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Master Circular for Mutual Funds - SEBI - SEBI/IMD/MC No.2/836/2011

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..... fforts have been made to incorporate certain applicable provisions of existing circulars (as on December 31, 2010) issued by other Department/Division of SEBI relevant to Mutual Funds. INDEX ABBREVIATIONS............................................................................. 5 CHAPTER 1..................................................................................... 6 OFFER DOCUMENT FOR SCHEMES ................................................. 6 CHAPTER 2................................................................................... 16 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN........................................................................ 16 CHAPTER 3................................................................................... 22 NEW PRODUCTS ........................................................................... 22 CHAPTER 4………………………………………………………………………….26 RISK MANAGEMENT SYSTEM.................................................... .....

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Master Circular for Mutual Funds - SEBI

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..... rge CDSC Fixed Maturity Plans FMP(s) Foreign Institutional Investor FII Global Depository Receipt GDR Gold Exchange Traded Fund GETF Hindu Undivided Family HUF Investor Service Center ISC Key Information Memorandum KIM Monthly Cumulative Report MCR National Stock Exchange NSE Net Asset Value NAV New Fund Offer NFO Non Performing Assets NPA(s) Permanent Account Number PAN Regulation Reg. SEBI (Mutual Funds) Regulations 1996 Regulations Securities and Exchange Board of India the Board Scheme Information Document SID Offer Statement of Additional Information SAI Document Systematic Investment Plan SIP Systematic Transfer Plan STP Systematic Withdrawal Plan SWP Trustee(s) Board of Trustee(s)/Trustee Company Uniform Client Code UCC CHAPTER 1 OFFER DOCUMENT FOR SCHEMES 1.1Filing of Offer Document with the Board SEBI Circular No. SEBI/IMD/CIR No.5/ 126096/08 dated May 23,2008 and SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009 1.1.1 The Offer Document shall have two parts i.e. Scheme Information Document (SID) and Statement of Additional Information (SAI). SID shall incorporate all information pertaining to a particular scheme. SAI shall incorporate all statutory i .....

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Master Circular for Mutual Funds - SEBI

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..... rvations, if any, from the Board, AMC shall file a soft copy of SAI with the Board in PDF format alongwith 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 two working days prior to the launch of the scheme. AMC shall also submit an undertaking to the Board while filing the soft copy that information contained in the soft copy of SID to be uploaded on SEBI website is current and relevant and matches exactly with the contents of the hard copy and that the AMC is fully responsible for the contents of the soft copy of SID. The soft copy of SID should also be uploaded on AMFI website two working days prior to launch of the scheme SEBI Circular No - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009. Failure to submit the printed SID to the Board before it is issued for circulation shall invite penalties under the Mutual Funds Regulations SEBI Circular N .....

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Master Circular for Mutual Funds - SEBI

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..... ed. 5. The account statements issued to investors shall indicate the applicable load structure. 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 - SEBI/IMD/CIR No.10/178129/09 dated September 29,2009. 1.2.2 Updation of SAI 1.2.2.1 A printed copy of SAI shall be made available to the investor(s) on request. SAI shall be updated within 3 months from end of financial year and filed with SEBI. 1.2.2.2 Any material changes in the SAI shall be made on an ongoing basis by way of updation on the Mutual Fund and AMFI website. SEBI shall be intimated of the changes made in the SAI within 7 days. The effective date for such changes shall be mentioned in the updated SAI. 1.2.2.3 A soft copy of updated SAI .....

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Master Circular for Mutual Funds - SEBI

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..... s 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 1.6.2.1Mutual Funds shall prepare KIM in the prescribed format For fomat of KIM please refer to the Chapter on Formats. The contents of KIM shall follow the same sequence as prescribed in the format. 1.6.3 Frequency of updation 1.6.3.1 KIM shall be updated at least once a year and shall be filed with SEBI. 1.6.3.2 In case of changes in the SID other than changes in fundamental attribute in terms of Reg 18 (15A), the addendum circulated to all the distributors/brokers/investor Service Centre (ISC) shall be attached to KIM till the KIM is updated. 1.6.3.3 In case any information in SID is amended more than once, the latest applicable addendum shall be a part of KIM (For example, in case of changes in load structure the addendum carrying the latest applicable load structure shall be attached to all KIM and SID already in stock till it is updated). 1.7 Easy Availability of Offer Document 1.7.1 Trustees and AMCs shall ensure that the SID of the schemes and SAI are readily available wi .....

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Master Circular for Mutual Funds - SEBI

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..... oned 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 (from 30 days in case of Open ended schemes and 45 days of close ended scheme). 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 Mutual Funds/AMCs shall make investment out of the NFO proceeds only on or after the closure of the NFO period. 1.9.4 The mutual fund should allot units/refund of money and dispatch statements of accounts within five business days from the closure of the NFO and all the schemes (except ELSS) shall be available for ongoing repurchase/sale/trading within five business days of allotment” 1.10 Discontinuation of the nomenclature - ‘Liquid Plus Scheme(s)’SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009 the nomenclature of their scheme(s) designated as “Liquid Plus Scheme(s)”. 1.10.1 The nomenclature “Liquid Plus Scheme(s)” has been discontinued from January 2009 since it gives a wrong impression of added liquidity. Mutual funds have been advised to carry out .....

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Master Circular for Mutual Funds - SEBI

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..... comparisons with appropriate benchmark(s) For examples of Benchmarks, refer to chapter on SID. c. The addendum to the SID detailing the modifications (if any) made to the scheme(s). 2.1.1.3 The letter to unit holders and revised SID (if any) shall be issued only after the final observations as communicated by the Board in terms of Regulation 29(3) of the Mutual Funds Regulations have been incorporated therein and final copies of the same have been filed with the Board. 2.1.1.4 Unit holders shall be given at least 30 days to exercise exit option. During this period, the unit holders who opt to redeem their holdings in part or in full shall be allowed to exit at the NAV applicable for the day on which the request is received, without charging exit load. PART II - CONSOLIDATION OF SCHEMES 2.2 Consolidation of Schemes SEBI Circular No. SEBI/MFD/CIR No.5/12031/03 dated June 23, 2003. 2.2.1 Any consolidation or merger of Mutual Fund schemes will be treated as a change in the fundamental attributes of the related schemes and Mutual Funds shall be required to comply with the Mutual Funds Regulations in this regard Regulation 18(15A) of the Mutual Funds Regulations. 2.2.2 Further, in order .....

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Master Circular for Mutual Funds - SEBI

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..... it holders and net assets in the consolidated scheme shall be filed with the Board within 21 days from the date of closure of the exit option SEBI Circular No- SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009. 2.2.2.5 Merger or consolidation shall not be seen as change in fundamental attribute of the surviving scheme if the following conditions are met SEBI Circular No- Cir / IMD / DF / 15/ 2010 dated October 22, 2010: a. Fundamental attributes SEBI Circular No-IIMARP/MF/CIR/01/294/98 dated February 4, 1998 of the surviving scheme do not change. The ‘surviving scheme’ means the scheme which remains in existence after the merger. b. Mutual Funds are able to demonstrate that the circumstances merit merger or consolidation of schemes and the interest of the unitholders of surviving scheme is not adversely affected. c. After approval by the Boards of AMCs and Trustees, the mutual funds shall file such proposal with SEBI. SEBI would communicate its observations on the proposal within the time period prescribed Regulation 29(3) of SEBI (Mutual Funds) Regulations, 1996. d. The letter to unitholders shall be issued only after the final observations communicated by S .....

