission of bio data of key personnel IIMARP/CIR /08/845/97 dated May 7,1997,IIMARP/MF/CIR/05/788/97 date April 28,1997 5.10.1 AMCs are required to submit 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 section on Formats. 5.11 Disclosure Of Executive Remuneration SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016 .....

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Master Circular for Mutual Funds - SEBI

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..... commission if any, to the sponsor or any of its associates, employees or their relatives. 5.13.2 Disclosures on brokerage and commission paid to associates/related parties/group companies of sponsor/Asset Management Company in the unaudited half yearly financial results, the abridged scheme wise annual report and the SAI, shall be made in the format as prescribed Please refer to the section on Formats. 5.14 Mutual Funds/ AMCs shall make continuous efforts to update email ID and mobile number of all unitholders. The said contact details shall be used for sending e-mails and SMS as envisaged in the circular. SEBI/HO/IMD/DF2/CIR/P/2018/92 dated June 05, 2018 PART II - REPORTS 5.15 Monthly Cumulative Report (MCR) SEBI circular MFD/CIR/07/206/2001 dated July 19, 2001, SEBI circular No IMD/Cir No.15/87045/2007 dated February 22, 2007, SEBI circular SEBI/IMD/CIR No 3/124444/08 dated April 30, 2008, SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016 5.15.1 Date and Mode of Submission: 5.15.1.1 MCR For format of MCR please refer to section on Formats. shall be submitted to the Board by 3rd working day of each month by way of an email. Hard copy should also be sent by hand .....

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Master Circular for Mutual Funds - SEBI

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..... to the Regulations/guidelines issued in the future from time to time. 5.18 Annual Statistical Report (ASR) IIMARP/CIR /08/845/97 DATED May 7,1997, MFD/CIR/02/110/02 dated April 26,2002, SEBI Cir No- IMD/CIR No 6/72245/06 dated July 20,2006, 5.18.1 AMC should submit the annual statistical report to SEBI in the prescribed format by 30th of April each year For format of ASR refer the section on Formats Quarterly Movement of Net Assets- SEBI CIR - IIMARP/MF/CIR/05/788/97 dated April 28, 1997 required mutual funds to submit the statement for quarterly movement of net assets. However, SEBI circular MFD/CIR/12/16588/02 dated August 28,2002 stated that such Statement of movement of net assets /portfolios are no more to be submitted. 5.19 Daily Transaction Report SEBI Circular No.MFD/CIR/07/384/99 dated December 17, 1999 and MFD/CIR/08/23026/99 dated December 23, 1999 5.19.1 All Mutual Funds shall submit details of transactions in secondary market on daily basis in the prescribed format For format of daily transaction report, please refer the section on formats. Accordingly, Mutual Funds are advised to make necessary arrangements with their custodians for the submission of reports on a dai .....

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Master Circular for Mutual Funds - SEBI

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..... d, as such, it is imperative that the data furnished to them is complete and accurate in all respects. It is therefore advised that to re-check the accuracy of the data furnished by your office for the Financial Year 2004-05 and ensure that all the columns are correctly filled-in and submit a ‘Supplementary Information Report’, if need be, to the Income Tax Department. The AIRs for the financial year 2005-2006 are required to be filed before August 31, 2006. 5.21.1 Mutual Funds are required to submit the Annual Information Return under section 285 BA in the Income-tax Act. As per this requirement, Trustees of Mutual Funds or such other person managing the affairs of the Mutual Funds (as may be duly authorized by the trustees in this behalf) have to report specified financial transactions in electronic media to Income Tax Department giving PAN of the transacting parties in an Annual Information Return (AIR). 5.21.2 Some common errors in these returns have been pointed out by the Directorate of Income Tax (Systems) as: 5.21.2.1 Not mentioning PAN or mentioning invalid PAN. 5.21.2.2 Entering incomprehensible/ incomplete names of transacting parties, e.g. names of 2 or 3 le .....

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Master Circular for Mutual Funds - SEBI

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..... t Regulations are complied with Regulations 18(6) and 18(7) of SEBI (Mutual Funds), Regulations, 1996 and SEBI Circular No. MFD/CIR No.010/024/2000 dated January 17, 2000. 6.3 Role of Independent Director on the Board of the AMC and Independent Trustees SEBI Circular No. MFD/CIR/11/354/2001 dated December 20, 2001, SEBI Circular No. MFD/CIR/13/16799/2002 dated August 29, 2002, SEBI Circular No. MFD/CIR/17/21105/2002 dated October 28, 2002. 6.3.1 An Independent Trustee shall not be associated in any manner with the Sponsor(s) Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996. The independent directors on the Board of the AMC shall not be associate of, or associated in any manner with, the sponsor or any of its subsidiaries or the trustees Regulation 21(d) of the SEBI (Mutual Funds) Regulations, 1996. 6.3.2 An ‘associate’ shall be defined as: 6.3.2.1 Relatives As defined under Section 6 of the Companies Act 1956 of Sponsor(s) or directors of the Sponsor Company or relatives of Associate Directors of the AMC(s) and Trustee. 6.3.2.2 Persons providing any type of professional service to the Mutual Funds, the AMC and the Trustees and the Sponsor(s). Also, persons .....

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Master Circular for Mutual Funds - SEBI

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..... rdquo;) respectively. With respect to tenure of independent trustees and independent directors, it has been decided that: 6.4.1.1 An independent trustee and independent director shall hold office for a maximum of 2 terms with each term not exceeding a period of 5 consecutive years. 6.4.1.2 No independent trustee or independent director shall hold office for more than two consecutive terms, however such individuals shall be eligible for re-appointment after a cooling-off period of 3 years. During the cooling-off period, such individuals should not be associated with the concerned MF, AMC & its subsidiaries and / or sponsor of AMC in any manner whatsoever. 6.4.1.3 Existing independent trustees and independent directors shall hold office for a maximum of 10 years (including all preceding years for which such individual has held office). In this respect, the following may be noted: a. Individuals who have held office for less than 9 years (as on November 30, 2017) may continue for the residual period of service. b. Individuals who have held office for 9 years or more (as on November 30, 2017) may comply the aforesaid provision in a phase manner, within a period of 2 years. SEBI Cir .....

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Master Circular for Mutual Funds - SEBI

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..... orms for investment and/or trading in securities by their employees. The Board of the AMC and Trustees shall ensure compliance with these Guidelines on a continuous basis and shall report any violations and remedial action taken by them in the periodical reports submitted to the Board Regulation 25(9) & 23(b) of SEBI (MF) Regulations, 1996. 6.6.1 Guidelines for Investment and/or Trading in Securities by Employees of AMC(s) and Trustees: 6.6.1.1 Applicability a. These Guidelines shall be applicable to all employees of AMC(s) and Trustees and shall form a part of the Code of Conduct for employees adopted by the AMC(s) and/or Trustees. New employees shall be bound by these Guidelines from the date of joining the AMC(s) and/or Trustees. b. These Guidelines shall cover transactions for sale or purchase of securities made SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/124 dated November 17, 2016. : i. In the name of employees, either individually or jointly, ii. In the name of the employees’ spouse, iii. As a member of HUF, iv. In the name of employees’ parent, sibling and child of such employee or of the spouse, any of whom is either dependent financially on such employee, .....

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Master Circular for Mutual Funds - SEBI

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..... e Mutual Fund of which the AMC is the investment manager. 6.6.2.3 Prior approval of personal investment transactions: a. All access persons except Compliance Officer shall apply in the form prescribed by the AMC(s) and/or Trustees to the Compliance Officer for prior approval of transactions for sale or purchase of securities other than those expressly stated to be exempt under these guidelines. The Compliance Officer shall apply to the Head of the AMC(s). The decision of the Compliance Officer shall be final and binding on the employee. b. In these Guidelines, in the case of the Compliance Officer’s own transactions for purchase or sale of securities or disclosure or any other related matter, the term "Compliance Officer" wherever it appears, shall be read as "Head of the AMC." c. The Compliance Officer may coordinate with the Fund Management Department of the Mutual Fund, wherever necessary, to clear requests of investment and/or trading in securities by the employees. d. The approval of Compliance Officer for carrying out a transaction of sale or purchase of a security by the access person shall not be valid for more than 7 trading days from the date of .....

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Master Circular for Mutual Funds - SEBI

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..... ils of such applications made shall be intimated to the Compliance Officer. c. The employees of the AMC(s) and/or Trustees including access person may apply for any rights offer of any company in which they are already shareholders. Applications for additional rights (over and above the normal rights entitlement) shares may be made by the employees including access person without getting the clearance from the Compliance Officer. An employee including access person may also sell and/or renounce his rights entitlement without getting the clearance from the Compliance Officer. However, if an access person wishes to purchase the “Rights renunciations” he shall get the clearance of the Compliance Officer for the same. Such purchases shall be done only at market prices. Details of any applications made in any rights issue, whether in the normal course, or through purchase of rights renunciations, shall be intimated to the Compliance Officer. 6.6.3.2 Investments through the secondary markets: a. An access person who wishes to make a secondary market transaction shall submit a written application to that effect to the Compliance Officer. Such an application shall specify the n .....

