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Master Circular for Mutual Funds - SEBI - SEBI/HO/IMD/DF3/CIR/P/2016/84

Extract

..... 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 .................................................................................. 29 NEW PRODUCTS ........................................................................... 29 CHAPTER 4 ................................................................................. 38 RISK MANAGEMENT SYSTEM ....................................................... 38 CHAPTER 5 ......................... .....

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Master Circular for Mutual Funds - SEBI

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..... ement Company AMC Asset under Management AUM Association of Mutual Funds in India AMFI Authorized Dealer AD Bombay Stock Exchange BSE Central Board of Direct Taxes CBDT Compliance Test Reports CTR(s) Common Account Statement CAS Contingent Deferred Sales Charge CDSC Compound Annual Growth Rate CAGR Depository Participant DP External Commercial Borrowings ECB Financial Action Task Force FATF Foreign Exchange Management Act FEMA Foreign Institutional Investor FII Fixed Maturity Plans FMP(s) Global Depository Receipt GDR Gold Exchange Traded Fund GETF Gold Monetization Scheme GMS Hindu Undivided Family HUF International Organization of Securities Commission IOSCO Investor Service Center ISC Key Information Memorandum KIM Know Your Client KYC Monthly 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 Boa .....

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Master Circular for Mutual Funds - SEBI

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..... from the date of refiling; SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997. d. If any changes to the SID are made after filing, the 21 working day(s) period will recommence from the date of submission of the last additional statement(s) SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997, SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997. 1.1.3.2 Filing of SAI a. A single SAI (common for all the schemes) can be filed with Board along with first draft of SID or can be filed separately. After incorporating the comments/observations, if any, from the Board, AMC shall file a soft copy of SAI with the Board in PDF format along with printed copy of the same SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29, 2009, upload the SAI on its website and on AMFI website. 1.1.3.3 Filing of Final SID a. Final SID (after incorporating comments of the Board) must reach the Board before it is issued for circulation. Soft copy of the final SID in PDF format along with a printed copy should be filed with Board 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 .....

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Master Circular for Mutual Funds - SEBI

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..... ervice Centre (ISC) so that the same can be attached to copies of SID already in stock, till the SID is updated. 3. In case any information in SID is amended more than once, the latest applicable addendum shall be a part of SID. (For example, in case of changes in load structure the addendum carrying the latest applicable load structure shall be attached to all KIM and SID already in stock till it is updated). 4. A public notice shall be given in respect of such changes in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of region where the Head Office of the Mutual Fund is situated. 1.2.1.3 A copy of all changes made to the scheme shall be filed with Board within 7 days of the change. A soft copy of updated SID shall be filed with Board in PDF Format along with printed copy of the same. AMC shall also submit an undertaking to the Board while filing the soft copy that information contained in the soft copy of SID to be uploaded on SEBI website is current and relevant and matches exactly with the contents of the hard copy and that the AMC is fully responsible for the contents of the soft copy of the SID SEBI Circular No - .....

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Master Circular for Mutual Funds - SEBI

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..... n ended schemes on maturity. 1.5 Standard Observations 1.5.1 Standard Observations have been prescribed to ensure minimum level of disclosures in the SID and SAI For Standard Observations, please refer to the section on Formats. 1.5.2 SEBI may revise the Standard Observations from time to time and in that case the date of revision shall also be mentioned. While filing the SID and SAI, AMC shall highlight and clearly mention the page number of the SAI and SID on which each standard observation has been incorporated. 1.6 KIM 1.6.1 Application forms for schemes of mutual funds shall be accompanied by the KIM in terms of Regulation 29 (4). KIM shall be printed at least in 7 point font size with proper spacing for easy readability. 1.6.2 Format of KIM 1.6.2.1 Mutual Funds shall prepare KIM in the prescribed format For 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 t .....

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Master Circular for Mutual Funds - SEBI

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..... o. 1.8.5.3 Balanced funds with equity investments of 40%-60% shall be compared with a tailored index having 50% of its weight selected from any equity index as above and the other 50% from an appropriate bond return index. 1.8.5.4 Money Market funds or liquid plans can be compared against a suitable Money Market Instrument or a combination of such instruments. 1.9 New Fund Offer (NFO) Period SEBI Circular no MFD/Cir.No 9/120/2000 dated November 24, 2000. SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010. The provisions mentioned shall be applicable for all NFOs launched on or after July 01, 2010 1.9.1 In case of open ended and close ended schemes (except ELSS schemes), the NFO should be open for 15 days. 1.9.2 The NFO period in case of ELSS schemes shall continue to be governed by guidelines issued by Government of India. 1.9.3 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, .....

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Master Circular for Mutual Funds - SEBI

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..... ion may be imposed when there are circumstances leading to a systemic crisis or event that severely constricts market liquidity or the efficient functioning of markets such as: 1.10.3.1.1 Liquidity issues - when market at large becomes illiquid affecting almost all securities rather than any issuer specific security. AMCs should have in place sound internal liquidity management tools for schemes. Restriction on redemption cannot be used as an ordinary tool in order to manage the liquidity of a scheme. Further, restriction on redemption due to illiquidity of a specific security in the portfolio of a scheme due to a poor investment decision, shall not be allowed. 1.10.3.1.2 Market Failures, exchange closures - when markets are affected by unexpected events 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 .....

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Master Circular for Mutual Funds - SEBI

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..... e fees and expenses charged to the scheme. c. Any safety net or guarantee provided. CHAPTER 2 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN PART I - CONVERSION OF SCHEMES 2.1 Conversion of Close Ended Scheme(s) to Open Ended Scheme(s) SEBI Circular No. MFD/CIR No.22/2311/03 dated January 30, 2003. 2.1.1 Although the procedure for conversion of close ended scheme(s) to open ended scheme(s) has been clearly enumerated in the Mutual Funds Regulations Regulation 33(3) of the SEBI (Mutual Funds), Regulations, 1996. following requirements are clarified again: 2.1.1.1 Since the scheme(s) would reopen for fresh subscriptions, disclosures contained in the SID shall be revised and updated. A copy of the draft SID shall be filed with the Board as required under Regulation 28(1) of the Mutual Funds Regulations along with filing fees prescribed under Regulation 28(2) of the Mutual Funds Regulations. Instructions issued by the Board SEBI Circular No. SEBI/IMD/Cir No 5/126096/08 dated May 23, 2008 for filing of the SID shall also be followed. 2.1.1.2 A draft of the communication to be sent to unit holders shall be submitted to the Board which shall include the following: a .....

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Master Circular for Mutual Funds - SEBI

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..... the option to exit at prevailing NAV without charging exit load, shall disclose all relevant information enabling them to take well informed decisions. This information will include, inter alia: 1. Latest portfolio of the concerned schemes Refer format of half yearly portfolio disclosure under section on Formats. 2. Details of the financial performance of the concerned schemes since inception in the format prescribed in SID Please refer to SID Format under section on Formats along with comparisons with appropriate benchmarks. 3. Information on the investment objective, asset allocation and the main features of the new consolidated scheme. 4. Basis of allocation of new units by way of a numerical illustration 5. Percentage of total NPAs and percentage of total illiquid assets to net assets of each individual scheme(s) as well the consolidated scheme. 6. Tax impact of the consolidation on the unit holders. 7. Any other disclosure as specified by the Trustees. 8. Any other disclosure as directed by the Board. 2.2.2.3 Updation of SID shall be as per the requirements for change in fundamental attribute of the scheme Please refer to SID chapter for further details. 2.2.2.4 Maintenance of .....