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Master Circular for Mutual Funds - SEBI

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..... ees, adopt either of the total expense structures laid out in Regulation Regulation 52 (6)(a) of SEBI (Mutual Funds) Regulations, 1996 and change the total expense structure after giving the unitholders an option to exit in accordance with Regulation Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996. 3.2 Gold Exchange Traded Fund Scheme SEBI Circular No. SEBI/IMD/CIR. No.4/58422/06 dated January 24, 2006, SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006, SEBI Circular No. SEBI/IMD/CIR No.14/84243/07 dated January 15, 2007. 3.2.2 A Gold Exchange Traded Fund (GETF) Scheme Regulation 2(mb) of the SEBI (Mutual Funds) Regulations, 1996 introduced vide Gazette Notification No. S.O. 38(E) dated January 12, 2006. shall invest primarily in: 3.2.2.1 Gold and 3.2.2.2 Gold related instruments Regulations 2(mc) of the Mutual Funds Regulations introduced vide Gazette Notification N o. S.O. 38(E) dated January 12, 2006. However investments in gold related instruments shall be done only after such instruments are specified by the Board SEBI Circular No. SEBI/IMD/CIR No. 4/58422/06 dated January 24, 2006. 3.2.3 Valuation: 3.2.3.1 Gold shall be valued based on the methodol .....

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Master Circular for Mutual Funds - SEBI

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..... .2 The proposed portfolio structure indicated in the SID and KIM shall be rated by a Credit Rating 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 Reports For format of Half Yearly Trustee Report please refer Chapter on Formats to the Board. The AMC(s) shall also report on the same in its bimonthly (CTR(s) For format of bimonthly CTR please refer Chapter 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.ce .....

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Master Circular for Mutual Funds - SEBI

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..... nthly basis and place the progress report in periodical meetings of the Board of the AMC and Trustees. 4.3.3 Review of Progress of implementation by Board of AMC and Trustee(s): 4.3.3.1The Board of the AMC and Trustee(s) shall review the progress made by the Mutual Funds with regard to Risk Management practices and the same shall be reported to the Board at the time of sending CTR(s) and Half Yearly Trustee Reports. 4.3.4 Review by Internal Auditors: 4.3.4.1 The review of Risk Management Systems shall be a part of internal audit and the auditors shall check their adequacy on a continuing basis. Their reports shall be placed before the Board of the AMC and Trustee(s) who shall comment on the adequacy of systems in the CTRs and Half Yearly Reports filed with the Board. CHAPTER 5 DISCLOSURES & REPORTING NORMS PART I - DISCLOSURES 5.1 Half Yearly disclosure of Portfolios SEBI Circular No. MFD/CIR No.010/024/00 dated January 17, 2000, SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000, SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001, SEBI Circular No. MFD/CIR/14/18337/2002 dated September 19, 2002, SEBI Circular No. IMD/CIR 8/132968/2008 dated July 24, 2008 .....

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Master Circular for Mutual Funds - SEBI

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..... te of the mutual fund. These websites should also be linked with AMFI website so that the investors and analyst(s) can access the annual reports of all mutual 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. 5.4 Disclosure of large unit holdings SEBI Circular No. MFD/CIR No.3/211/2001 dated April 30, 2001. 5.4.1 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 Chapter on Formats for requisite formats. 5.5 Portfolio disclosure for debt oriented close-ended and interval schemes/plans SEBI Circular No. IMD/CIR No.15/157701/2009 dated March 19, 2009 5.5.1 AMCs shall disclose the portfolio of such schemes in the prescribed format For portfolio format please refer to Cha .....

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Master Circular for Mutual Funds - SEBI

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..... roup companies of sponsor/Asset Management Company in the unaudited half yearly financial results, the abridged scheme wise annual report and the SAI, shall be made in the format as prescribed Please refer to the chapter on Formats. PART II - REPORTS 5.10 Monthly Cumulative Report (MCR) SEBI circular MFD/CIR/07/206/2001 dated July 19, 2001, SEBI circular No IMD/Cir No.15/87045/2007 dated February 22, 2007, SEBI circular SEBI/IMD/CIR No 3/124444/08 dated April 30, 2008 5.10.1 Date and Mode Of Submission: 5.10.1.1 MCR For format of MCR please refer to Chapter on Formats. shall be submitted to the Board by 3rd of each month by way of an email. Hard copy should also be sent by hand delivery/courier. 5.10.2 Other Guidelines: 5.10.2.1Details of the new schemes launched shall be reported in the MCR for the month in which the allotment is done. For example, if an NFO closes in the month of July and the allotment is done in the month of August, then, the details of the new scheme shall be reported in the MCR for the month of August that will reach SEBI by 3rd of September. 5.10.2.2 Further, additional report on overseas investment SEBI Circular No. SEBI/IMD/CIR NO 15/87045/07 dated February .....

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Master Circular for Mutual Funds - SEBI

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..... of April each year For format of ASR refer the Chapter on Formats Quarterly Movement of Net Assets- SEBI CIR - IIMARP/MF/CIR/05/788/97 dated April 28, 1997 required mutual funds to submit the statement for quarterly movement of net assets. However, SEBI circular MFD/CIR/12/16588/02 dated August 28,2002 stated that such Statement of movement of net assets /portfolios are no more to be submitted. 5.14 Daily Transaction Report SEBI Circular No.MFD/CIR/07/384/99 dated December 17, 1999 and MFD/CIR/08/23026/99 dated December 23, 1999 5.14.1 All Mutual Funds shall submit details of transactions in secondary market on daily basis in the prescribed format For format of daily transaction report, please refer the chapter on formats. Accordingly, Mutual Funds are advised to make necessary arrangements with their custodians for the submission of reports on a daily basis. The report is to be submitted to the Board in both hard as well as soft copy. 5.14.2 It must be ensured by the compliance officers of the custodians as well as that of Mutual Funds that the information submitted is correct and reaches the Board by 3.00 p.m. on the following working day (T+1). 5.15 Responsibilities of AMC(s) a .....

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Master Circular for Mutual Funds - SEBI

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..... quo;, if need be, to the Income Tax Department. The AIRs for the financial year 2005-2006 are required to be filed before August 31, 2006. 5.16.1 Mutual Funds are required to submit the Annual Information Return under section 285 BA in the Income-tax Act. As per this requirement, Trustees of Mutual Funds or such other person managing the affairs of the Mutual Funds (as may be duly authorized by the trustees in this behalf) have to report specified financial transactions in electronic media to Income Tax Department giving PAN of the transacting parties in an Annual Information Return (AIR). 5.16.2. Some common errors in these returns have been pointed out by the Directorate of Income Tax (Systems) as: 5.16.2.1. Not mentioning PAN or mentioning invalid PAN. 5.16.2.2.Entering incomprehensible/ incomplete names of transacting parties, e.g. names of 2 or 3 letters. 5.16.2.3.Entering incomprehensible/ incomplete addresses of transacting parties, e.g. ‘Nil’, ‘N/A’, ‘_’, in all address fields, incomplete postal addresses, names of buildings split into separate fields, names of two cities in address fields, wrong PIN codes, etc. 5.16.2.4 Incorrect distric .....