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Master Circular for Mutual Funds - SEBI

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..... e request, the name of the access person, the details of the proposed transaction and whether the request was approved or denied and waivers given, if any, and its reasons. e. No employee shall purchase any security (including derivatives) on a “Carry Forward” basis or indulge in “Short Sale” of any security (including derivatives) i.e. employees who effect any purchase transaction(s) shall ensure that they take delivery of the securities purchased, before selling them. f. Any transaction of Front Running by any employee directly or indirectly is strictly prohibited. For this purpose, “Front Running” means any transaction of purchase and/or sale of a security carried by any employee whether for self or for any other person, knowing fully well that the AMC also intends to purchase and/or sell the same security for its Mutual Fund operations. To ascertain that the employee had no prior knowledge of the Mutual Fund's intended transactions, the Compliance Officer may take a declaration in this regard from the employee. Such declaration may be included in the application form itself. g. Any transaction of self dealing by any employee either direct .....

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Master Circular for Mutual Funds - SEBI

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..... r, details of their personal transactions of purchase or sale of securities to the Compliance Officer. The details to be submitted are as follows: a. Details of transactions effected for purchase and/or sale of securities including transactions in rights entitlements through the secondary market within 7 calendar days from the date of transaction; b. Details of allotment received against application for public and rights issues within 7 calendar days from the date of receipt of the allotment advice; c. A statement of holding in securities as on March 31 within 30 calendar days from the end of every financial year ending March 31. 6.6.5.2 All employees other than access persons shall submit, in the form prescribed by the Mutual Fund, to the Compliance Officer: a. Details of each of their transactions for purchase or sale of securities including allotment in public and rights issues within 7 calendar days. b. A statement of holding in securities as on March 31 within 30 calendar days from the end of every financial year ending March 31. c. A declaration shall also be included in the reporting form on the lines of clause 6.6.3.2. (f) and 6.6.3.2 (g) regarding Front Running and Self De .....

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Master Circular for Mutual Funds - SEBI

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..... tion Regulation 39(2)(c) of the SEBI (MF) Regulations, 1996 would become applicable automatically without any reference from SEBI and accordingly the Scheme / Plan(s) shall be wound up and the units would be redeemed at applicable NAV. 6.9.1.4 If there is a breach of the 25% limit by any investor over the quarter, a rebalancing period of one month would be allowed and thereafter the investor who is in breach of the rule shall be given 15 days notice to redeem his exposure over the 25 % limit. Failure on the part of the said investor to redeem his exposure over the 25 % limit within the aforesaid 15 days would lead to automatic redemption by the Mutual Fund on the applicable Net Asset Value on the 15th day of the notice period. 6.9.1.5 The two conditions mentioned above shall also be complied within each subsequent calendar quarter thereafter, on an average basis, as specified by SEBI. 6.9.1.6 The Fund shall adhere to the requirements prescribed by SEBI from time to time in this regard. 6.9.2 Applicability for a Close ended scheme/Interval scheme 6.9.2.1 The Scheme(s) and individual Plan(s) under the Scheme(s) shall have: a. A minimum of 20 investors and b. No single investor shall .....

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Master Circular for Mutual Funds - SEBI

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..... corpus to ensure adherence to the investment objectives as stated in Scheme Information Document and compliance with investment restrictions specified under SEBI (Mutual Funds) Regulations, 1996. 6.10.2 In this regard, it has been decided that: a) The minimum subscription amount of debt oriented and balanced schemes at the time of new fund offer shall be at least 20 crore and that of other schemes shall be at least 10 crore. b) An average AUM of 20 crore on half yearly rolling basis shall be maintained for open ended debt oriented schemes. c) The existing open ended debt oriented schemes shall comply with point (b) stated above within one year from the date of issue of this circular. d) In case of breach of points (b) and (c) above, the AMC shall scale up the AUM of such scheme within a period of six months so as to comply with point (b) stated above, failing which the provisions of Regulation 39 (2) (c) of SEBI (Mutual Funds) Regulations, 1996 would become applicable. e) The confirmation on compliance of the above shall be reported to SEBI in the Half Yearly Trustee Reports. 6.11 Scheme Performance Review 6.11.1 AMCs and Trustees shall review the performance of their schemes on p .....

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Master Circular for Mutual Funds - SEBI

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..... Benchmark PRI values Benchmark TRI values 02/08/1995 1007.57 30/06/1999 1187.70 1256.38 30/11/2017 10226.55 13966.58 CAGR 12.20% Thus, in the above example (for advertisements in the month of December, 2017 the last of the preceding month would be November 30, 2017), CAGR= [(1187.70/1007.57)*(13966.58/1256.38) ^ (1/22.3452)]-1 [1 year= 365x days] CAGR= 12.20% (iii) Mutual funds shall use the composite CAGR as explained above, subject to making the following disclosure: *As TRI data is not available since inception of the scheme, benchmark performance is calculated using composite CAGR of XYZ (name of the benchmark index) PRI values from date.. to date.. and TRI values since date.." 6.12.3 This circular is applicable to all schemes of Mutual Funds with effect from February 1, 2018. PART III -SYSTEMS AUDIT OF MUTUAL FUNDS SEBI Circular No SEBI/IMD/CIR No. 9/176988/2009 dated September 16, 2009 6.13 Mutual funds shall have a systems audit conducted by an independent CISA/CISM qualified or equivalent auditor. 6.14 The systems audit should be comprehensive encompassing audit of systems and processes inter alia related to examination of integration of front office system with the b .....

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Master Circular for Mutual Funds - SEBI

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..... lish summary of the votes cast across all its investee company and its break-up in terms of total number of votes cast in favor, against or abstained from. 6.24 AMCs shall be required to make disclosure of votes cast on their website (in spreadsheet format) on a quarterly basis, within 10 working days from the end of the quarter. Further, AMCs shall continue disclosing voting details in their annual report. The votes cast by the Mutual Funds may be given in the revised format For formats, please refer to chapter on Formats for disclosure of vote cast in respect of resolutions passed in general meetings of the investee companies and in the format For formats, please refer to chapter on Formats for presenting summary of votes cast. 6.25 Further, on an annual basis, AMCs shall be required to obtain certification on the voting reports being disclosed by them. Such certification shall be obtained from a “scrutinizer” in terms of Rule 20 (3) (ix) of Companies (Management and Administration) Rules, 2014 and any future amendment/s to the said Rules thereof. The same shall be submitted to the trustees and also disclosed in the relevant portion of the Mutual Funds' annual rep .....

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Master Circular for Mutual Funds - SEBI

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..... r, the UCC pertaining to the parent Mutual Fund shall be provided and the allocation to individual schemes shall be done in the post closing session. SEBI Circular No. MRD/DoP/SE/Cir-35/2004 dated October 26, 2004. The UCC can be shared with the unit holders to facilitate tax benefits linked to payment of Securities Transaction Tax (STT). 7.4 Trading in Exchange Traded Derivatives Contracts SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005; SEBI Circular No. DNPD/Cir-30/2006 dated January 20, 2006, SEBI Circular No. SEBI/DNPD/Cir-31/2006 dated September 22, 2006. 7.4.1 For trading in Exchange Traded Derivatives Contracts, following should be observed: 7.4.1.1 Mutual Fund schemes can participate in derivatives market as per the guidelines issued by SEBI in this regard from time to time. SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005. 7.4.1.2 The Mutual Funds shall be treated at par with a registered FII in 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 .....

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Master Circular for Mutual Funds - SEBI

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..... ual Funds shall have position limits as applicable to clients presently. 7.6 Transactions of mutual funds in Government Securities in dematerialised form SEBI Circular No. MFD/CIR/05/432/2002 dated June 20, 2002 7.6.1 According to Regulation Regulation 44(1A) of SEBI (Mutual Funds) Regulations, 1996, the Mutual Funds having an aggregate of securities worth ₹ 10 crore or more are required to settle their transactions only through dematerialised securities. All Mutual Funds should enter into transactions relating to government securities only in dematerialised form. CHAPTER 8 NET ASSET VALUE Regulation 48(1) of SEBI (Mutual Funds) Regulations, 1996 8.1 Disclosure of Net Asset Value SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997, SEBI Circular No. MFD/CIR No.11/171/01 dated February 9, 2001, SEBI Circular No. MFD/CIR/13/087/2001 dated March 28, 2001; SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006, SEBI Circular No. SEBI/IMD/CIR No.5/96576/2007 dated June 25, 2007, SEBI Cir No. SEBI/IMD/Cir No.12/147132/08 dated December 11,2008; SEBI/HO/IMD/DF2/CIR/P/2018/92 dated June 05, 2018 8.1.1 Mutual Funds/ AMCs shall prominently disclose the NAVs of all sc .....