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Master Circular for Mutual Funds - SEBI

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..... ther details which in the opinion of the AMC/ Trustees is material. The addendum shall be filed with SEBI 21 days in advance of opening of plan(s). 2.3.2.2 AMC(s) shall publish an advertisement or issue a press release at the time of launch of such additional plan(s). 2.4 Single Plan SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 2.4.1 Mutual funds/AMCs shall launch schemes under a single plan and ensure that all new investors are subject to single expense structure. 2.4.2 Existing schemes with multiple plans based on the amount of investment (i.e. retail, institutional, super-institutional, etc) shall accept fresh subscriptions only under one plan. 2.4.3 Other plans will continue till the existing investors remain invested in the plan. 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 .....

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Master Circular for Mutual Funds - SEBI

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..... GDS of Banks. Investment in GDS and GMS by Gold ETFs of mutual funds will be subject to following conditions: a. The cumulative Investment by Gold ETF in GDS and GMS will not exceed 20% of total AUM of such schemes. b. Before investing in 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. SEB .....

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Master Circular for Mutual Funds - SEBI

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..... g Agency registered with the Board from the view point of assessing the degree of certainty for achieving the objective of capital protection and the rating shall be reviewed on a quarterly basis. 3.3.3 The Trustees shall continuously monitor the portfolio structure of the scheme and report the same in the Half Yearly Trustee Reports73 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 scheme Regulation 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 Gand .....

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Master Circular for Mutual Funds - SEBI

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..... ries may seek necessary transactional details from stock exchanges viz. Actual Trade value, Trading date, Settlement number, etc, for the purpose of enforcing lock-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 publi .....

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Master Circular for Mutual Funds - SEBI

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..... nagement, Operations, Customer Service, Marketing and Distribution, Disaster Recovery and Business Contingency, etc.) and is enclosed herewith as Annexure 2. 4.2 The 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 operatio .....

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Master Circular for Mutual Funds - SEBI

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..... mandates them to conduct stress test on all Liquid Fund and MMMF Schemes. 4.4.2.2 The stress test should be carried out internally at least on a monthly basis, and if the market conditions require so, AMC should conduct more frequent stress test. 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 co .....

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Master Circular for Mutual Funds - SEBI

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..... lation 59A of the Mutual Funds Regulations & SEBI Circular No. MFD/CIR No.010/024/00 dated January 17, 2000. 5.2.2 The Scheme Portfolio(s) For format of half yearly portfolio, please refer to the section on formats shall also be disclosed on the Mutual Funds’ web sites before the expiry of one month from the closure of each Half Year (i.e. March 31 and September 30) and a copy of the same shall be filed with the Board along with the Half Yearly Results SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001. 5.2.3 Disclosure of derivatives in Half Yearly Portfolios SEBI Circular Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010 5.2.3.1 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. 5.2.3.2 Further, while listing net assets, the margin amounts paid should be reported separately under cash or bank balances. 5.3 Unaudited Half Yearly Financials SEBI Circular MFD/CIR/1/200/2001 dated April 20, 2001 & SEBI Circular No. IMD/CIR No.8/132968/200 .....

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Master Circular for Mutual Funds - SEBI

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..... funds at one place SEBI Cir No - MFD/CIR/15/041/2002 dated March 14,2002. However, as per the Regulations Regulation 56(1) & 56(3) of SEBI (Mutual Funds) Regulations, 1996, a copy of Scheme wise Annual Report shall be also made available to unitholder(s) on payment of nominal fees. 5.5 Disclosure of large unit holdings SEBI Circular No. MFD/CIR No.3/211/2001 dated April 30, 2001. 5.5.1 The number of investors holding over 25 % of the NAV For further details, refer Section II - Scheme Governance in the Chapter on Governance Norms, in a scheme and their total holdings in percentage terms shall be disclosed in the Statement of Accounts issued after the NFO and also in the Half Yearly and Annual Results Please refer the section on Formats for requisite formats. 5.6 Asset Under Management (AUM) disclosure SEBI Circular No. Cir/IMD/DF/13/2011 dated August 22, 2011 5.6.1 Wherever the Mutual Funds discloses the AUM figures for the fund, disclosure on bifurcation of the AUM into debt/equity/ balanced etc, and percentage of AUM by geography (i.e. top 5 cities, next 10 cities, next 20 cities, next 75 cities and others) shall be made. The Mutual Funds shall disclose the aforesaid data on t .....

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Master Circular for Mutual Funds - SEBI

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..... distributor-wise gross inflows (indicating whether the distributor is an associate or group company of the sponsor(s) of the mutual fund), net inflows, average assets under management and ratio of AUM to gross inflows on their respective website on an yearly basis. In case the data mentioned above suggests that a distributor has an excessive portfolio turnover ratio, i.e. more than two times the industry average, AMCs shall conduct additional due-diligence of such distributors. 5.7.3 Mutual Funds / AMCs shall also submit the data mentioned in 5.7.1 and 5.7.2 to AMFI and the consolidated data in this regard shall be disclosed on AMFI website. 5.8 Scheme Related Disclosures SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016 In order to improve transparency as well as ease of access to Mutual Fund (MF) scheme related information, it has been decided that: Effective from June 30, 2016 5.8.1 Mutual Funds shall provide the following additional disclosures in the offer documents (Scheme Information Document (SID) / Key Information Memorandum (KIM)) of Mutual Fund scheme (for existing scheme / new scheme, as applicable): 5.8.1.1 The tenure for which the fund manager has b .....

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Master Circular for Mutual Funds - SEBI

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..... e remuneration is aligned with the interest of investors, MFs /AMCs shall make the following disclosures pertaining to a financial year on the MF/AMC website under a separate head - 'Remuneration': 5.11.1 Name, designation and remuneration of Chief Executive Officer (CEO), Chief Investment Officer (CIO) and Chief Operations Officer (COO) or their corresponding equivalent by whatever name called. 5.11.2 Name, designation and remuneration received of all employees of MF/AMC whose: 5.11.2.1 Annual remuneration was equal to or above INR 60 lakh for that year; 5.11.2.2 Monthly remuneration in the aggregate is not less than INR 5 lakh per month, if the employee is employed for a part of the financial year. 5.11.3 The ratio of CEO's remuneration to median remuneration of MF/AMC employees. 5.11.4 MF’s total AAUM, debt AAUM and equity AAUM and rate of growth over last three years. For this purpose, remuneration shall mean remuneration as defined in clause (78) of section 2 of the Companies Act, 2013.The AMCs/MFs shall disclose this information within one month from the end of the respective financial year (effective from FY 2015-16). 5.12 Disclosure of investor complaints .....

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Master Circular for Mutual Funds - SEBI

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..... as exchange traded funds (ETFs) shall also be provided as per the prescribed format. For format please refer to the section on formats. 5.14.2.3 Compliance officers of all the Mutual Funds are advised to take due care while forwarding the MCR data to SEBI. Compliance Officers shall confirm that the data forwarded is correct and does not require any revision. 5.15 New Scheme Report (NSR) SEBI Circular No. SEBI/IMD/CIR NO 13/118899/08 dated February 29, 2008, SEBI Circular No MFD/CIR/12/16588/02 dated August 28, 2002 & SEBI Circular No IIMARP/MF/CIR/05/788/97 dated April 28, 1997, SEBI Circular No. IIMARP/10772/93 dated July 14,1993, 5.15.1 All Mutual Funds shall submit the NSR to SEBI complete in all respects within 10 working days from the date of allotment in the prescribed format For details on format of NSR please refer the section on Formats.. 5.16 Bi-monthly Compliance Test Reports SEBI Circular No. SEBI/IMD/CIR NO 6/98057/07 dated July 5, 2007, SEBI Circular No MFD/CIR/11/36222/2005 dated March 16,2005, SEBI Circular No IIMARP/MF/CIR/10/1076/97 dated June 05,1997 & SEBI Circular No.MFD/CIR/5/360/2000 dated July 4, 2000, 5.16.1 AMCs’ shall do exception reporting .....