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Master Circular for Mutual Funds - SEBI

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..... ar No. MFD/CIR/13/16799/2002 dated August 29, 2002, SEBI Circular No. MFD/CIR/17/21105/2002 dated October 28, 2002. 6.3.1 An Independent Trustee shall not be associated in any manner with the Sponsor(s) Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996. The independent directors on the Board of the AMC shall not be associate of, or associated in any manner with, the sponsor or any of its subsidiaries or the trustees Regulation 21(d) of the SEBI (Mutual Funds) Regulations, 1996. 6.3.2 An ‘associate’ shall be defined as: 6.3.2.1 Relatives As defined under Section 6 of the Companies Act 1956. of Sponsor(s) or directors of the Sponsor Company or relatives of Associate Directors of the AMC(s) and Trustee. 6.3.2.2 Persons providing any type of professional service to the Mutual Funds, the AMC and the Trustees and the Sponsor(s). Also, persons having a material pecuniary relationship with the above mentioned entities that may, in the judgment of the Trustees, affect their independence. 6.3.2.3 Nominees of the companies who are stakeholders in the Sponsor company or AMC(s) (even if they are not deemed sponsors by virtue of holding less than 40% of net worth of AMC(s .....

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Master Circular for Mutual Funds - SEBI

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..... lar No. SEBI/IMD/CIR No.7/13391/03 dated July 11, 2003. 6.4.1The Board of the AMC and Trustees shall ensure compliance with these Guidelines on a continuous basis and shall report any violations and remedial action taken by them in the periodical reports submitted to the Board Regulation 25(9) & 23(b) of SEBI (MF) Regulations, 1996. 6.4.2 The guidelines enumerated below specify the minimum requirements that have to be followed. The AMC(s) and Trustees are free to set more stringent norms for investment and/or trading in securities by their employees. 6.4.3 Guidelines for Investment and/or Trading in Securities by Employees of AMC(s) and Trustees 6.4.3.1 Applicability a. These Guidelines shall be applicable to all employees of AMC(s) and Trustees and shall form a part of the Code of Conduct for employees adopted by the AMC(s) and/or Trustees. New employees shall be bound by these Guidelines from the date of joining the AMC(s) and/or Trustees. b. These Guidelines shall cover transactions for sale or purchase of securities made in the employees’ name, either individually or jointly, and in the name of the employees’ spouse and/or dependent children and transactions as .....

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Master Circular for Mutual Funds - SEBI

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..... investment transactions: a. All access persons except Compliance Officer shall apply in the form prescribed by the AMC(s) and/or Trustees to the Compliance Officer for prior approval of transactions for sale or purchase of securities other than those expressly stated to be exempt under these guidelines. The Compliance Officer shall apply to the Head of the AMC(s). The decision of the Compliance Officer shall be final and binding on the employee. b. In these Guidelines, in the case of the Compliance Officer’s own transactions for purchase or sale of securities or disclosure or any other related matter, the term "Compliance Officer" wherever it appears, shall be read as "Head of the AMC." c. The Compliance Officer may coordinate with the Fund Management Department of the Mutual Fund, wherever necessary, to clear requests of investment and/or trading in securities by the employees. d. The approval of Compliance Officer for carrying out a transaction of sale or purchase of a security by the access person shall not be valid for more than seven calendar days from the date of approval SEBI Circular No. SEBI/IMD/CIR No.7/13391/03 dated July 11, 2003. 130 SEBI Cir .....

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Master Circular for Mutual Funds - SEBI

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..... may be made by the employees including access person without getting the clearance from the Compliance Officer. An employee including access person may also sell and/or renounce his rights entitlement without getting the clearance from the Compliance Officer. However, if an access person wishes to purchase the “Rights renunciations” he shall get the clearance of the Compliance Officer for the same. Such purchases shall be done only at market prices. Details of any applications made in any rights issue, whether in the normal course, or through purchase of rights renunciations, shall be intimated to the Compliance Officer. 6.4.5.2 Investments through the secondary markets: a. An access person who wishes to make a secondary market transaction shall submit a written application to that effect to the Compliance Officer. Such an application shall specify the name of the company whose securities the employee wishes to buy and/or sell, type of security, and the number of shares and/or debentures and/or bonds and/or warrants and/or derivatives that the access person wishes to buy/sell. b. The Compliance Officer shall clear these requests if the following conditions are met: 1. .....

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Master Circular for Mutual Funds - SEBI

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..... liance Officer may take a declaration in this regard from the employee. Such declaration may be included in the application form itself. g. Any transaction of self dealing by any employee either directly or indirectly, whether alone or in concert with another person is prohibited. For this purpose, “Self Dealing’ means trading in the securities based on price sensitive information to which the employee has access by virtue of his office. Declaration to this effect may be taken from the employee while clearing the proposals for investment. h. The employees shall not insist or suggest to the concerned brokers to charge reduced brokerage, or accept any contract with a clause on reduced brokerage charge. 6.4.6 Investments in units of Mutual Fund Schemes 6.4.6.1 Access persons as well as other employees do not require prior permission of the Compliance Officer for purchase or sale of units of Mutual Fund schemes. However, details of each such transaction, excluding transactions in Money Market Mutual Fund schemes shall be reported by them to the Compliance Officer within 7 calendar days from the date of transaction. 6.4.6.2 In case of investments in SIP of any Mutual Fund sc .....

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Master Circular for Mutual Funds - SEBI

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..... every financial year ending March 31. c. A declaration shall also be included in the reporting form on the lines of clause 6.4.5.2. (f) and 6.4.5.2. (g) regarding Front Running and Self Dealing. 6.4.8 Review by the Board of Directors of AMC and the Trustee(s) 6.4.8.1 The Board of the AMC and the Trustees shall review the compliance of these Guidelines in their periodic meetings. They shall review the existing procedures and recommend changes in procedures based on the AMCs experience, industry practices and/or developments in applicable laws and regulations. They shall report compliance and any violations and remedial action taken by them in their reports submitted to the Board. 6.5 Responsibilities of AMC & Trustees MFD/CIR/09/014/2000 dated January 5, 2000 6.5.1 For effective discharge of their responsibilities under the Mutual Funds Regulations, the AMC(s) shall provide infrastructure and administrative support to the Trustees. The Mutual Fund may decide to appoint independent auditors and/or may have separate full fledged administrative set up for the Trustees. However, the expenditure incurred in this regard shall be within the limits as specified in Regulation 52(6) of t .....

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Master Circular for Mutual Funds - SEBI

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..... tors and b. No single investor shall account for more than 25% of the corpus of the Scheme(s)/Plan(s). 6.7.2.2 These conditions will be complied with immediately after the close of the NFO itself i.e. at the time of allotment. 6.7.2.3 In case of non-fulfillment with the condition of minimum 20 investors, the Scheme(s)/Plan(s) shall be wound up in accordance with Regulation Reg. 39 (2) (c) of SEBI (MF) Regulations, 1996 automatically without any reference from SEBI. 6.7.2.4 In case of non-fulfillment with the condition of 25% holding by a single investor on the date of allotment, the application to the extent of exposure in excess of the stipulated 25% limit would be liable to be rejected and the allotment would be effective only to the extent of 25% of the corpus collected. Consequently, such exposure over 25% limits will lead to refund within 6 weeks of the date of closure of the New Fund Offer. 6.7.2.5 For interval scheme the aforesaid provision will be applicable at the end of NFO and specified transaction period. 6.7.2.6 Requisite disclosure in this regard shall be made in the SID. 6.7.3 Determination of breach: 6.7.3.1 The average shall be calculated, at the end of each quarte .....