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Master Circular for Mutual Funds - SEBI

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..... places in case of equity oriented and balanced fund schemes also, if they so desire SEBI Circular No. MFD/CIR/11/16159/2002 dated August 22, 2002. Relevant disclosure in this regard shall be made in the SID/SAI SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002. 8.3 Uniform Cut off Timings for applicability of Net Asset Value of Mutual Fund scheme(s) and/ or plan(s) SEBI Circular No. SEBI/IMD/CIR No. 11/78450/06 dated October 11, 2006. 8.3.1 Mutual Funds should follow the Guidelines enumerated below with respect to uniform Cut -off Timings: 8.3.2 Definitions: 8.3.2.1 In these Guidelines, unless the context otherwise requires: a. ‘Cut-off Timing’, in relation to an investor making an application to a Mutual Fund for purchase or sale of units, shall mean, the outer limit of timing within a particular day which is relevant for determination of the NAV applicable for his transaction; b. ‘International scheme’ means a Mutual Fund scheme having substantial investments in foreign securities valued as per time zones other than Indian Standard Time zone; c. ‘Liquid fund schemes and plans’ shall mean the schemes and plans of a Mutual Fund as specifi .....

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Master Circular for Mutual Funds - SEBI

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..... shall be ensured that: a. Application is received before the applicable cut-off time. b. Funds for the entire amount of subscription/purchase as per the application are credited to the bank account of the respective liquid schemes before the cut-off time. c. The funds are available for utilization before the cut-off time without availing any credit facility whether intra-day or otherwise, by the respective liquid schemes. 8.3.5.3 For allotment of units in respect of switch-in to liquid schemes from other schemes, it shall be ensured that: a. Application for switch-in is received before the applicable cut-off time. b. Funds for the entire amount of subscription/purchase as per the switch-in request are credited to the bank account of the respective switch-in liquid schemes before the cut-off time. c. The funds are available for utilization before the cut-off time without availing any credit facility whether intra-day or otherwise, by the respective switch-in schemes. 8.3.5.4 The following Cut-off Timings shall be observed by Mutual Funds with respect to repurchase of units in liquid fund schemes and plans and the following NAVs shall be applied for such repurchase: a. Where the appl .....

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Master Circular for Mutual Funds - SEBI

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..... off time (3 pm) without availing any credit facility whether intra-day or otherwise, by the respective scheme. 8.3.6.4 For allotment of units in respect of switch-in to income/debt oriented mutual fund schemes/plans other than liquid schemes from other schemes, it shall be ensured that: 8.3.6.4.1 Application for switch-in is received before the applicable cut-off time. 8.3.6.4.2 Funds for the entire amount of subscription/purchase as per the switch-in request are credited to the bank account of the respective switch-in income/debt oriented mutual fund schemes/plans before the cut-off time. 8.3.6.4.3 The funds are available for utilization before the cut-off time without availing any credit facility whether intra-day or otherwise, by the respective switch-in income/debt oriented mutual fund schemes/plans. 8.3.6.5 The following Cut-off Timings shall be observed by Mutual Funds in respect of repurchase of units in its other schemes and their plans, and the following NAVs shall be applied for such repurchase: 8.3.6.5.1 Where the application is received up to 3.00 pm - closing NAV of the day on which the application is received; and 8.3.6.5.2 An application received after 3.00 pm - clos .....

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Master Circular for Mutual Funds - SEBI

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..... machine, running serial number shall be stamped from the first number to the last number as per its capacity before repetition of the cycle. 8.4.2 Every application for purchase shall be stamped on the face and the corresponding payment instrument shall be stamped on the back indicating the date and time of receipt and running serial number. The application and the payment instrument shall contain the same serial number. 8.4.3 Every application for redemption shall be stamped on the face thereof and on the investor’s acknowledgment copy (or twice on the application if no acknowledgment is issued) indicating the date and time of receipt and running serial number. 8.4.4 Different applications shall not be bunched together with the same serial number. 8.4.5 Blank papers shall not be time stamped. Genuine errors, if any, shall be recorded with reasons and the corresponding applications requests shall also be preserved. 8.4.6 The time stamping machine shall have a tamper proof seal and the ability to open the seal for maintenance or repairs must be limited to vendors or nominated persons of the mutual fund, to be entered in a proper record. 8.4.7 Breakage of seal and/or breakdown .....

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Master Circular for Mutual Funds - SEBI

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..... luation date, the scrip shall be treated as a non traded security. 9.1.2 Thinly Traded Securities 9.1.2.1 Thinly traded equity/ equity related securities: SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001. a. When trading in an equity and/or equity related security (such as convertible debentures, equity warrants etc.) in a month is both less than ₹ 5 lacs and the total volume is less than 50,000 shares, the security shall be considered as thinly traded security and valued accordingly. b. In order to determine whether a security is thinly traded or not, the volumes traded in all recognized Stock Exchanges in India may be taken into account. c. For example, if the volume of trade is 1,00,000 and value is ₹ 4,00,000, the shares do not qualify as thinly traded. Also if the volume traded is 40,000, but the value of trades is ₹ 6,00,000, the shares do not qualify as thinly traded. d. Where a Stock Exchange identifies the thinly traded securities by applying the above parameters for the preceding calendar month and publishes or provides the required information along with the daily quotations, the same can be used by the Mutual Funds. e. If the shares are not l .....

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Master Circular for Mutual Funds - SEBI

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..... thereof) shall be taken and discounted by 75 per cent i.e. only 25 per cent. Of the industry average P/E shall be taken as Capitalization rate (P/E ratio). Earnings per share (EPS) of the latest audited annual accounts shall be considered for this purpose. c. The value as per the Net Worth value per share and the capital earning value calculated as above shall be averaged and further discounted by 10 per cent. for illiquidity so as to arrive at the fair value per share. d. In case the EPS is negative, EPS value for that year shall be taken as zero for arriving at capitalised earning. e. In case where the latest Balance Sheet of the company is not available within nine months from the close of the year, unless the accounting year is changed, the shares of such companies shall be valued at zero. f. In case an individual security accounts for more than 5 per cent. of the total assets of the scheme, an independent valuer shall be appointed for the valuation of the said security. To determine if a security accounts for more than 5 per cent. of the total assets of the scheme, it shall be valued by the procedure above and the proportion which it bears to the total net assets of the schem .....

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Master Circular for Mutual Funds - SEBI

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..... e used as the benchmarks as they are traded regularly; free of credit risk; and traded across different maturity spectrums every week. Step 2: A Matrix of spreads (based on the credit risk) are built for marking up the benchmark yields. The matrix is built based on traded corporate paper on the wholesale debt segment of an appropriate stock exchange and the primary market issuances. The matrix is restricted only to investment grade corporate paper. Step 3: The yields as calculated above are Marked-up/Marked-down for ill-liquidity risk Step 4: The Yields so arrived are used to price the portfolio. 9.3 Methodology: 9.3.1 Construction of Risk Free Benchmark SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.3.1.1 Using Government of India dated securities; the Benchmark shall be constructed as below: a. Government of India dated securities will be grouped into various duration buckets such as 0.164-0.25 yrs. SEBI Circular No. Cir/IMD/DF/6/2012 dated February 28, 2012, 0.25- 0.5 yrs. SEBI/IMD/CIR No.16/ 193388/2010 dated February 02, 2010, 0.5-1 year, 1-2 years, 2-3 years, 4-5 years, 5-6 years and 6 years and the volume weighted yield would be computed for each bucket. Th .....

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Master Circular for Mutual Funds - SEBI

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..... ained by deducting the YTM in each duration category from the respective YTM of the GOI securities; g. In the event of lack of trades in the secondary market and the primary market the gaps in the matrix would be filled by extrapolation. If the spreads cannot be extrapolated for the reason of practicality, the gaps in the matrix will be filled by carrying the spreads from the last matrix. h. Accordingly, all Mutual Funds shall provide transaction details of various types of debt securities like NCDs, Mibor linked floaters and CPs on daily basis in the prescribed format enclosed at Annexure 3 to the agency recommended by AMFI. Submission of data would help in daily matrix generation, would improve uniformity and accuracy of valuation in the Mutual Funds industry SEBI Circular No. MFD/CIR.No 23 / 066 /2003 dated March 7,2003. 9.3.3 Mark-up/Mark-down Yield 9.3.3.1 The Yields calculated would be marked-up/marked-down to account for the illiquidity risk, promoter background, finance company risk and the issuer class risk. As the level of illiquidity risk would be higher for non rated securities the marking process for rated and non rated securities would be differentiated as follows: a. .....

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Master Circular for Mutual Funds - SEBI

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..... are multiple put options, the highest value obtained by valuing to the various put dates and valuing to the maturity date is to be taken as the value of the instruments. 9.4.1.3 Securities with both Put and Call option on the same day a. The securities with both Put and Call option on the same day would be deemed to mature on the Put/Call day and would be valued accordingly. 9.5 Valuation of Government Securities 9.5.1 Government securities will be valued at prices for government securities released by an agency suggested by AMFI to ensure uniformity in calculation of NAVs SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.6 Illiquid SecuritiesSEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 1. Provided that in case any scheme has illiquid securities in excess of 15% of total assets as on September 30, 2000 then such a scheme shall within a period of two years bring down the ratio of illiquid securities within the prescribed limit of 15 per cent. in the following time frame: a. All the illiquid securities above 20 per cent. of total assets of the scheme shall be assigned zero value on September 30, 2001. b. All the illiquid securities above 15 per cent. .....