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Master Circular for Mutual Funds - SEBI

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..... dopted by the Board of the AMC(s) to strengthen the compliance mechanism. 5.19.2 The Trustee(s) shall also review all information and documents received from the AMC(s) as required under the compliance process. 5.19.3 AMC(s) shall develop a suitable Management Information System for reporting to the Trustees. The report shall contain specific comments on all issues related to the operation of the Mutual Fund as undertaken by the AMC including those provided in the format for reporting by AMC to Trustees Please refer the formats section for format for reporting by AMC to Trustees. 5.19.4 The half-yearly report on the activities of the mutual fund to be submitted by the trustees to the Board under the Mutual Funds Regulations Regulation 18(23)(a) of SEBI (MF) Regulations, 1996 shall cover all issues mentioned in the prescribed format as well as any other issue relevant to the operation of the Mutual Fund For format of Trustee Report, please refer to the formats section.. The Trustees may mention in their report, if they so desire, that they have relied on the reports obtained from the independent auditor or internal/ statutory auditors or the Compliance Officer as the case may be. Th .....

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Master Circular for Mutual Funds - SEBI

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..... or each scheme of the Mutual Fund. CHAPTER 6 GOVERNANCE NORMS PART I - FUND GOVERNANCE 6.1 Formation of Audit and Valuation Committees by the Trustees and/or AMC SEBI Circular No. MFD/CIR No.010/024/2000 dated January 17, 2000. 6.1.1 Audit Committee 6.1.1.1 Trustees shall constitute an audit committee, comprising of the Trustees and chaired by an Independent Trustee to review the internal audit systems and recommendations of the internal and statutory audit reports and ensure that the rectifications as suggested by internal and external auditors are acted upon. 6.1.2 Valuation Committee 6.1.2.1 The AMC shall constitute an in-house valuation committee consisting of senior executives including personnel from accounts, fund management and compliance departments. This committee shall, on a regular basis review the systems and practices of valuation of securities. 6.2 Review and Reporting of Transactions SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000, SEBI Circular No. MFD/CIR No.010/024/2000 dated January 17, 2000, SEBI Circular No. SEBI/MFD/CIR/10/039/2001 dated February 9, 2001. 6.2.1 Reporting of transactions 6.2.1.1 Transaction(s) by directors of the AMC a. Directors o .....

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Master Circular for Mutual Funds - SEBI

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..... ng off period of three years has elapsed from the date of his disassociation. 6.3.5 Mutual Funds are required to have a minimum of 50 per cent. and two-third independent directors on the Board of the AMC(s) and Trustees respectively Regulation 21(d) and Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996. In case the composition of the directors does not meet these requirements, Mutual Funds are required to inform the Board along with the steps proposed to ensure compliance. 6.3.6 AMC(s) or Trustees shall appoint Independent Directors in place of the resigning director(s) within a period of 3 months from the date of resignation. Where Mutual Funds are unable to meet this time limit, they shall report to the Board explaining the reasons for non compliance. Mutual Funds may maintain a panel of eligible persons who can be appointed as Independent Directors For biodata of directors (AMC and Trustee), please refer to section on Formats as and when required. They may also consider appointing more than the required minimum number of Independent Directors to enhance the standards of corporate governance and also to meet the regulatory requirements in case of resignation of an ind .....

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Master Circular for Mutual Funds - SEBI

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..... , Compliance Officer and Heads of all divisions and/or departments or any other employee as decided by the AMC(s) and/or Trustees. c. To guide employees of AMC(s) and Trustees in maintaining a high standard of probity that one would expect from an employee in a position of responsibility. 6.4.4 General 6.4.4.1 Investments Covered: a. These Guidelines cover transactions for purchase or sale of any securities such as shares, debentures, bonds, warrants, derivatives and units of Mutual Fund schemes. b. These Guidelines do not apply to the following investments by the employees: 1. Investments in Fixed Deposits with banks and/or Financial Institutions and/or companies, Life Insurance Policies, Provident Funds (including Public Provident Fund) or investment in savings schemes such as National Savings Certificates, National Savings Schemes, Kisan Vikas Patra, or any other similar investment. 2. Investments of a non-financial nature such as gold etc., Real Estate has been deleted pursuant to the amendment to the Mutual Funds Regulations launching the Real Estate Mutual Funds Schemes wherein guidelines have been prescribed for employee investment in Real Estate. where there is no likely co .....

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Master Circular for Mutual Funds - SEBI

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..... the AMC and the Trustees at the time of review. 6.4.5 Investments in Shares and/or Debentures and/or Bonds and/or Warrants and/or Derivatives Investments in securities shall broadly be classified into investments through (a) primary markets and (b) secondary markets. 6.4.5.1 Investments through the primary markets: a. An employee including access person is permitted to apply to a public issue of shares and/or debentures and/or bonds and/or warrants of any company, as long as the application is made in the normal course of the public issue. Such an application may be made without seeking the clearance from the Compliance Officer. Employees of AMC(s) and Trustees are prohibited from applying in any reserved quota such as promoters’ quota, employees’ quota etc. Employees shall not participate in any private placement of equity by any company. b. Notwithstanding anything stated in (a) above, an employee of an AMC(s) and/or Trustees may apply for shares and/or debentures and/or bonds and/or warrants in a preferential offer, in cases where such a preferential offer is being made by a company that belongs to the same industrial group as the company in which the employee alread .....

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Master Circular for Mutual Funds - SEBI

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..... chase /sale transaction on a personal basis would be cleared only if the Mutual Fund has not transacted in that particular security for at least 15 calendar days. c. The Compliance Officer shall keep a track of the transactions of the employees and transactions of the Mutual Fund to ensure that there is no conflict of interest between them i.e. the Compliance Officer should track whether the Mutual Fund has transacted in the same securities either before or after the employee’s transaction(s). d. The Compliance Officer shall maintain a record of all requests for pre clearance regarding the purchase or sale of a security, including the date of the request, the name of the access person, the details of the proposed transaction and whether the request was approved or denied and waivers given, if any, and its reasons. e. No employee shall purchase any 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 .....

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Master Circular for Mutual Funds - SEBI

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..... the investors; c. The concerned Mutual Fund Scheme is contemplating to issue dividend to the unit holders and this has not been communicated to the investors; d. There is a likelihood of a change in the accounting policy, or a significant change in the valuation of any asset, or class of assets and the same has not been communicated to the investors; e. There is a likelihood of conversion of a close ended scheme to an open ended scheme and vice versa and this has not been communicated to the investors. 6.4.7 Periodic Disclosures 6.4.7.1 All access persons shall submit, in the form prescribed by the Mutual Fund of which the AMC is the investment manager, details of their personal transactions of purchase or sale of securities to the Compliance Officer. The details to be submitted are as follows: a. Details of transactions effected for purchase and/or sale of securities including transactions in rights 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 securit .....

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Master Circular for Mutual Funds - SEBI

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..... ty for an open-ended scheme 6.7.1.1 The Scheme/Plan shall have: a. a minimum of 20 investors and b. no single investor shall account for more than 25% of the corpus of the Scheme/Plan(s). 6.7.1.2 If either/both of such limit(s) is breached during the NFO of the Scheme, it shall be ensured that within a period of three months or the end of the succeeding calendar quarter from the close of the NFO of the Scheme, whichever is earlier, the Scheme complies with these two conditions. 6.7.1.3 In case the Scheme / Plan(s) does not have a minimum of 20 investors in the stipulated period, the provisions of Regulation Regulation 39(2)(c) of the SEBI (MF) Regulations, 1996 would become applicable automatically without any reference from SEBI and accordingly the Scheme / Plan(s) shall be wound up and the units would be redeemed at applicable NAV. 6.7.1.4 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 t .....