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Master Circular for Mutual Funds - SEBI

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..... ential investment limits and access rights to systems interface. 6.11 Mutual Funds/ AMCs should get the above systems audit conducted once in two years. 6.12 The Systems Audit Report and compliance status should be placed before the Trustees of the mutual fund. 6.13 The systems audit report/findings alongwith trustee comments should be communicated to SEBI. 6.14 For the financial years April 2008 - March 2010, the systems 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 6.15 Mutual Funds should play an active role in ensuring better corporate governance of listed companies. 6.16 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. 6.17 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 pr .....

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Master Circular for Mutual Funds - SEBI

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..... . SEBI/IMD/CIR No.01/1756/04 dated January 27, 2004. Such UCC should be obtained before commencing the trading on behalf of the scheme(s)/plan(s). At the time of entering an order, the UCC pertaining to the parent Mutual Fund shall be provided and the allocation to individual schemes shall be done in the post closing session. SEBI Circular No. MRD/DoP/SE/Cir-35/2004 dated October 26, 2004. The UCC can be shared with the unit holders to facilitate tax benefits linked to payment of Securities Transaction Tax (STT). 7.4 Trading in Exchange Traded Derivatives Contracts SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005; SEBI Circular No. DNPD/Cir-30/2006 dated January 20, 2006, SEBI Circular No. SEBI/DNPD/Cir-31/2006 dated September 22, 2006. 7.4.1 For trading in Exchange Traded Derivatives Contracts, following should be observed: 7.4.1.1. Mutual Fund schemes can participate in derivatives market as per the guidelines issued by SEBI in this regard from time to time. SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005. 7.4.1.2 The Mutual Funds shall be treated at par with a registered FII in respect of position limits in index futures, index options, stock options and s .....

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Master Circular for Mutual Funds - SEBI

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..... only in dematerialised form. CHAPTER 8 NET ASSET VALUE Regulation 48(1) of SEBI (Mutual Funds) Regulations, 1996 8.1 Disclosure of Net Asset Value SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997, SEBI Circular No. MFD/CIR No.11/171/01 dated February 9, 2001, SEBI Circular No. MFD/CIR/13/087/2001 dated March 28, 2001; SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006, SEBI Circular No. SEBI/IMD/CIR No.5/96576/2007 dated June 25, 2007, SEBI Cir No. SEBI/IMD/Cir No.12/147132/08 dated December 11,2008 8.1.1 The NAV of schemes shall be published on a daily basis by the Mutual Funds at least in two daily newspapers Regulation 48(2) of SEBI (Mutual Funds) Regulations, 1996. 8.1.2 NAV and sale/repurchase price of all Mutual Fund schemes except for Fund of Fund Schemes shall be updated on AMFI’s website and the Mutual Funds’ websites by 9 p.m. of the same day SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006. 8.1.3 Fund of Fund Schemes shall have an extended time up to 10 a.m. the following business day in this regard SEBI Circular No. SEBI/IMD/CIR No.5/96576/2007 dated June 25, 2007. and the NAVs shall be published in newspapers with .....

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Master Circular for Mutual Funds - SEBI

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..... means a Mutual Fund scheme having substantial investments in foreign securities valued as per time zones other than Indian Standard Time zone; c. ‘Liquid fund schemes and plans’ shall mean the schemes and plans of a Mutual Fund as specified in the guidelines Please refer to the Section on liquid schemes issued by SEBI in this regard SEBI Circular No.SEBI/IMD/CIR No.13/150975/09 dated January 19, 2009. 8.3.3 Applicability 8.3.3.1 The Guidelines on Cut off Timings for applicability of Net Asset Value of Mutual Fund scheme(s) and/ or plan(s) shall be applicable to all schemes and plans of Mutual Funds except: a. International schemes and b. Transactions in Mutual Fund units undertaken on a recognized Stock Exchange. 8.3.4 Fixation of uniform Cut-off Timings 8.3.4.1 Mutual Funds shall reckon the Cut-off Timings for their schemes and plans in compliance with these Guidelines and the same shall be uniformly implemented for all investors. 8.3.4.2 Mutual Funds shall ensure that each payment instrument for subscription or purchase of units is deposited in a bank expeditiously by utilization of the appropriate banking facility, so as to comply with the requirement in Clause 8.3. .....

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Master Circular for Mutual Funds - SEBI

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..... the respective switch-in schemes. 8.3.5.4 The following Cut-off Timings shall be observed by Mutual Funds with respect to repurchase of units in liquid fund schemes and plans and the following NAVs shall be applied for such repurchase: a. Where the application is received up to 3.00 pm - the closing NAV of day immediately preceding the next business day; and b. Where the application is received after 3.00 pm - the closing NAV of the next business day. 8.3.5.5 Mutual Funds shall calculate NAV for each calendar day for their liquid fund schemes and plans. a. Explanation: “Business Day” does not include a day on which the Money Markets are closed or otherwise not accessible. 8.3.6 Cut-off Timings for schemes and plans other than liquid fund schemes and plans 8.3.6.1 A Mutual Fund shall reckon only prospective NAV, in accordance with this clause, in respect of all their schemes and plans i.e. for other than liquid fund schemes and plans 8.3.6.2 The following Cut-off Timings shall be observed by Mutual Funds in respect of purchase of units in other schemes and plans and following NAVs shall be applied for such purchase: a. Where the application is received up to 3.00 pm wit .....

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Master Circular for Mutual Funds - SEBI

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..... be applied for such repurchase: a. Where the application is received up to 3.00 pm - closing NAV of the day on which the application is received; and b. An application received after 3.00 pm - closing NAV of the next business day. 8.3.7 Switch and Sweep Transactions 8.3.7.1 Paragraphs 8.3.5 and 8.3.6 shall apply to ‘switch in’ transactions as if they were purchase transactions and to ‘switch out’ transactions as if they were repurchase transactions. 8.3.7.2 Paragraphs 8.3.5 and 8.3.6 shall apply to ‘sweep’ transactions as if they were purchase transactions and to ‘reverse sweep’ transactions as if they were repurchase transactions. 8.3.7.3 In case of ‘switch’ transactions from one scheme to another, the allocation shall be in line with redemption payouts. 8.3.8. Time Stamping 8.3.8.1 Application from investors shall be received by Mutual Funds only at official points of acceptance, addresses of which shall be disclosed in the SID and on Mutual Funds’ websites. 8.3.8.2 Cut off timings as prescribed under Paragraphs 8.3.5 and 8.3.6 shall apply with reference to the point of time at which the applications are received .....

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Master Circular for Mutual Funds - SEBI

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..... the ability to open the seal for maintenance or repairs must be limited to vendors or nominated persons of the mutual fund, to be entered in a proper record. 8.4.7 Breakage of seal and/or breakdown of the time stamping process shall be duly recorded and reported to the Trustees. 8.4.8 Every effort should be made to ensure uninterrupted functioning of the time stamping machine. In case of breakdown, the Mutual Funds shall take prompt action to rectify the situation. During the breakdown period, Mutual Funds shall adopt an alternative time stamping method that has already been approved by the Board of the AMC and the Trustee(s). An audit trail shall be available to check and ensure the accuracy of the time stamping process during the said period. 8.4.9 Any alternate mode of application that does not have any physical or electronic trail shall be converted into a physical piece of information and time stamped in accordance with these Guidelines. 8.4.10 Mutual Funds shall maintain and preserve all applications/ requests, duly time stamped as aforesaid, at least for a period of eight years Regulation 50(2) of SEBI (Mutual Funds) Regulations, 1996 to be able to produce them as and when .....