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Master Circular for Mutual Funds - SEBI

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..... will continue till 30.09.2000 after which there will be no further accrual of income. In short, taking the above example, from the beginning of the 2nd quarter there will be no further accrual on income. 9.7.3.2 On classification of the asset as NPA from a quarter past due date of interest, all interest accrued and recognized in the books of accounts of the Mutual Fund till the date shall be provided for. For e.g. if interest income falls due on 30.06.2000, accrual of interest will continue till 30.09.2000 even if the income as on 30.06.2000 has not been received. Further, no accrual will take place from 01.10.2000 onwards. Full provision will be made for interest accrued and outstanding as on 30.06.2000. 9.7.4 Provision for NPAs - Debt Securities 9.7.4.1 Both secured and unsecured investments, once they are recognized as NPAs, call for provisioning in the same manner and where these are related to close ended schemes, the phasing would be such that to ensure full provisioning prior to the closure of the scheme or the scheduled phasing whichever 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. Mutu .....

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Master Circular for Mutual Funds - SEBI

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..... provisions can be written back in full. b. The asset will be reclassified as performing on clearance of all interest arrears and if the debt is regularly serviced over the next two quarters. c. In case the company has fully cleared all the arrears of interest, the interest not credited on accrual basis shall be credited at the time of receipt. d. The provision made for the principal amount can be written back in the following manner 1. 100% of the asset provided for in the books will be written back at the end of the 2nd quarter where the provision of principal was made due to the interest defaults only. 2. 50% of the asset provided for in the books will be written back at the end of the 2nd quarter and 25% after every subsequent quarter where both installments and interest payment were in default earlier. 3. Explanation: The words “2nd quarter” wherever appear, shall mean 2nd calendar quarter. SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001. e. An asset is reclassified as 'standard asset' only when both, the overdue interest and overdue installments are paid in full and there is satisfactory performance for a subsequent period of 6 months. 9.7.6 Rec .....

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Master Circular for Mutual Funds - SEBI

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..... d for eight quarters of regular servicing of the debt. The provision shall be written back only after the asset is reclassified as ‘performing asset’. 9.7.9 Disclosure in the Half Yearly Portfolio Reports 9.7.9.1 Mutual Funds shall make scrip wise disclosures of NPAs on Half Yearly basis along with the Half Yearly Portfolio Disclosure in the format prescribed For formats of Half yearly disclosure, please refer to the section on Formats. 9.7.9.2 The total amount of provisions made against the NPAs shall be disclosed in addition to the total quantum of NPAs and their proportion to the assets of the Mutual Fund scheme. In the list of investments and asterisk mark shall be given against such investments which are recognized as NPAs. Where the date of redemption of an investment has lapsed, the amount not redeemed shall be shown as ‘Sundry Debtors’ and not investment, provided, that where an investment is redeemable by installments, that will be shown as an investment until all installments have become overdue. 9.8 Investment in Unlisted Equity Shares SEBI Circular No. MFD/CIR/03/526/2002 dated May 9, 2002. 9.8.1 To ensure uniformity in calculation of NAV the fol .....

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Master Circular for Mutual Funds - SEBI

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..... e an individual security accounts for more than 5 per cent of the total assets of the scheme, an independent valuer shall be appointed for the valuation of the said security. To determine if a security accounts for more than 5 per cent of the total assets of the scheme, it shall be valued in accordance with the procedure as mentioned above on the date of valuation. 9.8.2 At the discretion of the AMCs and with the approval of the Trustees, unlisted equity shares may be valued at a price lower than the value derived using the aforesaid methodology. 9.8.3 Due Diligence 9.8.3.1 Mutual Funds shall not make Investment in unlisted equity shares at a price higher than the price obtained by using the aforesaid methodology. However, this restriction is not applicable for investment made in the Initial Public Offers (IPOs) of the companies or firm allotment in public issues where all the regulatory requirements and formalities pertaining to public issues have been complied with by the companies and where the Mutual Funds are required to pay just before the date of public issue. 9.8.3.2 The Board of the AMC and Board of Trustees shall lay down the parameters for investing in unlisted equity sh .....

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Master Circular for Mutual Funds - SEBI

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..... per format For format please refer to the section on formats. These disclosures shall be made settlement date wise on daily basis with a time lag of 30 days SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012. 9.11 Consistency 9.11.1 All AMC’s shall ensure that similar securities held under its various schemes shall be valued consistently. CHAPTER 10 LOADS, FEES, CHARGES AND EXPENSES 10.1 Limits on fees and expenses charged to schemes SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997, SEBI Circular No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998, SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 10.1.1 Mutual Funds may charge certain expenses to a scheme, as specified under Regulations. Regulation 52(4) of the Mutual Funds Regulations,1996 Apart from the these expenses, any other expense as may be approved by SEBI under clause (xiii) of Sub Regulation 52(4) can also be charged to the Mutual Fund schemes. Other expenses directly attributable to a scheme may be charged with the approval of trustees within the overall limits as provided in the Regulation 52(6). SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 10.1.2 Additional TER .....

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Master Circular for Mutual Funds - SEBI

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..... mentioned additional expenses, if any. 10.1.5 Total Expense Ratio - Change and Disclosure SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/18 dated February 5, 2018 and SEBI/HO/IMD/DF2/CIR/P/2018/91 dated June 05, 2018. (a) AMCs shall prominently disclose on a daily basis, the TER (scheme-wise, date-wise) of all schemes under a separate head -“Total Expense Ratio of Mutual Fund Schemes” on their website and on the website of AMFI in downloadable spreadsheet format Please refer to section on Formats for requisite formats.. (b) Any change in the base TER (i.e. TER excluding additional expenses provided in Regulation 52(6A)(b), 52(6A)(c) of SEBI (Mutual Funds) Regulations, 1996 and Goods and Services Tax on investment and advisory fees) in comparison to previous base TER charged to any scheme/plan shall be communicated to investors of the scheme/plan 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 .....

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Master Circular for Mutual Funds - SEBI

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..... ess SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012: (a) Mutual Funds/AMCs shall annually set apart at least 2 basis points on daily net assets within the maximum limit of TER as per regulation 52 of the Regulations for investor education and awareness initiatives. Mutual Funds shall make complete disclosures in the half yearly trustee report to SEBI regarding the investor education and awareness initiatives undertaken. (b) SEBI Circular No. CIR/IMD/DF/23/2017 dated March 15, 2017Certain portion of the 2 basis points of daily net assets is being set aside by Mutual Funds/AMCs for investor education and awareness initiatives at industry level. (c) In this respect, for the purpose of increasing awareness of Mutual Funds as a financial product category it has been decided to permit celebrity endorsements at industry level, subject to the following conditions: i. Celebrity endorsement shall be allowed only at industry level, for the purpose of increasing awareness of Mutual Funds as a financial product category. Such celebrity endorsements should not promote a scheme of a particular Mutual Fund or be used as a branding exercise of a Mutual Fund house/ AMC. ii. Expenses to .....

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Master Circular for Mutual Funds - SEBI

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..... , 2001, SEBI Circular No. MFD/CIR No.5/153/2001 dated May 24, 2001. 10.2.1 In case of investments made by the Sponsor(s), no brokerage or commission shall be paid. 10.3 Restriction on charging Service Tax SEBI Circular No. MFD/CIR/04/430/2002 dated June 19, 2002, SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 10.3.1 AMC(s) can charge Service Tax, as per applicable Taxation Laws, to the scheme(s) within the limits prescribed under Regulations Reg. 52(6) of the SEBI (Mutual Funds) Regulations, 1996. 10.3.2 Mutual funds /AMCs may charge service tax on investment and advisory fees to the scheme in addition to the maximum limit of TER as prescribed in Regulation 52 Regulation 52 of SEBI (Mutual Funds) Regulations, 1996. 10.3.3 Service tax on other than investment and advisory fees, if any, shall be borne by the scheme within the maximum limit of TER as per Regulation 52 Regulation 52 of SEBI (Mutual Funds) Regulations, 1996. 10.3.4 Service tax on exit load, if any, shall be paid out of the exit load proceeds and exit load net of service tax, if any, shall be credited to the scheme. 10.3.5 Service tax on brokerage and transaction cost SEBI Circular No. CIR/ IMD/ DF/ 24/20 .....

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Master Circular for Mutual Funds - SEBI

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..... gent's commissions without any restrictions mentioned in Para (b) above. (d) The exit load charged Regulation 51A of SEBI (Mutual Funds) Regulations, 1996., if any, after the commencement of SEBI (Mutual Funds) (Second Amendment) Regulations, 2012, shall be credited to the scheme. (e) The distributors should disclose all the commissions (in the form of trail commission or any other mode) payable to them for the different competing schemes of various Mutual Funds from amongst which the scheme is being recommended to the investor. 10.4.2 The above guidelines became applicable for: (a) Investments in mutual fund schemes (including additional purchases and switch-in to a scheme from other schemes) w.e.f August 1, 2009 (b) Redemptions from mutual fund schemes (including switch-out from other schemes) w.e.f August 1, 2009 (c) New mutual fund schemes launched on or after August 1, 2009 (d) Systematic Investment Plans (SIP) registered on or after August 1, 2009 SEBI Circular No.MFD/CIR/04/430/2002 dated June 19, 2002, SEBI Circular No. CIR/IMD/df/21/2012 dated September 13, 2012. 10.4.3 The AMCs are required to bring the contents of these guidelines to the notice of their distributors .....