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Master Circular for Mutual Funds - SEBI

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..... 1 Redemptions effected pursuant to these Guidelines shall be completed within 10 days from the day of winding up of the scheme(s) and/or plan(s). 6.7.6 Reporting to the Board 6.7.6.1 Compliance with these Guidelines shall be reported in Compliance Test Reports (CTRs) and Half Yearly Trustee Reports. 6.8 Minimum Assets under Management (AUM) of Debt Oriented Schemes SEBI Circular No. Cir/IMD/DF/15/2014 dated June 20, 2014 6.8.1 It has been observed that many debt oriented schemes are operating with a very low AUM. In the interest of investors, it is important that debt oriented schemes have an adequate 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. 6.8.2 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 schem .....

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Master Circular for Mutual Funds - SEBI

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..... audit should be completed by September 30, 2010. PART IV - ROLE OF MUTUAL FUNDS IN CORPORATE GOVERNANCE OF PUBLIC LISTED COMPANIES SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 6.16 MFs should play an active role in ensuring better corporate governance of listed companies. 6.17 AMCs shall disclose their general policies and procedures for exercising the voting rights in respect of shares held by them on the website of the respective AMC as well as in the annual report distributed to the unit holders from the financial year 2010-11. 6.18 AMCs are required to disclose on the website of the respective AMC as well as in the annual report distributed to the unit holders from the financial year 2010-11, the actual exercise of their proxy votes in the AGMs/EGMs of the investee companies in respect of the following matters. 6.18.1 Corporate governance matters, including changes in the state of incorporation, merger and other corporate restructuring, and antitakeover provisions 6.18.2 Changes to capital structure, including increases and decreases of capital and preferred stock issuances. 6.18.3 Stock option plans and other management compensation issues; 6.18.4 .....

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Master Circular for Mutual Funds - SEBI

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..... d. CHAPTER 7 SECONDARY MARKET ISSUES 7.1 Non Applicability of Listing Deposit SEBI Circular No. SMD-II(N)/2113/94 dated April 12, 1994. Further, in this regard, circulars issued by SEBI from time to time may be considered. 7.1.1 The requirement of collecting listing deposit as specified under Circular Letter No. SE/12936 dated April 6, 1992 shall not be applicable to Mutual Fund schemes seeking listing on the Stock Exchanges. 7.2 Payment of Margins SEBI Circular No. MFD/CIR/9/230/2001 dated August 14, 2001 7.2.1 The applicable margins shall be paid as per the guidelines issued by SEBI and as directed by stock exchanges from time to time. 7.3 Unique Client Codes SEBI Circular No. MFD/CIR No.8/290/01 dated July 30, 2001, SEBI Circular No. SEBI/SMD/SE/11/2003/31/03 dated March 31, 2003, SEBI Circular No. SEBI/IMD/CIR No.01/1756/04 dated January 27, 2004, SEBI Circular No. MRD/DoP/SE/Cir-35/2004 dated October 26, 2004, SEBI Circular No. SEBI/IMD/CIR No.2/46603/05 dated August 10, 2005. Further, in this regard, circulars issued by SEBI from time to time may be considered 7.3.1 Mutual Funds are not permitted to operate in the securities market without furnishing a valid Unique Client Cod .....

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Master Circular for Mutual Funds - SEBI

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..... shall be provided to the dissenting unit holders. Such option shall be kept open for a period of one month prior to the scheme commencing trading in derivatives. e. No exit load shall be charged to the unit holders exercising such exit options. 7.4.1.5 Positions limits as specified by SEBI for Mutual Funds and its schemes from time to time shall be applicable Please refer SEBI Circular No DNPD/Cir - 29/2005 Dated September 14, 2005 for position limits and subsequent circulars issued in this regard from time to time. 7.5 Trading in Interest Rate Derivatives SEBI Circular No. SEBI/MFD/CIR No.03/158/03 dated June 10, 2003. 7.5.1 Mutual Fund schemes are permitted to undertake transactions in Forward Rate Agreements and Interest Rate Swaps with banks, PDs & FIs as per applicable RBI Guidelines RBI Circular dated November 1, 1999., mutual funds can also trade in interest rate derivatives through the Stock Exchanges subject to requisite disclosures in the SID SEBI Circular No. SEBI/MFD/CIR No.03/158/03 dated June 10, 2003. 7.5.2 The following position limits SEBI Circular No. CIR/MRD/DRMNP/26/2014 dated September 15, 2014 in IRF shall be applicable for Mutual Fund level and scheme lev .....

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Master Circular for Mutual Funds - SEBI

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..... ences shall also be disclosed SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006. 8.1.5 In case the NAVs are not available before the commencement of business hours on the following day due to any reason, Mutual Funds shall issue a press release giving reasons for the delay and explain when they would be able to publish the NAVs SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006. 8.2 Rounding off NAVs SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002, SEBI Circular No. MFD/CIR/11/16159/2002 dated August 22, 2002. 8.2.1 To ensure uniformity, Mutual Funds shall round off NAV up to four decimal places for index funds and all types of debt & liquid/money market schemes. 8.2.2 For all equity oriented and balanced fund schemes, Mutual Funds shall round off NAVs up to two decimal places. However, Mutual Funds can round off the NAVs up to more than two decimal 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 Tim .....

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Master Circular for Mutual Funds - SEBI

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..... is received upto 2.00 p.m. on a day and funds are available for utilization before the cut-off time without availing any credit facility, whether, intra-day or otherwise - the closing NAV of the day immediately preceding the day of receipt of application; b. where the application is received after 2.00 p.m. on a day and funds are available for utilization on the same day without availing any credit facility, whether, intra-day or otherwise - the closing NAV of the day immediately preceding the next business day ; and c. irrespective of the time of receipt of application, where the funds are not available for utilization before the cut-off time without availing any credit facility, whether, intra-day or otherwise - the closing NAV of the day immediately preceding the day on which the funds are available for utilization. 8.3.5.2 For allotment of units in respect of purchase in liquid schemes, it 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 utili .....

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Master Circular for Mutual Funds - SEBI

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..... credited. In respect of purchase of units of mutual fund schemes (other than liquid schemes), the closing NAV of the day on which the funds are available for utilization shall be applicable for application amount equal to or more than ₹ 2 lakh, irrespective of the time of receipt of such application SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 8.3.6.3 For allotment of units in respect of purchase in income/debt oriented mutual fund schemes/plans other than liquid schemes, it shall be ensured that SEBI Circular No SEBI/IMD/DF/15/2010 dated November 26, 2010: 8.3.6.3.1 Application is received before the applicable cut-off time (3 pm). 8.3.6.3.2 Funds for the entire amount of subscription/purchase as per the application are credited to the bank account of the respective schemes before the cut-off time (3 pm). 8.3.6.3.3 The funds are available for utilization before the cut-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. .....

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Master Circular for Mutual Funds - SEBI

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..... ustee Reports shall contain a declaration on whether the Trustees are satisfied with the systems and procedures of the Mutual Fund designed for the purpose of compliance with these Guidelines. 8.3.9.3 Further, the substance of these Guidelines shall be disclosed to investors in the SID or in any addendum thereto. 8.3.9.4 Encumbrance of the scheme property SEBI Circular No SEBI/IMD/DF/15/2010 dated November 26, 2010 Regulations Fourth Schedule of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 provides that the AMC shall not acquire any of the assets out of the scheme property which involves the assumption of any liability which is unlimited or which may result in encumbrance of the scheme property in any way. AMC’s are advised to strictly adhere to the said provision. 8.4 Requirements with respect to time stamping machines [pursuant to Clause 8(3)] 8.4.1 For every 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 d .....

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Master Circular for Mutual Funds - SEBI

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..... able to investors and/or number of units allotted to them, and 8.5.1.3 To make the calculations more comprehensible to the investors. 8.5.2 Exit loads shall be charged as a percentage of the NAV i.e. applicable load as a percentage of NAV will be subtracted from the NAV to calculate the repurchase price. 8.5.3 The formula for the same is as follows: 8.5.3.1 Sale Price = Applicable NAV 8.5.3.2 Repurchase Price = Applicable NAV *(1 - Exit Load, if any) CHAPTER 9 VALUATION 9.1 Definitions SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000, SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001 and SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.1.1 Non Traded Securities SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.1.1.1 When a security (other than Government Securities) is not traded on any Stock Exchange for a period of thirty days prior to the valuation 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 convertib .....