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Master Circular for Mutual Funds - SEBI

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..... ove parameters for the preceding calendar month and publishes or provides the required information along with the daily quotations, the same can be used by the Mutual Funds. e. If the shares are not listed on the Stock Exchanges which provide such information, then Mutual Funds shall make their own analysis in line with the above criteria to check whether such securities are thinly traded or not and then value them accordingly. 9.1.3 Thinly traded Debt Securities SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.1.3.1 A debt security (other than Government Securities) shall be considered as a thinly traded security if, on the valuation date, there are no individual trades in that security in marketable lots (currently applicable) on the principal Stock Exchange or any other Stock Exchange. 9.2. Valuation of Securities 9.2.1 Traded Securities: SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.2.1.1 When a security (other than debt securities) is not traded on any Stock Exchange on a particular valuation day, the value at which it was traded on the selected Stock Exchange, as the case may be, on the earliest previous day may be used provided such date is .....

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Master Circular for Mutual Funds - SEBI

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..... mine if a security accounts for more than 5 per cent. of the total assets of the scheme, it shall be valued by the procedure above and the proportion which it bears to the total net assets of the scheme to which it belongs will be compared on the date of valuation SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001. g. In case trading in an equity security is suspended up to thirty days, then the last traded price shall be considered for valuation of that security. If an equity security is suspended for more than thirty days, then the AMC(s) or Trustees shall decide the valuation norms to be followed and such norms shall be documented and recorded. 9.2.4 Non traded/thinly Traded Debt security 9.2.4.1 A thinly traded debt security as defined above shall be valued as per the norms for non traded debt security. a. Valuation SEBI Circular No. SEBI/IMD/CIR No.16/ 193388/2010 dated February 02, 2010 of money market and debt securities with residual maturity of upto 91 days: 1. All money market and debt securities, including floating rate securities, with residual maturity of upto 91 days shall be valued at the weighted average price at which they are traded on the particular valua .....

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Master Circular for Mutual Funds - SEBI

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..... duration buckets may be changed to reflect the market value more closely by any agency suggested by AMFI giving benchmark yield/ matrix of spreads over benchmark yield. b. The benchmark as calculated above will be set at least weekly, and in the event of any significant movement in prices of Government Securities on account of any event impacting interest rated on any day such as a change in the Reserve Bank of India (RBI) policies, the benchmark will be reset to reflect any change in the market conditions. 9.3.2 Building a Matrix of Spreads for Marking-up the Benchmark Yield SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 9.3.2.1 Mark up for credit risk over the risk free benchmark YTM as calculated in 9.3.1 above, will be determined using the trades of corporate debentures/bonds of different ratings. All trades on appropriate stock exchange during the fortnight prior to the benchmark date will be used in building the corporate YTM and spread matrices. Initially these matrices will be built only for corporate securities of investment grade. The matrices are dynamic and the spreads will be computed every week. The matrix will be built for all duration buckets for whi .....

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Master Circular for Mutual Funds - SEBI

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..... justments for Securities rated by external rating agencies SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. Category Discretionary mark up/mark down + - Rated instruments with duration upto 2 years 100 bps 50 bps Rated instruments with duration over 2 years 75 bps 25 bps 1. The rationale for the above discount structure is to take cognizance of the differential interest rate risk of the securities. This structure will be reviewed periodically. b. Adjustments for Internally Rated Securities SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 1. To value an un-rated security, the fund manager shall assign an internal credit rating, which will be used for valuation. Since un-rated instruments tend to be more illiquid than rated securities, the yields would be marked up by adding discretionary discount as under: Category Discretionary discount Unrated instruments with duration upto 2 years Discretionary discount of upto +50 bps over and above mandatory discount of +50 bps Unrated instruments with duration over 2 years Discretionary discount of upto +50 bps over and above mandatory discount of +25 bps 2. The benchmark yield/ matrix of spreads over risk free benc .....

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Master Circular for Mutual Funds - SEBI

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..... . of total assets of the scheme shall be assigned zero value on September 30, 2002. 2. In respect of closed ended funds, for the purposes of valuation of illiquid securities, the limits of 15 per cent. and 20 per cent. applicable to open ended funds should be increased to 20 per cent. and 25 per cent. respectively. 3. Where a scheme has illiquid securities as at September 30, 2001 not exceeding 15% in the case of an open-ended fund and 20% in the case of closed fund, the concessions of giving time period for reducing the illiquid security to the prescribed limits would not be applicable and at all time the excess over 15% or 20% shall be assigned nil value 9.6.1 Aggregate value of “illiquid securities” under a scheme, which are defined as non-traded, thinly traded and unlisted equity shares, shall not exceed 15 per cent of the total assets of the scheme and any illiquid securities held above 15 per cent. of the total assets shall be assigned zero value. 9.6.2 All Mutual Funds shall disclose as on March 31 and September 30 the scheme wise total illiquid securities in value and percentage of the net assets while disclosing Half Yearly Portfolios to the unit holders. In th .....

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Master Circular for Mutual Funds - SEBI

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..... Mutual Funds will not have discretion to extend the period of provisioning. The provisioning against the principal amount or installments shall be made at the following rates irrespective of whether the principal is due for repayment or not. a. 10 percent of the book value of the asset shall be provided for after 6 months past due date of interest i.e. 3 months form the date of classification of the asset as NPA. 86 Master Circular for Mutual Funds b. 20 percent of the book value of the asset should be provided for after 9 months past due date of interest i.e. 6 months from the date of classification of the asset as NPA. c. Another 20 percent of the book value of the assets shall be provided for after 12 months past due date of interest i.e. 9 months from the date of classification of the asset as NPA. d. Another 25 percent of the book value of the assets shall be provided for after 15 months past due date of interest i.e. 12 months from the date of classification of the asset as NPA. e. The balance 25 percent of the book value of the asset shall be provided for after 18 months past due date of the interest i.e. 15 months from the date of classification of the assets as NPA. 9.7.4. .....

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Master Circular for Mutual Funds - SEBI

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..... subsequent period of 6 months. 9.7.6 Receipt of past dues: 9.7.6.1 When the Mutual Fund has received income/ principal amount after their classifications as NPAs: a. For the next 2 quarters, income shall be recognized on cash basis and thereafter on accrual basis. The asset will be continued to be classified as NPA for these two quarters. b. During this period of two quarters although the asset is classified as NPA no provision needs to be made for the principal if the same is not due and outstanding. c. If part payment is received towards principal, the asset continues to be classified as NPA and provisions are continued as per the norms set at 9.7.4 above Any excess provision will be written back. 9.7.7 Classification of Deep Discount Bonds as NPAs 9.7.7.1 Investments in Deep Discount Bonds can be classified as NPAs, if any two of the following conditions are satisfied: a. If the rating of the Bond comes down to Grade ‘BB’ (or its equivalent) or below b. If the company is defaulting in their commitments in respect of other assets, if available. c. Full Net worth erosion. 9.7.7.2 Provision should be made as per the norms set at 9.7.4 above as soon as the asset is clas .....