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Master Circular for Mutual Funds - SEBI

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..... Mutual Funds/AMCs shall carry out an exercise of de-duplication of folios across all Mutual Funds within a period of 6 months from August 22, 2011. 10.6 No Load on Bonus Units and Units allotted on Reinvestment of Dividend SEBI Circular No. SEBI/IMD/CIR No. 14/120784/08 dated March 18, 2008 10.6.1 AMC(s) shall not charge entry and/or exit load on bonus units and units allotted on reinvestment of dividend. Necessary disclosures in this regard shall be made in the SID filed with the Board SEBI Circular No. CIR/ IMD/DF/24/2012 dated November 19, 2012 10.7 Filing fees SEBI Cir No. SEBI / IMD / CIR No. 5 / 169030 / 2009 dated July 8, 2009 10.7.1 Revised filing fee Gazettee Notification No. LAD-NRO/GN/20014-15/03/1089 on SEBI (Payment of Fees) (Amendment) Regulations, 2014 dated 23 May, 2014 as per the SEBI (Payment of Fees) Amendment Regulations 2014 would be applicable to those scheme(s) whose SID has been filed with SEBI on or after May 23, 2014. 10.8 Exit load parity 10.8.1 While charging exit loads, no distinction among unit holders should be made based on the amount of subscription SEBI Circular No. SEBI / IMD / CIR No. 6 /172445/ 2009 dated August 7,2009 All Mutual Funds shall ens .....

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Master Circular for Mutual Funds - SEBI

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..... of its products. 11.2.1.5 Such notice shall be given in at least 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. 11.2.1.6 The notice shall, in font size 10, bold, categorically state that pursuant to dividend distribution, NAV of the scheme would fall to the extent of payout and statutory levy (if applicable). 11.2.2 Liquid / Debt Schemes with frequent dividend distribution 11.2.2.1 The requirement of giving notice is not mandatory for scheme(s)/ plan(s)/ option(s) with dividend distribution frequency ranging from daily up to monthly distribution if requisite disclosures in this regard are made in the SID. 11.2.3 Listed Schemes/Plans 11.2.3.1 Listed scheme(s)/ plan(s) shall follow the requirements stipulated in the Listing Agreement for dividend declaration and distribution. 11.3 Non availability of Unit Premium Reserve for dividend distribution SEBI circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 11.3.1 Regulations Ninth and Eleventh Schedule of SEBI (Mutual Funds) Regulations, 1996 provide the accounting policies to be followed for .....

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Master Circular for Mutual Funds - SEBI

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..... n /purchase debt and money market securities with maturity of upto 91 days only With effect from February 01, 2009 make investment in /purchase debt and money market securities with maturity of upto182 days only.. This shall also be applicable in case of inter scheme transfer of securities Transition provision: Inter-scheme transfers of securities having maturity upto 365 days and held in other schemes as on February 01, 2009 shall be permitted till October 31, 2009. With effect from November 1, 2009 the requirements stated at paragraph 12.2.1 above shall apply to such inter-se scheme transfers also. 12.2.1.1 Explanation: a. In case of securities where the principal is to be repaid in a single payout the maturity of the securities shall mean residual maturity. In case the principal is to be repaid in more than one payout then the maturity of the securities shall be calculated on the basis of weighted average maturity of security. b. In case of securities with put and call options (daily or otherwise) the residual maturity of the securities shall not be greater than 91 days w.e.f May 01, 2009. c. In case the maturity of the security falls on a non-business day then settlement of sec .....

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Master Circular for Mutual Funds - SEBI

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..... oup as defined under regulation 2 (mm) of SEBI (Mutual Funds) Regulations, 1996 (Regulations) and shall include an entity, its subsidiaries, fellow subsidiaries, its holding company and its associates. 12.4.4 Trustee shall review exposure of a mutual fund, across all its schemes, towards individual issuers, group companies and sectors. Trustee should satisfy themselves on the levels of exposure and confirm the same to SEBI in the half-yearly trustee report starting from the half-year ending March 31, 2016. 12.4.5 The revised investment restrictions at issuer level, sector level and group level shall be applicable to all new schemes and fresh investments by existing schemes from the date of this circular (i.e. February 15, 2016). 12.4.6 Existing mutual fund schemes shall comply with the revised investment restrictions at issuer level, sector level and group level within a period of one year from the date of issue of this circular (i.e. February 15, 2016). Existing close ended schemes shall not be required to sell their investments to comply with the restrictions. However, if existing close ended schemes sell their investments then their fresh investments shall be subject to the rest .....

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Master Circular for Mutual Funds - SEBI

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..... of the AMC and Trustees. Details of such investments shall be communicated by the AMCs to the Trustees in their periodical reports, along with clear indication as to how the parameters set for investments have been complied with. Prior approval of the Board of the AMC and Trustees shall be required in case investment is sought to be made in an unrated security falling outside the prescribed parameters. 12.7 Investments in Units of Venture Capital Funds SEBI Circular No. MFD/CIR/9/230/2001 dated August 14, 2001. 12.7.1 Mutual Fund schemes can invest in listed or unlisted securities or units of Venture Capital Funds within the prescribed investment limits as applicable. Clauses 10 and 11, Seventh Schedule of SEBI (Mutual Funds), Regulations, 1996. 12.8 Investment limits for Government guaranteed debt securities SEBI Circular No. SEBI/IMD/CIR No.8/18944/03 dated October 6, 2003. 12.8.1 Prudential investment norms as per Regulations stipulating limits for investments in debt securities Clauses 1 and 1A, Seventh Schedule of SEBI (Mutual Funds), Regulations, 1996. issued by a single issuer are applicable to all debt securities issued by public bodies or institutions such as electricity .....

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Master Circular for Mutual Funds - SEBI

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..... funds parked, percentage of NAV. 12.10.1.8 Trustees shall, in the Half Yearly Trustee Reports certify that provisions of the Mutual Funds Regulations pertaining to parking of funds in short term deposits pending deployment are complied with at all points of time. The AMC(s) shall also certify the same in its CTR(s). 12.10.1.9 Investments made in short term deposits pending deployment of funds Clause 8, Schedule Seven, SEBI (Mutual Funds), Regulations, 1996. shall be recorded SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. and reported to the Trustees including the reasons for the investment especially comparisons with interest rates offered by other scheduled commercial banks. SEBI Circular No. SEBI/IMD/CIR No.9/20306/03 dated November 12, 2003. 12.10.1.10 Except for clause (12.10.1.7) the above guidelines shall not apply to term deposits placed as margins for trading in cash and derivatives market SEBI Circular No. SEBI/IMD/Cir No.7/129592/08 dated June 23, 2008.. However, duration of such term deposits shall be disclosed in the Half Yearly Portfolio SEBI Circular No. SEBI/IMD/Cir No.7/129592/08 dated June 23, 2008. 12.11 Reconciliation Procedure for Investment in Govern .....

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Master Circular for Mutual Funds - SEBI

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..... in context of these transactions keeping in mind the interest of investors in their schemes: a. Category of counterparty b. Credit rating of counterparty c. Tenor of collateral d. Applicable haircuts 12.12.1.6 Mutual funds shall ensure compliance with the Seventh Schedule of the Mutual Funds Regulations about restrictions on investments, wherever applicable, with respect to repo transactions in corporate debt securities. 12.12.1.7 The details of repo transactions of the schemes in corporate debt securities, including details of counterparties, amount involved and percentage of NAV shall be disclosed to investors in the half yearly portfolio statements and to SEBI in the half yearly trustee report. 12.12.1.8 To enable the investors in the mutual fund schemes to take an informed decision, the concerned Scheme Information Document shall disclose the following: a. The intention to participate in repo transactions in corporate debt securities in accordance with directions issued by RBI and SEBI from time to time; b. The exposure limit for the scheme; and c. The risk factors associated with repo transactions in corporate bonds 12.13 Overseas Investment SEBI Circular No. SEBI/IMD/CIR No. .....

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Master Circular for Mutual Funds - SEBI

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..... a. The Board of the AMC and Trustees shall exercise due diligence in making investment decisions and record the same. SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. They shall make a detailed analysis of risks and returns of overseas investment and how these investments would be in the interest of investors. Investment shall be made in liquid actively traded securities /instruments. b. The Board of the AMC and Trustees may prescribe detailed parameters for making such investments which may include identification of countries, country rating, country limits etc. They shall satisfy themselves that the AMC has experienced key personnel, research facilities and infrastructure for making such investments. Other specialized agencies and service providers associated with such investments e.g. custodian, bank, advisors etc. shall also have adequate expertise and infrastructure facilities. Their past track record of performance and regulatory compliance record, if they are registered with foreign regulators, should also be considered. Necessary agreements may be entered into with them as required. 12.13.3.3 Mandatory Disclosure Requirements for Mutual Fund schemes proposing overse .....