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Master Circular for Mutual Funds - SEBI

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..... private placement, the value at which it was bought may be used for a period of fifteen days beginning from the date of purchase. 9.2.2 Non-Traded /and/or Thinly Traded Securities: SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.2.2.1 AMCs shall value non traded and/or thinly traded securities “in good faith” based on the Valuation norms prescribed below: 9.2.3 Non-traded/ and/or thinly traded equity securities: 9.2.3.1 Based on the latest available Balance Sheet, Net Worth shall be calculated as follows: a. Net Worth per share = [Share Capital+ Reserves (excluding Revaluation Reserves) - Miscellaneous expenditure and Debit Balance in Profit and Loss Account] / Number of Paid up Shares. b. Average Capitalization rate (P/E ratio) for the industry based upon either BSE or NSE data (which shall be followed consistently and changes, if any, noted with proper justification 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 .....

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Master Circular for Mutual Funds - SEBI

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..... ar No. Cir/IMD/DF/6/2012 dated February 28, 2012 days: 1. All money market and debt securities, including floating rate securities, with residual maturity of over 60 days shall be valued at weighted average price at which they are traded on the particular valuation day. When such securities are not traded on a particular valuation day they shall be valued at benchmark yield/ matrix of spread over risk free benchmark yield obtained from agency(ies) entrusted for the said purpose by AMFI. 2. The approach in valuation of non traded debt securities is based on the concept of using spreads over the benchmark rate to arrive at the yields for pricing the non traded security. 3. The Yields for pricing the non traded debt security would be arrived at using the process as defined below. Step 1: A Risk Free Benchmark Yield is built using the government securities as the base. Government securities are 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 wh .....

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Master Circular for Mutual Funds - SEBI

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..... ervative publicly available rating will be used; b. For each rating category, average volume weighted yield will be obtained both from trades on the appropriate stock exchange and from the primary market issuances c. Where there are no secondary trades on the appropriate stock exchange in a particular rating category and no primary market issuances during the fortnight under consideration, then trades on appropriate stock exchange during the 30 day period prior to the benchmark date will be considered for computing the average YTM for such rating category; d. If the matrix cannot be populated using any or all of the above steps, then credit spreads from trades on appropriate stock exchange of the relevant rating category over the AAA trades will be used to populate the matrix; e. In each rating category, all outliers will be removed for smoothening the YTM matrix; f. Spreads will be obtained 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 practic .....

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Master Circular for Mutual Funds - SEBI

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..... designation may be) of the AMC shall give prior approval to the use of discretionary mark up or down limit. 9.4 Valuation of securities with Put/Call Options: SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.4.1 The option embedded securities would be valued as follows: 9.4.1.1 Securities with call option a. The securities with call option shall be valued at the lower of the value as obtained by valuing the security to final maturity and valuing the security to call option. In case there are multiple call options, the lowest value obtained by valuing to the various call dates and valuing to the maturity date is to be taken as the value of the instrument. 9.4.1.2 Securities with Put option a. The securities with put option shall be valued at the higher of the value as obtained by valuing the security to final maturity and valuing the security to put option. In case there 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 wo .....

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Master Circular for Mutual Funds - SEBI

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..... bt Securities) SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.7.1 Definition of a Non Performing Asset (NPA) 9.7.1.1 An ‘asset’ shall be classified as NPA if the interest and/or principal amount have not been received or remained outstanding for one quarter from the day such income and/or installment was due. 9.7.2 Effective date for classification and provisioning of NPAs 9.7.2.1 The definition of NPA may be applied after a quarter past due date of the interest. For e.g. if the due date for interest is 30.06.2016, it will be classified as NPA from 01.10.2016. 9.7.3 Treatment of income accrued on the NPA and further accruals 9.7.3.1 After the expiry of the 1st quarter from the date the income has fallen due, there will be no further interest accrual on the asset i.e. if the due date for interest falls on 30.06.2016 and if the interest is not received, accrual will continue till 30.09.2016 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 int .....

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Master Circular for Mutual Funds - SEBI

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..... after due date i.e. 30.09.2016. The provisioning will be done in the following phased manner: 10% provision 01.01.2016 6 months past due date of interest i.e. 3 months from the date of classification of asset as NPA (01.10.2016) 20% provision 01.04.2016 20% provision 01.07.2016 25% provision 01.10.2016 25% provision 01.01.2017 b. Thus, one and half years past the due date of income or one year and three months from the date of classification of the ‘asset’ as an NPA, the ‘asset’ will be fully provided for. If any installment is fallen due, during the period of interest default, the amount of provision shall be the installment amount or above provision amount, whichever is higher. 9.7.5 Reclassification of assets 9.7.5.1 Upon reclassification of assets as ‘performing assets’: a. In case a company has fully cleared all the arrears of interest, the 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. .....

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Master Circular for Mutual Funds - SEBI

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..... t reschedulement and only payment of interest is in default, the classification of the asset as NPA shall be continued and existing provisions shall not be written back. This practice shall be continued for two quarters of regular servicing of the debt. Thereafter, this be classified as ‘performing asset’ and the interest provided can be written back. b. If the reschedulement is done due to default in interest and principal amount, the asset shall continue as NPA for a period of 4 quarters, even though the asset is continued to be serviced during these 4 quarters regularly. Thereafter, the asset can be classified as ‘performing asset’ and all the interest provided till such date shall be written back. c. If the reschedulement is done for a second/ third time or thereafter, the characteristics of NPA should be continued 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 Disclosur .....

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Master Circular for Mutual Funds - SEBI

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..... S) of the latest audited annual accounts will 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 15 per cent for illiquidity so as to arrive at the fair value per share. 9.8.1.2 The above valuation methodology shall be subject to the following conditions: a. All calculations shall be based on audited accounts. b. If 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. c. If the Net Worth of the company is negative, the share would be marked down to zero. 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 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 th .....

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Master Circular for Mutual Funds - SEBI

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..... rustees and the statutory auditors. 9.10 Dissemination of information: 9.10.1 All mutual funds shall provide transaction details, including inter scheme transfers, of money market and debt securities on daily basis to the agency entrusted for providing the benchmark yield/ matrix of spread over risk free benchmark yield. Submission of data SEBI Circular No. MFD/CIR/23 /066 / 2003 dated March 7, 2003. For disclosure of transaction details, please refer to the section on Formats would help in daily matrix generation and would improve uniformity and accuracy of valuation in the mutual funds industry. 9.10.2 The AMCs shall also disclose all details of debt and money market securities transacted (including inter scheme transfers) in its schemes portfolio on its website and the same shall be forwarded to AMFI for consolidation and dissemination as 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 consi .....

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Master Circular for Mutual Funds - SEBI

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..... /DF/24/2012 dated November 19, 2012. incurred for the purpose of execution of trade may be capitalized to the extent of 12bps and 5bps for cash market transactions and derivatives transactions respectively. Any payment towards brokerage and transaction cost, over and above the said 12 bps and 5bps for cash market transactions and derivatives transactions respectively may be charged to the scheme within the maximum limit of Total Expense Ratio (TER) as prescribed under regulation 52 Regulation 52 of the SEBI (Mutual Funds) Regulations, 1996. Any expenditure in excess of the said prescribed limit (including brokerage and transaction cost, if any) shall be borne by the AMC or by the trustee or sponsors. 10.1.6 Soft-dollar arrangement refers to an arrangement between AMCs and brokers in which the AMC executes trades through a particular broker and in turn the broker may provide benefits such as free research, hardware, software or even non-research-related services, etc., to the AMC. It may be noted that such arrangements between AMCs and brokers should be limited to only benefits (like free research report, etc.) that are in the interest of investors and the same should be suitably di .....