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Master Circular for Mutual Funds - SEBI

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..... uniformity in calculation of NAV the following guidelines are issued: 9.8.1.1 Methodology for Valuation - unlisted equity shares of a company shall be valued "in good faith" as below: a. Based on the latest available audited balance sheet, Net Worth shall be calculated as the lower of item (1) and (2) below: 1. Net Worth per share = [Share Capital + Free Reserves (excluding revaluation reserves) - Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] / Number of Paid up Shares. 2. After taking into account the outstanding warrants and options, Net Worth per share shall again be calculated and shall be = [Share Capital + consideration on exercise of Option and/or Warrants received/receivable by the Company + Free Reserves (excluding Revaluation Reserves) - Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] / Number of Paid up Shares plus Number of Shares that would be obtained on conversion and/or exercise of Outstanding Warrants and Options. 3. The lower of (1) and (2) above shall be used for calculation of Net Worth per share and for further c .....

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Master Circular for Mutual Funds - SEBI

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..... eters for investing in unlisted equity shares. They shall pay specific attention as to whether due diligence was exercised while making such investments and shall review the performance of such investments in their periodical meetings SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. 9.8.4 Reporting of Compliance 9.8.4.1 Comments on compliance of these Guidelines shall be indicated by the AMCs and Trustees in their CTRs For CTR format please refer to the chapter on formats. and Half Yearly Reports For Half Yearly Reports, please refer to the chapter on formats filed with the Board. 9.9 Valuation of securities not covered under the current valuation policy SEBI/IMD/CIR No.16/193388/2010 dated February 02, 2010 and Cir/IMD/DF/4/2010 dated June 21, 2010: 9.9.1 In case of securities purchased by mutual funds do not fall within the current framework of the valuation of securities then such mutual fund shall report immediately to AMFI regarding the same. Further, at the time of investment AMCs shall ensure that the total exposure in such securities does not exceed 5% of the total AUM of the scheme. 9.9.2 AMFI has been advised that the valuation agencies should ensure that the valu .....

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Master Circular for Mutual Funds - SEBI

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..... publication and other general expenses not attributable to any scheme(s). 10.1.2.4 Fund Accounting Fees. 10.1.2.5 Expenses on investment management/general management. 10.1.2.6 Expenses on general administration, corporate advertising and infrastructure costs. 10.1.2.7 Depreciation on fixed assets and software development expenses. 10.1.2.8 Such other costs as may be prohibited by the Board. 10.1.3 The expenditure and/or fee payable by Mutual Funds to the Depositories may either be capitalized or included as part of recurring expenditure within the limits prescribed under Regulation 52(6) of the Mutual Funds Regulations SEBI Circular No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998. 10.1.4 Further, each item of expenditure accounting for more than 10% of total expenditure shall be disclosed in the accounts or the notes thereto of the schemes SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 10.1.5 Provision of charging of additional management fees by the Asset Management Companies in case of schemes launched on no load basis SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010. 10.1.5.1 AMC shall not collect any additional management fees referred .....

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Master Circular for Mutual Funds - SEBI

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..... ed to the investor, a maximum of 1% of the redemption proceeds shall be maintained in a separate account which can be used by the AMC to pay commissions to the distributor and to take care of other marketing and selling expenses. Any balance shall be credited to the scheme immediately. 10.4.1.4 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 switchout 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, 2009219. 10.4.4 The AMCs are required to bring the contents of these guidelines to the notice of their distributors and monitor compliance. 10.5 No Load on Bonus Units and Units allotted on Reinvestment o .....

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Master Circular for Mutual Funds - SEBI

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..... record date in their meeting Clause 20 of Third Schedule of SEBI (Mutual Funds) Regulations, 1996. Dividend so decided, shall be paid, subject to availability of distributable surplus. 11.2.1.2 Record date shall be the date which will be considered for the purpose of determining the eligibility of investors whose names appear on the register of unit holders for receiving dividends. The NAV shall be adjusted to the extent of dividend distribution and statutory levy, if applicable, at the close of business hours on record date. 11.2.1.3 Within one calendar day of the decision of the Trustees with respect to the dividend to be distributed, the AMC(s) shall issue a notice to the public communicating the decision including the record date. The record date shall be five calendar days from the issue 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 .....

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Master Circular for Mutual Funds - SEBI

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..... the investments in money market instruments of an issuer are not in compliance with the Gazette Notification No. LAD - NRO/GN/2009-10/07/165404 dated June 5, 2009, AMC shall ensure compliance within a period of 3 months from the date of notification. 12.1 Investments by Index Funds: SEBI Circular No - MFD/CIR/09/014/2000 dated January 5, 2000 12.1.1 Investments by index funds shall be in accordance with the weightage of the scrips in the specific index as disclosed in the SID See Clause 10, Seventh Schedule of Mutual Funds Regulations. In case of sector or industry specific scheme, the upper ceiling on investments may be in accordance with the weightage of the scrips in the representative sectoral index or sub index as disclosed in the SID or 10% of the NAV of the scheme, whichever is higher. 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 upto1 .....

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Master Circular for Mutual Funds - SEBI

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..... ary. c. Risks factors such as loss, bankruptcy etc. associated with such transactions. 12.4.3 Reporting Requirement 12.4.3.1 The AMC(s) shall report to the Trustees on a quarterly basis about the level of lending, in terms of value, volume and intermediaries and also earnings and/or losses, value of collateral security etc. 12.4.3.2 The Trustees shall periodically review the securities lending contract and take reasonable steps to ensure that the same is not, in any way, detrimental to the interests of the unit holders of the scheme. 12.4.3.3 The Trustees shall offer their comments on the above aspects in the Half Yearly Trustee Report filed with the Board. Regulation 18(23)(a) of the Mutual Funds Regulations. Further, for format of Half Yearly Trustee Report please refer to chapter on Formats. 12.4.4 Existing schemes 12.4.4.1 In case an existing SID does not provide for lending of securities, Mutual Funds may still lend securities belonging to the scheme, in accordance with the SEBI Guidelines, provided approval is obtained from the Trustees and the intention to lend securities is conveyed to the unit holders. 12.5 Approval for Investment in Unrated Debt Instruments SEBI Circular .....

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Master Circular for Mutual Funds - SEBI

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..... 96. 12.9.1 The guidelines for deployment of funds in short term deposits of commercial banks for schemes are as under: 12.9.1.1 “Short Term” for parking of funds by Mutual Funds shall be treated as a period not exceeding 91 days. SEBI Circular No. SEBI/IMD/Cir No.1/91171/07 dated April 16, 2007. 12.9.1.2 Such deposits shall be held in the name of the concerned scheme. 12.9.1.3 Mutual Funds shall not park more than 15% of their net assets in short term deposits of all scheduled commercial banks put together. This limit however may be raised to 20% with prior approval of the Trustees. Also, parking of funds in short term deposits of associate and sponsor scheduled commercial banks together shall not exceed 20% of the total deployment by the Mutual Fund in short term deposits. 12.9.1.4 Mutual Funds shall not park more than 10% of the net assets in short term deposits with any one scheduled commercial bank including its subsidiaries. 12.9.1.5 Trustees shall ensure that funds of a particular scheme are not parked in short term deposit of a bank which has invested in that scheme. 12.9.1.6 In case of liquid and debt oriented schemes, AMC(s) shall not charge any investment mana .....