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Master Circular for Mutual Funds - SEBI

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..... ments b. Amount invested in various schemes and any breach of the exposure limit laid down in the SID. 12.13.3.6 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. 12.13.3.7 Reporting to the Board: a. The Trustees shall offer their comments on the compliance of these guidelines in the Half Yearly Reports filed with the Board. 12.13.3.8 Prudential Investment Norms: a. Investment restrictions specified in Schedule Seven of the Mutual Funds Regulations are applicable to overseas investments stipulated under paragraph 12.13.2.1- 12.13.2.10 b. However, Clause 4 of the Seventh Schedule of the Mutual Funds Regulations that restricts investments in Mutual Fund units up to 5% of net assets and prohibits charging of fees, shall not be applicable to investments in Mutual Funds in foreign countries made in accordance with these Guidelines. c. Management fees and other expenses charged by the Mutual Funds in foreign countries along with the management fee and recurring expenses charged to the domestic Mutual Fund scheme shall not exceed the total limits on expenses .....

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Master Circular for Mutual Funds - SEBI

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..... .17.1 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. 12.17.2 The Board of the AMC shall develop a mechanism to verify that due diligence is being exercised while making investment decisions especially in cases of investment in unlisted and privately placed securities, unrated debt securities, NPAs, transactions where associates are involved and instances where the performance of the .....

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Master Circular for Mutual Funds - SEBI

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..... against which the hedging position has been taken, shall be treated under the limits mentioned in point 12.18.1.1. 12.18.1.8 Hedging of Interest Rate Risk a. SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/109 dated September 27, 2017 To reduce interest rate risk in a debt portfolio, mutual funds may hedge the portfolio or part of the portfolio (including one or more securities) on weighted average modified duration basis by using Interest Rate Futures (IRFs).The maximum extent of short position that may be taken in IRFs to hedge interest rate risk of the portfolio or part of the portfolio, is as per the formula given below: (Portfolio Modified Duration * Market Value of the Portfolio) (Futures Modified Duration * Futures Price / PAR) b. In case the IRF used for hedging the interest rate risk has different underlying security(s) than the existing position being hedged, it would result in imperfect hedging. c. Imperfect hedging using IRFs may be considered to be exempted from the gross exposure, upto maximum of 20% of the net assets of the scheme, subject to the following: i. Exposure to IRFs is created only for hedging the interest rate risk based on the weighted average modified dur .....

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Master Circular for Mutual Funds - SEBI

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..... gulations, 1996 and all unit holders shall be given a time-period of at least 30 days to exercise the option to exit at prevailing NAV without charging of exit load. The risks associated with imperfect hedging shall be disclosed and explained by suitable numerical examples in the offer documents and also needs to be communicated to the investors through public notice or any other form of correspondence. ii. In case of new schemes, the risks associated with imperfect hedging shall be disclosed and explained by suitable numerical examples in the offer documents 12.18.2 Definition of Exposure in case of Derivative Positions 12.18.2.1 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 of Contracts Option bought Option Premium Paid * Lot Size * Number of Contracts. 12.18.2.2 The provisions shall be applicable for all .....

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Master Circular for Mutual Funds - SEBI

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..... nds they hold. They shall not be allowed to sell protection and hence not permitted to enter into short positions in the CDS contracts. However, they shall be permitted to exit their bought CDS positions, subject to para (d) below. b. Mutual funds can participate as users in CDS for the eligible securities as reference obligations, constituting from within the portfolio of only Fixed Maturity Plans (FMP) schemes having tenor exceeding one year. c. Mutual funds shall buy CDS only from a market maker approved by the RBI and enter into Master Agreement with the counterparty as stipulated under RBI Guidelines. Exposure to a single counterparty in CDS transactions shall not exceed 10% of the net assets of the scheme. d. The cumulative gross exposure through credit default swap in corporate bonds along with equity, debt and derivative positions shall not exceed 100% of the net assets of the scheme. e. The total exposure related to premium paid for all derivative positions, including CDS, shall not exceed 20% of the net assets of the scheme. f. Before undertaking CDS transactions, mutual funds shall put in place a written policy on participation in CDS approved by the Board of the Asset M .....

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Master Circular for Mutual Funds - SEBI

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..... is clause: (1) the term "Person" shall carry the same meaning under Section 2(31) of the Income Tax Act, 1961 (2) the phrase “resident in India” shall carry the same meaning as in the Income Tax Act, 1961 (3) “resident” in a country, other than India, shall mean resident as per the direct tax laws of that country. 13.2.2 MF shall ensure that only QFIs who comply with para 13.2.1 are allowed to invest under these routes. 13.2.3 MF shall ensure that QFIs meet the KYC requirements as per the FATF standards, Prevention of Money Laundering Act, 2002 (PMLA) rules and regulations made thereunder, and SEBI circulars issued in this regard before accepting subscriptions from QFIs. 13.2.4 The aggregate investments by QFIs under both the routes shall be subject to a total overall ceiling of US $10 billion for equity schemes. 13.2.5 In addition to the above, the aggregate investments by QFIs under both the routes for debt schemes which invest in infrastructure (“Infrastructure” as defined under the extant ECB guidelines issued by RBI) debt of minimum residual maturity of 5 years, shall be subject to a total overall ceiling of US $3 billion within th .....

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Master Circular for Mutual Funds - SEBI

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..... all ensure that units/ UCRs held by QFIs are free from all encumbrances i.e. pledge or lien cannot be created for such units. 13.2.13 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 13.2.14 MF shall ensure that all the investor related documents/ records of the QFIs are available with them. 13.2.15 MF shall ensure compliance with laws (rules and regulations) of the jurisdictions where the QFIs are based and also ensure that the interest of existing unit holders of the MF schemes are not adversely affected due to the issuance of UCRs/ demat units to the QFIs. 13.2.16 In case of any penalty, pending litigations or proceedings, findings of Inspections or investigations for which action may have been taken or is in the process of being taken by an overseas regulator against MF/ AMC, it shall bring such information to the attention of SEBI and unitholders of the concerned scheme. 13.2.17 MF shall be responsible for the deduction of applicable tax at source out of the redemption proceeds before making redemption payments to QFIs. 13.2.18 MF/DP shall require QFIs to submit necessary information for the .....

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Master Circular for Mutual Funds - SEBI

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..... ney to the MF’s scheme account on the same day as the receipt of funds from QFIs. In case of receipt of money after business hours, DP shall remit the funds to MF scheme account by next business day. c. If for any reasons, the DP is not able to remit the money to the MF scheme account within the stipulated timeframe as mentioned in para-b, the DP shall immediately return the money to the designated overseas bank account of the QFIs. d. MF shall process the order and credit units into the demat account of the QFIs. e. If for any reasons the units are not allotted, MF / DP shall ensure that the money is remitted back to the QFI’s designated overseas bank account within 3 working days from the date of receipt of subscription of money in the single rupee pool bank account of the DP maintained with a designated AD category I bank. Redemption f. QFIs can redeem, either through Delivery Instruction (physical/ electronic) or any another mode prescribed by the Depositories. On receipt of instruction from QFIs, DP shall process the same and forward the redemption instructions to the MF. Upon receipt of instruction from DP, MF shall process the same and shall credit the single rup .....

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Master Circular for Mutual Funds - SEBI

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..... ts) 13.4.1 There shall be four parties involved - QFIs, UCR issuer (based overseas), SEBI registered Custodian (based in India) and MF. 13.4.2 QFIs can subscribe / redeem only through the UCR Issuer. 13.4.3 MF shall appoint one or more UCR issuing agent overseas and one SEBI registered custodian in India. 13.4.4 UCR issuer appointed by MF shall act as agent of the MF. 13.4.5 MF can appoint entities fulfilling the following conditions as UCR issuer: a. The entity is able to demonstrate that it has proven track record, expertise and technology in the business of issuance of global depository receipts/global custody agency b. The entity is registered with an overseas securities market/ banking regulator. 13.4.6 MF shall seek no objection from SEBI before appointing any UCR issuer and furnish the details and information sought by SEBI about the UCR issuer. SEBI reserves the right to seek additional information / clarification and direct action, including non appointment/ revocation of appointment of that UCR Issuing Agent. 13.4.7 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 13.4.8 Custodians appo .....

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Master Circular for Mutual Funds - SEBI

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..... the funds into MF scheme account (in rupee terms). Upon receipt of funds; the MF shall issue units to the custodian and custodian shall in turn confirm to the UCR Issuer to issue UCR to the QFIs. f. In case of redemption, UCR issuer shall confirm receipt of redemption request to the MF & Custodian. Upon receipt of instruction, MF shall process and remit redemption proceeds to the UCR issuer which in turn shall remit redemption proceeds to the designated bank account of the QFIs. g. In case of dividend payout, the MF shall remit the dividend amount proceeds to the UCR issuer which in turn shall remit the dividend amount to the designated bank account of the QFIs. 13.5 The investment by the QFIs in MF equity and debt schemes under this scheme shall also be subject to the relevant and extant FEMA regulations and guidelines issued by the Reserve Bank of India under FEMA, 1999 from time to time. CHAPTER 14 ADVERTISEMENTS SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011 and SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012 14.1 Advertisement shall be in terms of Sixth Schedule Sixth Schedule of SEBI (Mutual Funds) Regulations, 1996 as amended via gazette notificatio .....