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Master Circular for Mutual Funds - SEBI

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..... 10.2 Restriction on paying brokerage or commission SEBI Circular No. MFD/CIR No.3/211/2001 dated April 30, 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 t .....

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Master Circular for Mutual Funds - SEBI

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..... ions after July 31, 2009 can be used by mutual funds for marketing and selling expenses including distributor’s/agent's commissions without any restrictions mentioned in Para (b) above. 10.4.1.4 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. 10.4.1.5 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: 10.4.2.1 Investments in mutual fund schemes (including additional purchases and switch-in to a scheme from other schemes) w.e.f August 1, 2009 10.4.2.2 Redemptions from mutual fund schemes (including switch-out from other schemes) w.e.f August 1, 2009 10.4.2.3 New mutual fund schemes launched on or after August 1, 2009 10.4.2.4 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 .....

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Master Circular for Mutual Funds - SEBI

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..... o detect if a distributor is splitting investments in order to enhance the amount of transaction charges and take stringent action including recommendations to AMFI to take appropriate action. 10.5.3 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 chargin .....

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Master Circular for Mutual Funds - SEBI

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..... sue of public notice. 11.2.1.4 Before the issue of such notice, no communication whatsoever indicating the probable date of dividend declaration shall be issued by any Mutual Fund or its distributors 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 circula .....

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Master Circular for Mutual Funds - SEBI

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..... r. 12.2 Investments by Liquid Schemes and plans SEBI Circular No - SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009 12.2.1 The ‘liquid fund schemes and plans’ shall make investment in /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 .....

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Master Circular for Mutual Funds - SEBI

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..... estment limit may be extended to 25% of the net assets of the scheme with the prior approval of the Board of Trustees. b) For this purpose, a group means a group 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. 296 SEBI Circular No. CIR/IMD/DF/05/2014 dated March 24, 2014 138 Master Circular for Mutual Funds 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 .....

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Master Circular for Mutual Funds - SEBI

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..... 2000. 12.6.1 Mutual Funds may, for the purpose of operational flexibility, constitute committees to approve investment proposals in unrated instruments. However, detailed parameters for investment in unrated debt instruments have to be approved by the Board 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 .....

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Master Circular for Mutual Funds - SEBI

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..... s for parking of funds in short term deposits of scheduled commercial banks. 12.10.1.7 Half Yearly portfolio statements shall disclose all funds parked in short term deposit(s) under a separate heading. Details shall also include name of the bank, amount of 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 (12.9.1.7) the above guidelines shall not apply to term deposits placed as margins for trading in cash and derivatives market SEBI Circular No. SEBI .....

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Master Circular for Mutual Funds - SEBI

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..... ons, 1996, mutual funds shall borrow through repo transactions only if the tenor of the transaction does not exceed a period of six months. 12.12.1.5 The Trustees and the Asset Management Companies shall frame guidelines about, inter alia, , the following 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 sec .....

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Master Circular for Mutual Funds - SEBI

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..... lines while making overseas investments: 12.13.3.1 Appointment of a Dedicated Fund Manager: a. A dedicated fund manager shall be appointed for making the above overseas investments stipulated under clause 12.13.2.1 to 12.13.2.10. 12.13.3.2 Due Diligence: a. The Board of the AMC and Trustees shall exercise due diligence in making investment decisions and record the same. SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. They shall make a detailed analysis of risks and returns of overseas investment and how these investments would be in the interest of investors. Investment shall be made in liquid actively traded securities /instruments. b. The Board of the AMC and Trustees may prescribe detailed parameters for making such investments which may include identification of countries, country rating, country limits etc. They shall satisfy 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 an .....

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Master Circular for Mutual Funds - SEBI

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..... the Head Office of the Mutual Fund is situated. The communication to unit holders shall also disclose the risk factors associated with such investments. 12.13.3.5 Detailed periodic reporting to Trustees by AMC(s) shall include: a. Performance of overseas investments b. Amount invested in various schemes and any breach of the exposure limit laid down in the SID. 12.13.3.6 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 .....

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Master Circular for Mutual Funds - SEBI

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..... ectors 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. 12.16.2 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 scheme(s) is poor. 12.16.3 AMC(s) shall report compliance with these requirements in their periodical reports to the Trustees and the Trustees shall report the same to the Board in the Half Yearly Trustee Reports For Half Yearly Trustee Report please refer to the section on Formats. Trustees shall also check compliance with these Guidelines through independent auditors or internal and/or statutory auditors or other systems develo .....

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Master Circular for Mutual Funds - SEBI

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..... 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. 12.17.1.9 The provisions shall be applicable for all new schemes launched post the issue of the aforementioned guidelines. For all existing schemes, compliance with the guidelines shall be effective from October 01, 2010. 12.18 Interval Schemes/Plans SEBI Circular No. CIR/IMD/DF /19/2010 dated November 26, 2010 12.18.1 Certain SIDs provide that the subscription to the scheme can be made during a specific period (known as specified transaction period) and the repurchase of units is permitted on all business days subject to applicable loads (except for redemption during specified transaction period when no load is charged). These schemes are generally referred to as ‘interval schemes’. 12.18.2 For all interval schemes/plans Applicability: The AMC shall ensure compliance with the requirements mentioned in Clause 12.16.2 from the date of next specified transaction period or April 1, 2011 whichever is later. Schemes for whi .....

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Master Circular for Mutual Funds - SEBI

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..... 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 Management Company and the Trustees as per the guidelines specified by RBI and Securities and Exchange Board of India (SEBI). The policy shall be reviewed by mutual funds, at least once a year. g. To enable the investors in the mutual funds schemes to take an informed decision, the concerned Scheme Information Document (SID) shall disclose the intention to participate in CDS transaction in corporate debt securities in accordance with directions issued by RBI and SEBI from time to time, and related information as appropriate in this regard. h. Mutual funds shall also disclose the details of CDS transactions of the scheme in corporate debt securities in the monthly portfolio statements as well as in the half yearly trustee report, as per the format Please refer to section on Formats for requisite formats. Further, mutual funds shall disclose the scheme wise details of CDS transacti .....

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Master Circular for Mutual Funds - SEBI

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..... ne year but less than three years, performance advertisement of scheme(s) shall be provided for as many as twelve month periods as possible, such periods being counted from the last day of the calendar quarter preceding the date of advertisement, alongwith benchmark index performance for the same periods. 13.3.3 Where the scheme has been in existence for less than one year, past performance shall not be provided. 13.3.4 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. 13.3.5 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 Stateme .....

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Master Circular for Mutual Funds - SEBI

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..... MCs and Trustees the publicized percentage allocation and the final portfolio. Variations between indicative portfolio allocation and final portfolio will not be permissible. CHAPTER 14 INVESTOR RIGHTS & OBLIGATIONS PART I - INVESTOR RIGHTS 14.1 Payment of interest for delay in dispatch of redemption and/or repurchase proceeds and/or dividend SEBI Circular No. SEBI/MFD/CIR/2/266/2000 dated May 19, 2000. 14.1.1 In the event of failure to dispatch: a. Redemption or repurchase proceeds within 10 working days from the date of receipt of such requests and/ or b. Dividend within the stipulated 30 day period SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009, 14.1.2 The AMC(s) shall be liable to pay interest @ 15 per cent per annum to the unit holders. Regulation 53(c) of the SEBI (Mutual Fund) Regulations, 1996. AMC(s) must ensure that the interest amount due for the period of delay in dispatch of repurchase or redemption and/or dividend is added to the proceeds when such payments are made to the investors. Such interest shall be borne by the AMC(s). 14.1.3 Details of such payments shall be sent to the Board along with the CTR(s). For CTR format please ref .....