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Master Circular for Mutual Funds - SEBI

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..... is to the RBI, a certificate confirming compliance with these requirements and any other guidelines issued by the RBI from time to time in this regard. Compliance shall also be reported to the Board in the CTRs of AMC(s) and Half Yearly Trustee Reports. 12.11 Overseas Investment SEBI Circular No. SEBI/IMD/CIR No.7/104753/07 dated September 26, 2007 & SEBI Circular No. SEBI/IMD/CIR No.2/122577/08 dated April 8, 2008. 12.11.1 Applicable limits: 12.11.1.1 Aggregate ceiling for overseas investments is US $ 7 billion SEBI Circular No. SEBI/IMD/CIR No.2/122577/08 dated April 8, 2008. and within this overall limit, Mutual Funds can make overseas investments subject to a maximum of US $ 300 million per Mutual Fund. 12.11.1.2 Aggregate ceiling for investment by Mutual Funds in overseas Exchange Traded Fund (ETF(s)) that invest in securities is US $ 1 billion subject to a maximum of US $ 50 million per Mutual Fund. 12.11.2 Permissible investments: 12.11.2.1 ADR(s) and/or GDR(s) issued by Indian or foreign companies. 12.11.2.2 Equity of overseas companies listed on recognized Stock Exchanges overseas. 12.11.2.3 Initial and Follow on Public Offerings for listing at recognized Stock Exchang .....

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Master Circular for Mutual Funds - SEBI

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..... equate expertise and infrastructure facilities. Their past track record of performance and regulatory compliance record, if they are registered with foreign regulators, should also be considered. Necessary agreements may be entered into with them as required. 12.11.3.4 Mandatory Disclosure Requirements for Mutual Fund schemes proposing overseas investments: a. Intention to invest in foreign securities and/or ETF(s) shall be disclosed in the SID. The attendant risk factors and returns ensuing from such investments shall be explained clearly in the SID. Mutual Funds shall also disclose as to how such investments will help in the furtherance of the investment objectives of the scheme(s). Such disclosures shall be in a language comprehensible to an average investor b. Mutual Funds shall disclose the name of the Dedicated Fund Manager for making overseas investments as stipulated under paragraph 12.11.3.2 above. c. Mutual Funds shall disclose exposure limits i.e. the percentage of assets of the scheme they would invest in foreign securities / ETF(s). d. Such investments shall be disclosed while disclosing Half Yearly portfolios in the prescribed format under a separate heading "For .....

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Master Circular for Mutual Funds - SEBI

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..... shall not be applicable to investments in Mutual Funds in foreign countries made in accordance with these Guidelines. c. Management fees and other expenses charged by the Mutual Funds in foreign countries along with the management fee and recurring expenses charged to the domestic Mutual Fund scheme shall not exceed the total limits on expenses as prescribed under Regulation 52(6) of the Mutual Funds Regulations. Where the scheme is investing only a part of the net assets in overseas Mutual Funds, the same principle shall be applicable for that part of investment. Details of calculation for charging such expenses shall be reported to the Board of the AMC and the Trustees and shall also be disclosed in the Annual Report of the scheme d. The application Please refer the chapter on formats for format of proposal for investments in foreign securities and ETFs for seeking approval for investing in foreign securities, ADR/GDR/overseas ETF(s) shall be made in advance of making investments. On receipt of approval from the Board, intimation may be sent by the AMC(s) to Overseas Investment Division, Foreign Exchange Department, RBI. 12.12 Investments in Indian Depository Receipts (IDRs) SEB .....

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Master Circular for Mutual Funds - SEBI

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..... independent auditors or internal and/or statutory auditors or other systems developed by them. 12.15 Norms for investment and disclosure by Mutual Funds in derivatives SEBI Circular No. Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010 12.15.1 Exposure Limits 12.15.1.1. The cumulative gross exposure through equity, debt and derivative positions should not exceed 100% of the net assets of the scheme. 12.15.1.2. Mutual Funds shall not write options or purchase instruments with embedded written options. 12.15.1.3 The total exposure related to option premium paid must not exceed 20% of the net assets of the scheme. 12.15.1.4 Cash or cash equivalents with residual maturity of less than 91 days may be treated as not creating any exposure. 12.15.1.5 Exposure due to hedging positions may not be included in the above mentioned limits subject to the following: a. Hedging positions are the derivative positions that reduce possible losses on an existing position in securities and till the existing position remains. b. Hedging positions cannot be taken for existing derivative positions. Exposure due to such positions shall have to be added and treated under limits mentioned in Point 12.15.1.1. c. An .....

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Master Circular for Mutual Funds - SEBI

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..... t specified transaction period or April 1, 2011 whichever is later. Schemes for which observations (final) under Regulation 29 of SEBI (Mutual Funds) Regulations, 1996 have been issued but are yet to be launched would be required to carry out the changes in Scheme Information Document and file the same with SEBI before the launch. : 12.16.2.1. The units shall be mandatorily listed. 12.16.2.2. No redemption/repurchase of units shall be allowed except during the specified transaction period (the period during which both subscription and redemption may be made to and from the scheme). The specified transaction period shall be of minimum 2 working days. 12.16.2.3.Minimum duration of an interval period in an interval scheme/plan shall be 15 days. 12.16.2.4. Investments shall be permitted only in such securities which mature on or before the opening of the immediately following specified transaction period. a. Explanation: In case of securities with put and call options the residual time for exercising the put option of the securities shall not be beyond the opening of the immediately following transaction period. CHAPTER 13 ADVERTISEMENTS SEBI Circular No. MFD/CIR/4/51/2000 dated June 5 .....

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Master Circular for Mutual Funds - SEBI

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..... SEBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000. 13.3.1 The following standards of communication shall be followed. These shall also be followed in case of activities organized to promote Mutual Funds, the AMC(s) or their schemes: 13.3.1.1 Communications shall be fair and in good faith. 13.3.1.2 No material fact shall be omitted, if such omission will cause the communication to be misread and misunderstood. 13.3.1.3 The fact that Mutual Fund investments are prone to risks of fluctuation in NAV, uncertainty of dividend distributions, etc. shall be adequately brought to the notice of unit holders or public in all communications. 13.3.1.4 When engaged in public speaking, seminars, TV or Radio shows, interview to the press etc., Mutual Funds and their employees shall observe these Guidelines, even though some of such forms of communications may not amount to advertisement and/or distribution of Sales Literature. 13.3.1.5 Use of exaggerated or unwarranted claims, superlatives and opinions, not substantiated by available public data shall be refrained from and future forecasts and estimates of growth shall be avoided. 13.3.1.6 Disclosure of risks as required by the Mutual Funds R .....

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Master Circular for Mutual Funds - SEBI

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..... dicating investment objectives of the scheme. c. Logo or trademark or corporate symbol, if any. d. General services offered i.e. frequency of Net Asset Value (NAV) disclosure, liquidity etc. e. Contact details for further information and scheme literature, etc. f. Entry and/or exit loads, if applicable if the advertisement is for a scheme. 13.6.1.3 The following information is prohibited in this form of advertisement: a. Declaration of NAV and performance of the scheme. b. Promise of any returns except in case of assured returns schemes. c. Comparisons and usage of ranking given by a third party. d. Product Launches - mean and include all advertisements issued during the period in which the NFO is open. 13.6.1.4 In such advertisements, risk factors may not be mentioned. However, a general statement to refer to the SID for details is necessary. Tombstone advertisement could be through any media and would cover hoardings, bus panels, kiosks, web - display etc. 13.6.2 Product Launch Advertisement: 13.6.2.1 This form of advertisement shall be used only for launch and/ or re-launch of schemes. These advertisements must contain the following minimum information: a. Name of the Mutual Fun .....