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Master Circular for Mutual Funds - SEBI

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..... t be provided SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011. 14.3.4 In case of Money Market schemes or cash and liquid schemes SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012, wherein investors have very short investment horizon, the performance can be advertised by simple annualisation of yields if a performance figure is available for at least 7 days, 15 days and 30 days provided it does not reflect an unrealistic or misleading picture of the performance or future performance of the scheme. 14.3.5 For the sake of standardization, a similar return in INR and by way of CAGR must be shown for the following apart from the scheme benchmarks: Scheme Type Benchmark Equity Scheme Sensex or Nifty Long term debt scheme 10 year dated GOI security Short term debt fund 1 year T-bill These disclosures shall form a part of the Statement of Additional Information and all advertisements of Mutual Funds. 14.3.6 Any disclosure regarding quarterly/ half yearly/ yearly performance shall pertain to respective calendar quarterly/ half yearly/ yearly only. 14.3.7 SEBI Circular No. Cir/IMD/DF/23/2017 dated March 15, 2017When the performance of a particular Mutual Fund scheme is adv .....

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Master Circular for Mutual Funds - SEBI

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..... nd KIM without indicating the portfolio or yield, directly or indirectly: 14.4.2.1 MFs/AMCs shall disclose their credit evaluation policy for the investments in debt securities. 14.4.2.2 MFs/AMCs shall also disclose the list of sectors they would not be investing. 14.4.2.3 MFs shall disclose the type of instruments which the schemes propose to invest viz. CPs, CDs, Treasury bills etc 14.4.2.4 MFs shall disclose the floors and ceilings within a range of 5% of the intended allocation (in %) against each sub asset class/credit rating. For example, it may be disclosed that x-y % would be in AAA rated bank CD as per the sample matrix below: Credit Rating Instruments AAA AA A BBB CDs CDs NCDs Securitized debt Any Ohter 14.4.2.5 After the closure of NFO, the AMCs will report in the next meeting of AMCs and Trustees the publicized percentage allocation and the final portfolio. Variations between indicative portfolio allocation and final portfolio will not be permissible. CHAPTER 15 INVESTOR RIGHTS & OBLIGATIONS PART I - INVESTOR RIGHTS 15.1 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 dated .....

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Master Circular for Mutual Funds - SEBI

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..... MC shall make a continuous effort to remind the investors through letters to take their unclaimed amounts. 15.2.6 Further, to ensure Mutual Funds play a pro-active role in tracing the rightful owner of the unclaimed amounts: a. Mutual Funds shall be required to provide on their website, the list of names and addresses of investors in whose folios there are unclaimed amounts. b. AMFI shall also provide on its website, the consolidated list of investors across Mutual Fund industry, in whose folios there are unclaimed amounts. The information provided herein shall contain name of investor, address of investor and name of Mutual Fund/s with whom unclaimed amount lies. c. Information at point (a) & (b) above may be obtained by investor only upon providing his proper credentials (like PAN, date of birth, etc.) along-with adequate security control measures being put in place by Mutual Fund / AMFI. d. The website of Mutual Funds and AMFI shall also provide information on the process of claiming the unclaimed amount and the necessary forms / documents required for the same. e. Further, the information on unclaimed amount along-with its prevailing value (based on income earned on deploym .....

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Master Circular for Mutual Funds - SEBI

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..... , the Depositories shall match their PAN database to determine the common PANs and allocate the PANs among themselves for the purpose of sending CAS. For PANs which are common between depositories and AMCs, the Depositories shall send the CAS. In other cases (i.e. PANs with no demat account and only MF units holding), the AMCs/ MF-RTAs shall continue to send the CAS to their unit holders as is being done presently in compliance with the Regulation 36(4) of the SEBI (Mutual Funds) Regulations. 15.3.2.5 In case investors have multiple accounts across the two depositories, the depository having the demat account which has been opened earlier shall be the default depository which will consolidate details across depositories and MF investments and dispatch the CAS to the investor. However, option shall be given to the demat account holder by the default depository to choose the depository through which the investor wishes to receive the CAS. 15.3.2.6 The CAS shall be generated on a monthly basis. The AMCs /MF-RTAs shall provide the data with respect to the common PANs to the depositories within three days from the month end. The depositories shall then consolidate and dispatch the CAS w .....

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Master Circular for Mutual Funds - SEBI

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..... ly basis. However, in case of demat accounts with nil balance and no transactions in securities and in mutual fund folios, the requirement to send physical statement shall be applicable as specified in SEBI circular no. CIR/MRD/DP/21/2014 issued on July 01, 2014. 15.3.2.14 Further, the holding statement dispatched by the DPs to their BOs with respect to the dormant demat accounts with balances shall also be dispatched half-yearly in partial modification of clauses 5(b) and 6(c) of the circular no. CIR/MRD/DP/22/2012 dated August 27, 2012. 15.3.2.15 The dispatch of CAS by the depositories to BOs would constitute compliance by the Depository Participants with requirement under Regulation 43 of SEBI (Depositories and Participants) Regulations, to provide statements of account to the BOs as also compliance by the MFs with the requirement under Regulation 36(4) of SEBI (Mutual Funds) Regulations. 15.3.2.16 Further, in order to increase transparency of information to investors, it has been decided that SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016 and SEBI/HO/IMD/DF2/CIR/P/2016/89 dated September 20, 2016 a. Each CAS issued to the investors shall also provide the t .....

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Master Circular for Mutual Funds - SEBI

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..... six months prior to the date of generation of the Statement of Accounts. In such cases, the Statement of Accounts may be issued along with the scheme’s Portfolio Statement or Annual Report and should reflect the last closing balance and value of the units prior to the date of generation of the Statement of Accounts. Further, if so mandated, a soft copy of the Statement of Accounts shall be e-mailed to the unit holders instead of a physical statement. 15.4 AMC’s Annual Reports for unitholders SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000 15.4.1 The annual report containing accounts of the AMCs should be displayed on the website of Mutual Fund. It should also be mentioned in the Annual Report of Mutual Funds schemes that the unitholders, if they so desire may request for the Annual Report of the AMC. 15.5 Distribution of Proceeds realized from illiquid securities/ NPAs SEBI Circular No. MFD/CIR/05/432/2002 dated June 20, 2002. Some of the investments made by Mutual Funds may become non-performing assets (NPAs) or illiquid at the time of maturity/winding up of the scheme(s). In due course of time i.e. after the maturity/ winding up of the scheme(s), these N .....

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Master Circular for Mutual Funds - SEBI

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..... ss Facility and use of e-wallet for investment in Mutual Funds SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/39 dated May 08, 2017 15.8.1 Instant Access Facility (IAF) 1. IAF facilitates credit of redemption proceeds in the bank account of the investor on the same day of redemption request. In order to further enhance the reach of Mutual Funds (MFs) towards the retail investors, it has been decided to issue guidelines for extending IAF. MFs/AMCs may offer IAF subject to the following conditions: a. Eligibility -IAF shall be allowed through online mechanism and only for resident individual investors. b. Applicability i. NAV: While observing the extant cut-off timings with respect to repurchase (i.e. Redemption), under IAF the following NAVs shall be applied: where the IAF application is received up to 3.00pm-the lower of (i) NAV of previous calendar day and (ii) NAV of calendar day on which application is received; where the IAF application is received after 3.00 pm -the lower of (i) NAV of calendar day on which such application is received, and (ii) NAV of the next calendar day. ii. Scheme-MFs/ AMCs can offer IAF only in Liquid schemes of the MF. iii. Monetary Limit-The monetary lim .....

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Master Circular for Mutual Funds - SEBI

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..... 00/-per MF per financial year. Further, in partial modification to the Circular CIR/IMD/DF/10/2014 dated May 22, 2014, the limit of INR 50,000/-would be an umbrella limit for investments by an investor through both e-wallet and/or cash, per MF per financial year. e. MFs/ AMCs shall ensure that e-wallet issuers shall not offer any incentives such as cashback, vouchers, etc., directly or indirectly for investing in MF schemes. f. MFs/ AMCs shall ensure that only amounts loaded into e-wallet through cash or debit card or net banking, can be used for subscription to MF schemes. g. MFs/ AMCs shall ensure that amount loaded into e-wallet through credit card, cash back, promotional scheme etc. should not be allowed for subscription to MF schemes. h. MFs/ AMCs shall also comply with the requirement of no third party payment norm for investment made using e-wallets. PART II - INVESTOR’S OBLIGATIONS 15.9 Mandatory mentioning of PAN Number SEBI Circular No. MRD/DoP/Cir-05/2007 dated April 27, 2007, SEBI Circular No. MRD/DoP/Cir-08/2007 dated June 25, 2007, SEBI Circular No. MRD/DoP/MF/Cir-08/2008 dated April 3, 2008 15.9.1 For, the requirement of mentioning PAN Number by investors of mu .....