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Master Circular for Mutual Funds - SEBI

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..... 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 alongwith its prevailing value (based on income earned on deployment of such unclaimed amount), shall be separately disclosed to investors through the periodic statement of accounts / Consolidated Account Statement sent to the investors. 14.2.7 Disclosures on above provisions shall be made in the SAI /SID. Disclosure on the unclaimed amounts and the number of such investors for each scheme shall be made in the Annual Report also. Please refer to Schedule XI of SEBI (Mutual Funds) Regulations, 1996 14.3 Dispatch of Statement of Accounts SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000, SEBI Circular No. IMD/CIR/12/80083/2006 dated November 20, 2006 and SEBI Circular No.Cir/IMD/DF/16/2011 dated September 08, 2011 14.3.1 AMCs shall allot the units to the applicant whose application has been accepted and also send confirmation specifying the number .....

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Master Circular for Mutual Funds - SEBI

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..... ll be given to the demat account holder by the default depository to choose the depository through which the investor wishes to receive the CAS. 14.3.2.6 The CAS shall be generated on a monthly basis. The AMCs /MFRTAs 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 within ten days from the month end. 14.3.2.7 Where statements are presently being dispatched by email either by the Mutual Funds or by the Depositories, CAS shall be sent through email. However, where an investor does not wish to receive CAS through email, option shall be given to the investor to receive the CAS in physical form at the address registered in the Depository system. 14.3.2.8 A proper grievance redressal mechanism shall be put in place by the depositories and the AMCs/MF-RTAs which shall also be communicated to the investors through CAS. AMCs/MF-RTAs would be accountable for the authenticity of the information provided through CAS in respect of MF investments and timely sharing of such information with Depositories. The Depositories would be responsible for the timely dispatch of CAS .....

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Master Circular for Mutual Funds - SEBI

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..... iance by the MFs with the requirement under Regulation 36(4) of SEBI (Mutual Funds) Regulations. 14.3.2.16 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: a) Each CAS issued to the investors shall also provide the total purchase value / cost of investment in each scheme. b) Further, CAS issued for the half-year (September/ March) shall also provide. i. The amount of actual commission paid by AMCs/Mutual Funds (MFs) to distributors (in absolute terms) during the half-year period against the concerned investor’s total investments in each MF scheme. The term ‘commission’ here refers to all direct monetary payments and other payments made in the form of gifts / rewards, trips, event sponsorships etc. by AMCs/MFs to distributors. ii. The scheme’s average Total Expense Ratio (in percentage terms) for the half-year period, of both direct plan and regular plan, for each scheme where the concerned investor has invested in. Such half-yearly CAS shall be issued to all MF investors, excluding those investors who do not have any holdings in MF schemes an .....

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Master Circular for Mutual Funds - SEBI

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..... ll distribute such amounts to the old investors if such amounts are substantial and realized within two years. If the amounts realized are not substantial or are realized after two years, the same may be transferred to the Investor Education Fund maintained by each Mutual Fund. The decision as to the determination of substantial amount shall be taken by the trustees of mutual funds after considering the relevant factors. 14.6 Change of Mutual Fund Distributor 14.6.1 Incase an investor wishes to change his distributor or wishes to go direct, Mutual Funds/AMC’s shall ensure compliance with the instruction of the investor informing his desire to change his distributor and / or go direct, without compelling that investor to obtain a ‘No Objection Certificate’ from the existing distributor. SEBI Circular No -SEBI/IMD/CIR No./ 13/187052 /2009 December 11, 2009 14.7 Additional mode of payment through Applications Supported by Blocked Amount (hereinafter referred to as “ASBA”) in Mutual Funds SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 14.7.1 ASBA facility which investors have been enjoying for subscription to public issue of equit .....

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Master Circular for Mutual Funds - SEBI

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..... f the brochure among their distributors and agents (including brokers, banks, post offices) and the investors. 14.10.3 AMCs may publish the same as small booklets. In such a case, while the booklets must bear SEBI name and logo, AMC may give their name as publisher. This may also be displayed prominently on their web sites 14.10.4 AMFI may consider including the brochure as a part of study material for their training programmes for investors and for their certification programme conducted for agents and distributors. 14.10.5 Board may be kept informed about the steps taken by the AMCs in this regard from time to time. 14.11 Financial Inclusion: 14.11.1 In context of Mutual Funds, financial inclusion implies that the concept of Mutual Fund products is understood by all and are accessible to anyone who wishes to make an investment in them. Also, investors should be capable of figuring out which Mutual Fund scheme is appropriate for their financial objectives. Towards this, it has been decided that: a. Mutual Funds shall mandatorily also make available printed literature on mutual funds in regional languages for investor awareness and education. b. Mutual Funds to introduce Investor a .....

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Master Circular for Mutual Funds - SEBI

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..... following criteria: a. Multiple point presence (More than 20 locations) b. AUM raised over ₹ 100 Crore across industry in the non-institutional category but including high networth individuals (HNIs) c. Commission received of over ₹ 1 Crore p.a. across industry d. Commission received of over ₹ 50 Lakh from a single Mutual Fund 15.4.1.3 At the time of empanelling distributors and during the period i.e. review process, Mutual Funds/AMCs shall undertake a due diligence process to satisfy ‘fit and proper’ criteria that incorporate, amongst others, the following factors: a. Business model, experience and proficiency in the business. b. Record of regulatory / statutory levies, fines and penalties, legal suits, customer compensations made; causes for these and resultant corrective actions taken. c. Review of associates and subsidiaries on above factors. d. Organizational controls to ensure that the following processes are delinked from sales and relationship management processes and personnel: 1. Customer risk / investment objective evaluation. 2. MF scheme evaluation and defining its appropriateness to various customer risk categories. 15.4.1.4 In this resp .....

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Master Circular for Mutual Funds - SEBI

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..... m sample survey of investors. 15.4.1.6 Mutual Funds/AMCs may implement additional measures as deemed appropriate to help achieve greater investor protection. 15.5 Code of Conduct: 15.5.1 Mutual Funds are required to monitor the activities of their distributors, agents, brokers to ensure that they do not indulge in any malpractice or unethical practice while selling or marketing Mutual Funds units. Any non compliance with the Mutual Funds Regulations and Guidelines pertaining to Mutual Funds especially guidelines on advertisements and/ or sales literature and/or Code of Conduct shall be reported in the periodic meetings of the Board of the AMC and the Trustee(s) and shall also be reported to the Board by the AMC(s) in their CTR(s) and by the Trustees in their Half Yearly Reports. 15.5.2 AMFI has prescribed a Code of Conduct for Mutual Fund intermediaries enclosed herewith as Annexure 1 Refer Annexure and Reports for details on Code of Conduct. All intermediaries shall follow the Code of Conduct strictly and not indulge in any practice contravening it directly or indirectly. 15.5.3 Non compliance with the Code of Conduct shall be reported by the Mutual Funds to the Board and AMFI. Fu .....

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Master Circular for Mutual Funds - SEBI

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..... person holding a valid AMFI certification whose validity expires between June 01, 2010 and December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, by December 31, 2010. 15.7.3 An associated person holding a valid AMFI/NISM certification whose validity expires anytime after December 31, 2010, would be required to comply with the CPE requirements as laid down by NISM under the relevant clauses of the Certification Regulations, prior to the expiry of the validity of the certification. 15.7.4 The requirement of obtaining registration from AMFI after obtaining certification, as per the Circular dated November 28, 2002, would continue. 15.8 New cadre of distributors SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 15.8.1 A new cadre of distributors, such as postal agents, retired government and semi-government officials (class III and above or equivalent) with a service of at least 10 years, retired teachers with a service of at least 10 years, retired bank officers with a service of at least 10 years, and other similar persons (such as Bank correspondents) as may be notified .....

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Master Circular for Mutual Funds - SEBI

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..... mber 15.10.1 AMFI shall create a unique identity number of the employee/ relationship manager/ sales person of the distributor interacting with the investor for the sale of mutual fund products, in addition to the AMFI Registration Number (ARN) of the distributor. 15.10.2 The application form for mutual fund schemes shall have provision for disclosing the unique identity number of such sales personnel along with the ARN of distributor. CHAPTER 16 TRANSACTION IN MUTUAL FUNDS UNITS 16.1 Maintenance of documents SEBI Circular No - SEBI/IMD/CIR No.12 /186868 /2009 dated December 11,2009 16.1.1 As per the requirements specified by Board in respect of “Anti Money Laundering (AML) Standards/Combating Financing of Terrorism (CFT) / Obligations of Securities Market Intermediaries under Prevention of Money Laundering Act, 2002 and Rules framed thereunder” SEBI Circular No ISD/AML/CIR-1/2008 dated December 19, 2008, maintenance of all documentation pertaining to the unitholders/ investors is the responsibility of the AMC. 16.1.2. Accordingly, vide SEBI Circular No - SEBI/IMD/CIR No.12 /186868 /2009 dated December 11, 2009, AMCs were advised to confirm whether all the investor rela .....

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Master Circular for Mutual Funds - SEBI

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..... r 13,2009 16.2.1 Stock Exchange terminals can be used for facilitating transactions in mutual fund schemes. The Stock Exchange mechanism would also extend the present convenience available to secondary market investors to mutual fund investors. 16.2.2 Units of mutual fund schemes may be permitted to be transacted through registered stock brokers of recognized stock exchanges and such stock brokers will be eligible to be considered as official points of acceptance SEBI Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006. 16.2.3 The respective stock exchange would provide detailed operating guidelines to facilitate the same. 16.2.4 In this regard, Mutual Funds/AMC are advised that: 16.2.4.1 Empanelment and monitoring of Code of Conduct for brokers acting as mutual fund intermediaries a. The stock brokers intending to extend the transaction in Mutual Funds through stock exchange mechanism shall be required to comply with the requirements of passing the AMFI certification examination Please refer Chapter 15 on Certification and Registration of Mutual Funds intermediaries. All such stock brokers would then be considered as empanelled distributors with mutual fund/AMC. b. The .....

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Master Circular for Mutual Funds - SEBI

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..... tain ISIN for each option of the scheme and quote the respective ISIN along with the name of the scheme, in all Statement of Account/Common Account Statement (CAS) issued to the investors. 16.2.4.8 Know your client (KYC) a. Where investor desires to hold units in dematerialised form, the KYC performed by DP in terms of SEBI requirements SEBI Circular No - MRD/DoP/Dep/Cir-29/2004 dated August 24, 2004 would be considered compliance with applicable requirements specified in this regard SEBI Circular No - ISD/AML/CIR-1/2008 dated December 19, 2008 by Mutual Funds/AMCs. b. The Mutual Funds/AMC shall take necessary steps to do KYC requirements of all investors as per the prescribed guidelines SEBI Circular No. MIRSD/SE/Cir-21/2011, dated October 5, 2011, SEBI Circular No.MIRSD/Cir-23/2011 dated December 2, 2011 and SEBI Circular No.MIRSD/Cir- 26 /2011 dated December 23, 2011. 16.2.4.9 Stock exchanges and mutual funds/AMCs, based on the experience gained may improve the mechanism in the interest of investors. 16.2.4.10 In addition to the existing facilities of purchasing and redeeming directly with the Mutual Funds and Stock Brokers, the following be noted SEBI Circular No CIR/IMD/DF/17/ .....

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Master Circular for Mutual Funds - SEBI

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..... prescribed SEBI (Mutual Funds) Regulations, 1996 shall be adhered to with regard to allotment of units and receipt of redemption proceeds at the investor’s level. 16.2.4.14 Transferability of Mutual Fund units SEBI Circular No - CIR/IMD/DF/10/2010 dated August 18, 2010 a. Regulations Regulation 37(1) of SEBI (Mutual Fund) Regulations, 1996 states that “a unit unless otherwise restricted or prohibited under the scheme, shall be freely transferable by act of parties or by operation of law.” The spirit and intention of this regulation is not to prohibit transferability of units as a general rule or practice. b. All AMCs shall clarify by way of an addendum that units of all mutual fund schemes held in demat form shall be freely transferable from the date of the issue of said addendum which shall be not later than October 1, 2010. However, restrictions on transfer of units of ELSS schemes during the lock-in period shall continue to be applicable as per the ELSS Guidelines. 16.2.5 Stock exchanges and mutual funds/AMCs, based on the experience gained may further improve the mechanism in the interest of investors. Necessary clarifications, if any, would be issued at appro .....

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Master Circular for Mutual Funds - SEBI

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..... mply with para 17.1.2.1 are allowed to invest under these routes. 17.1.2.3 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. 17.1.2.4 The aggregate investments by QFIs under both the routes shall be subject to a total overall ceiling of US $10 billion for equity schemes. 17.1.2.5 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 the existing ceiling of US $25 billion for FII investment in corporate bonds issued by infrastructure companies. 17.1.2.6 MF can accept subscriptions from QFIs till such time the investments by QFIs under both the routes reaches US $8 billion in equity schemes and US $2.5 billion in debt schemes and the remaining limit of US $2 billion in equity schemes and US $0.5 billion in debt sche .....

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Master Circular for Mutual Funds - SEBI

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..... re 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. 17.1.2.16 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. 17.1.2.17 MF shall be responsible for the deduction of applicable tax at source out of the redemption proceeds before making redemption payments to QFIs. 17.1.2.18 MF/DP shall require QFIs to submit necessary information for the purpose of obtaining PAN. MF/DP may use the combined PAN cum KYC form to be notified by CBDT for QFIs. MF/ DP may take any additional information/ documents from the QFIs other than those mentioned in the common PAN cum KYC from to ensure compliance with Para 17.1.2.3 above. 17.1.3 Other conditions for direct route (demat account). 17.1.3.1 There shall be 3 parties under this route - QFIs, q .....

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Master Circular for Mutual Funds - SEBI

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..... turn 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 rupee pool bank account of the DP with the redemption proceeds. g. The DP can make fresh purchase of units of equity and debt schemes of MF (if so instructed by the QFIs) out of the redemption proceeds received provided that payment is made towards such purchase is made within two working days of receipt of money from MF in the pooled bank account. In case no purchase is made .....

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Master Circular for Mutual Funds - SEBI

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..... foreign country by opening bank account overseas (in accordance with the relevant extant FEMA regulations) or in Indian rupees in the respective MF scheme account held in India. 17.1.4.12 MF shall mandate the UCR issuer regarding the requirements for KYC, Customer due diligence process and documents and information to be collected from the QFIs in terms of the requirements mentioned in para 17.1.2.13 above. 17.1.4.13 MF shall obtain the relevant records of KYC/ other documents from the UCR issuer in order to comply with FATF standards, PMLA and SEBI circulars issued in this regard and ensure compliance with para 17.1.2.14. 17.1.4.14 Units purchased and redeemed through UCR issuer shall be settled on gross basis and under no circumstances shall be netted against other investors of UCR issuer 17.1.4.15 Process flow: a. The QFIs places a purchase/ subscription order through the UCR issuer. In case of MF opening bank account overseas (in accordance with the relevant extant FEMA regulations) b. UCR issuer shall forward the order of QFIs to the MF/Custodian. Upon receipt and transfer of funds to India; the MF shall issue units to the custodian and custodian in turn confirm to the UCR Iss .....

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Master Circular for Mutual Funds - SEBI

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..... missible activities of AMC, then the AMC shall: 17.2.3.1 disclose on their websites, the returns provided by the said manager for all the schemes (mutual fund, pension funds, offshore funds etc) on a monthly basis. 17.2.3.2 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. 17.2.3.3 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. 17.3 Product Labeling in Mutual Funds SEBI Circular No. CIR/IMD/DF/5/2013 dated March 18, 2013 17.3.1 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 mutua .....

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Master Circular for Mutual Funds - SEBI

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