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Master Circular for Mutual Funds - SEBI

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..... 23230/2002 dated November 28, 2002, SEBI Circular No. SEBI/MFD/CIR No.01/6693/03 dated April 3, 2003, SEBI Circular No. SEBI/IMD/CIR No.2/254/04 dated February 4, 2004, SEBI Circular No. MFD/CIR/06/210/2002 dated June 26, 2002., Exemption for Senior Citizens: Senior citizens with experience in distributing Mutual Funds units are exempt from the mandatory certification examination if they have completed 50 years of age and have experience of at least 5 years as on September 30, 2003.391 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. 16.1 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. 16.2 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 mark .....

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Master Circular for Mutual Funds - SEBI

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..... of products to that customer category. Appropriateness is defined as selling only that product categorization that is identified as best suited for investors within a defined upper ceiling of risk appetite. No exception shall be made. b. Execution Only - in case of transactions that are not booked as ‘advisory’, it shall still require: i. The distributor has information to believe that the transaction is not appropriate for the customer, a written communication be made to the investor regarding the unsuitability of the product. The communication shall have to be duly acknowledged and accepted by investor. ii. A customer confirmation to the effect that the transaction is ‘execution only notwithstanding the advice of in-appropriateness from that distributor be obtained prior to the execution of the transaction. iii. That on all such ‘execution only’ transactions, the customer is not required to pay the distributor anything other than the standard flat transaction charge. c. There shall be no third categorization of customer relationship / transaction. d. While selling Mutual Fund products of the distributors’ group/affiliate/associates, the distri .....

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Master Circular for Mutual Funds - SEBI

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..... okerage and/or sub-brokerage etc. shall be in accordance with parameters and guidelines specified by the Board and AMFI from time to time. Mutual Funds shall monitor the compliance of these guidelines and Code of Conduct by their intermediaries in terms of business done across all Mutual Funds. In case of non-compliance, Mutual Funds shall suspend further business and payment of commissions, etc. until full compliance by the empaneled intermediary. 16.7 Certification Programme for sale and/ or distribution of mutual fund products SEBI Circular No. Cir/IMD/DF/5/2010 dated June 24, 2010 16.7.1 With effect from June 01, 2010, the certification examination for distributors, agents or any other persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products, would be conducted by the National Institute of Securities Markets (NISM) For Notification under regulation 3 of the Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007 please refer to section on Annexures. The text of notification in this regard is enclosed herewith as Annexure 6. 16.7.2 Under the existing instructi .....

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Master Circular for Mutual Funds - SEBI

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..... d schemes shall comprise of diversified equity schemes, fixed maturity plans (FMPs), index schemes, Retirement benefit schemes having tax benefits and Liquid schemes/ Money Market Mutual Fund schemes SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/37 February 25, 2016. and should have returns equal to or better than their scheme benchmark returns during each of the last three years. 16.8.3 These new cadre of distributors would require a simplified form of NISM certification and AMFI Registration. 16.9 Developing alternative distribution channels SEBI Circular No. CIR/IMD/DF/05/2014 dated March 24, 2014 16.9.1 In order to increase penetration of Mutual Fund products and to energise the distribution network while protecting the interest of investors, SEBI had permitted additional expense ratio of 30 bps for garnering funds from B-30 cities. This development would lead to setting up of distribution infrastructure by AMCs. However, in order to achieve participation from all parts of the country in Mutual Funds there is greater need for developing additional distribution channels. Therefore, it has been decided that: a. Distribution through PSU banks: PSU banks which have wide bank branche .....

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Master Circular for Mutual Funds - SEBI

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..... lated documentation was incomplete/inadequate/not available or was stated to be maintained by the distributors, then the Trustees were advised to ensure the following: 17.1.2.1 No further payment of any commissions, fees and / or payments in any other mode should be made to such distributors till full compliance/ completion of the steps enumerated herein. 17.1.2.2 Take immediate steps to obtain all investor/ unit holders documents in terms of the AML/ CFT, including KYC documents/ PoA as applicable. 17.1.2.3 Take immediate steps to obtain all supporting documents in respect of the past transactions. 17.1.2.4 On a one time basis, send statement of holdings and all transactions since inception of that folio in duplicate to the investor and seek confirmation from the unit holders on the duplicate copy. 17.1.2.5 Set up a separate customer services mechanism to handle/ address queries and grievance of the above mentioned unitholders. 17.1.3 Pending completion of documentation, exercise great care and be satisfied of investor bonafides before authorizing any transaction, including redemption, on such accounts/ folios. 17.1.4 The Trustees were required forthwith to confirm to Board that t .....

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Master Circular for Mutual Funds - SEBI

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..... licable SEBI guidelines Please refer Chapter 16 on Certification and Registration of Mutual Funds intermediaries, applicable to intermediaries engaged in selling and marketing of mutual fund units. c. It is clarified that, stock exchanges shall monitor the compliance of the code of conduct specified regarding empanelment of intermediaries by mutual funds Please refer Chapter 16 on Certification and Registration of Mutual Funds intermediaries. 17.2.4.2 Time stamping a. Time stamping as evidenced by confirmation slip given by stock exchange mechanism to be considered sufficient compliance with clause for cut-off timing for liquid scheme and plans, cut-off timing for other schemes and plans and time stamping provisions mandated by Board Please refer to Chapter 8 - Net Asset Value for details on cut off timing provisions. 17.2.4.3 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 accounts. refer to Chapter 15- Investor Rights and services. 17.2.4.4 Investor grievanc .....

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Master Circular for Mutual Funds - SEBI

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..... b. Permit Depository participants of registered Depositories to process only redemption request of units held in demat form. 17.2.4.10 The following be noted with respect to investors having demat account and purchasing and redeeming mutual funds units through stock brokers and clearing members: a. Investors shall receive redemption amount (if units are redeemed) and units (if units are purchased) through broker/clearing member’s pool account. Mutual Funds(MF)/ Asset management Companies(AMC) would pay proceeds to the broker/clearing member (in case of redemption) and broker/clearing member in turn to the respective investor and similarly units shall be credited by MF/AMC into broker/clearing member’s pool account (in case of purchase) and broker/clearing member in turn to the respective investor. b. Payment of redemption proceeds to the broker/clearing members by MF/AMC shall discharge MF/AMC of its obligation of payment to individual investor. Similarly, in case of purchase of units, crediting units into broker/clearing member pool account shall discharge MF/AMC of its obligation to allot units to individual investor. 17.2.4.11 The following may be noted in this rega .....

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Master Circular for Mutual Funds - SEBI

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..... s) has been allowed to use infrastructure of the recognised stock exchanges to purchase and redeem mutual fund units directly from Mutual Fund/Assets Management Companies on behalf of their clients, including direct plans. The other provisions of circular no. CIR/MRD/DSA/32/2013 dated October 04, 2013 remain unchanged. 17.3 Cash Investments in mutual funds SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 17.3.1 In order to help enhance the reach of mutual fund products amongst small investors, who may not be tax payers and may not have PAN/bank accounts, such as farmers, small traders/businessmen/workers, cash transactions in mutual funds to the extent of 50,000/- SEBI Circular No. CIR/IMD/DF/10/2014 dated May 22, 2014 per investor, per mutual fund, per financial year shall be allowed subject to (i) compliance with Prevention of Money Laundering Act, 2002 and Rules framed there under; the SEBI Circular(s) on Anti Money Laundering (AML) and other applicable AML rules, regulations and guidelines and (ii) sufficient systems and procedures in place. 17.3.2 Repayment in the form of redemptions, dividend, etc. with respect to aforementioned investments shall be paid only th .....

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Master Circular for Mutual Funds - SEBI

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..... onthly basis. 18.2.3.2 in case of any performance advertisement is issued by the AMC for any scheme, then the details of returns of all the schemes (mutual fund, pension funds, offshore funds etc) managed by that fund manager shall be provided. 18.2.3.3 in case the difference between the annual returns provided by the schemes managed by the same fund manager is more than 10% then the same shall be reported to the trustee and explanation for the same shall be disclosed on the website of the AMC. 18.3 Product Labeling in Mutual Funds SEBI Circular No. CIR/IMD/DF/5/2013 dated March 18, 2013 18.3.1 All the mutual funds shall ‘Label’ their schemes on the parameters as mentioned under: a. Nature of scheme such as to create wealth or provide regular income in an indicative time horizon (short/ medium/ long term). b. A brief about the investment objective (in a single line sentence) followed by kind of product in which investor is investing (Equity/Debt). c. Level of risk in mutual fund schemes shall be increased to five as under SEBI Circular No. CIR/IMD/DF/4/2013 dated April 30, 2015 i. Low - principal at low risk ii. Moderately Low - principal at moderately low risk iii. Mod .....

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Master Circular for Mutual Funds - SEBI

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