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Master Circular for Mutual Funds - SEBI

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..... the scheme at the then prevailing NAV and this shall be clarified in the advertisements. The type of plan or option of the scheme for which yield is advertised shall also be mentioned. d. The aforesaid annualized yields when used shall be shown for the, last 1 year, 3 years, 5 years and since the launch of the scheme. For Funds in existence for less than one year, performance may be advertised in terms of total returns and such return shall not be annualized. e. In case of Money Market schemes or cash and liquid plans, 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 SEBI Circular No. SEBI/IMD/CIR No 14/187175/ 2009 dated December 15,2009, 15 days SEBI Circular No. SEBI/MFD/CIR No.6/12357/03 dated June 26, 2003. and 30 days SEBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000. provided it does not reflect an unrealistic or misleading picture of the performance or future performance of the scheme. SEBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000. f. All advertisements displaying returns or yields must disclose in the main body of the advertisemen .....

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Master Circular for Mutual Funds - SEBI

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..... SEBI Circular No. SEBI/MFD/CIR No.6/12357/03 dated June 26, 2003. 13.8.1 In audio-visual media based advertisements, the statement “Mutual Fund investments are subject to market risks, read all scheme related documents carefully” shall be displayed in a clearly legible font size covering at least 80% of the total screen space. The remaining 20% space can be used for the name of the Mutual Fund or logo or name of the scheme, etc. Both the visual and the voice over of the standard warning will be run for at least 5 seconds SEBI Circular No. SEBI/IMD/CIR No. 12/118340/08 dated February 26, 2008. and in an easily understandable manner. 13.8.2 Further, no addition or deletion of words shall be made in the standard warning SEBI Circular No. SEBI/IMD/CIR No. 17/ 193751/2010 dated February 04, 2010. 13.8.3 Advertisements through audio media like radio, cassettes, CDs etc. shall read the above statement in a manner easily understandable to the listeners over a period of five seconds SEBI Circular No. SEBI/IMD/CIR No. 12/ 118340/08 dated February 26, 2008. 13.9 Sales Literature 13.9.1 All statements made and facts reported in sales literature of a scheme should be substantiated .....

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Master Circular for Mutual Funds - SEBI

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..... al effect on the yield for that period, the same should be disclosed in the advertisement. SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009 h. The publisher of the ranking data. 13.10.3.2 The above disclosures must be set forth prominently in the body of the advertisement and/or Sales Literature. 13.10.3.4 If the ranking consists of a symbol (for e.g., a star system) rather than a number, the advertisement or Sales Literature must disclose the meaning of the symbol (for e.g., a four-star ranking indicates that the fund is in the top 30% of all Mutual Fund schemes). 13.10.3.5All advertisements and/ or Sales Literature containing rankings must disclose prominently in the main body of such communication that past performance is not a guarantee of future results. 13.10.4 Time Periods: 13.10.4.1All ranking set forth in an advertisement and/ or Sales Literature must be current to the most recent calendar quarter ended, in case of advertising prior to the submission for publication or in case of Sales Literature prior to use. 13.10.4.2 Except for Money Market Mutual Funds: a. Advertisements and/ or Sales Literature must not use rankings based on yield for a p .....

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Master Circular for Mutual Funds - SEBI

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..... heme or class of schemes have a common portfolio. 13.11 Indicative portfolios and yields in mutual funds schemes SEBI Circular No. IMD/CIR No. 14/1510/2009 dated January 19, 2009 13.11.1 Mutual Funds shall not offer any indicative portfolio and indicative yield. No communication regarding the same in any manner whatsoever, shall be issued by any Mutual Fund or distributors of its products. The compliance of the same shall be monitored by the AMC and Trustees and reported in their respective reports to SEBI. 13.12 Disclosure of risk factors in the advertisements SEBI Circular No IIMARP/MF/CIR/01/294/98 dated February 4,1998 13.12.1 Regarding disclosure of risk factors in the advertisements by the mutual funds as mentioned Regulations Clauses 10, 13 and 14 of the Advertisement Code of SEBI ( Mutual Funds) Regulations, 1996, it is clarified that : 13.12.1.1 All advertisements announcing the launch of a scheme and those which solicit subscription to the scheme shall disclose all the risk factors as required by the advertisement code. 13.12.1.2 All advertisements containing performance information, advertising yield/return etc. shall also disclose all the risk factors. 13.12.1.3 Any adv .....

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Master Circular for Mutual Funds - SEBI

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..... 4.2.4 The AMC shall make a continuous effort to remind the investors through letters to take their unclaimed amounts. 14.2.5 The investment management and advisory fee charged by the AMC for managing unclaimed amounts shall not exceed 50 basis points. 14.2.6 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 14.3.1 Mutual Funds shall dispatch Statement of Accounts within 5 business days from the closure of the NFO. 14.3.2 Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) or Systematic Withdrawal Plan (SWP) SEBI Circular No. IMD/CIR/12/80083/2006 dated November 20, 2006 a. Mutual Funds may dispatch the Statement of Accounts to the unit holders under SIP or STP or SWP, once every quarter ending March, June, September and December within 10 working days of the end of the respective quarter. The first St .....

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Master Circular for Mutual Funds - SEBI

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..... 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 equity capital of companies has been extended to the investors subscribing to New Fund Offers (NFOs) of mutual fund schemes. It shall co-exist with the current process, wherein cheques/ demand drafts are used as a mode of payment. 14.7.2The banks which are in SEBI’s list shall extend the same facility in case of NFOs of mutual fund schemes to all eligible investors in Mutual Fund units. 14.7.3Mutual Funds shall ensure that adequate arrangements are made by Registrar and Transfer Agents for the implementation of ASBA. Mutual Funds/AMCs shall make all relevant discl .....

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Master Circular for Mutual Funds - SEBI

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..... ken by the AMCs in this regard from time to time. CHAPTER 15 CERTIFICATION AND REGISTRATION OF INTERMEDIARIES SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001, SEBI Circular No. MFD/CIR/20/23230/2002 dated November 28, 2002, SEBI Circular No. SEBI/MFD/CIR No.01/6693/03 dated April 3, 2003, SEBI Circular No. SEBI/IMD/CIR No.2/254/04 dated February 4, 2004, SEBI Circular No. MFD/CIR/06/210/2002 dated June 26, 2002., Exemption for Senior Citizens: Senior citizens with experience in distributing Mutual Funds units are exempt from the mandatory certification examination if they have completed 50 years of age and have experience of at least 5 years as on September 30, 2003.326 They are also required to follow the guidelines prescribed by the Board and AMFI. They had to attend a mutual fund training programme and a certificate to that effect endorsed by a mutual fund should be submitted to AMFI. 15.1 No Mutual Fund shall deal with any intermediary (i.e. distributors, agents, brokers, sub brokers or called by any other name, whether individuals or belonging to any other organization structure) in relation to selling and marketing of Mutual Fund units unless they have cleared .....

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Master Circular for Mutual Funds - SEBI

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..... t from June 01, 2010, the certification examination for distributors, agents or any other persons employed or engaged or to be employed or engaged in the sale and/or distribution of mutual fund products, would be conducted by the National Institute of Securities Markets (NISM) For Notification under regulation 3 of the Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007 please refer Chapter on Annexure. 15.6.2 Under the existing instructions, the agent/ distributor was exempted from the AMFI certification examination if he had completed fifty years of age and had at least five years of experience in distribution of mutual fund units. As per regulation 4(3) of the Certification Regulations, persons who have attained the age of fifty years or who have at least ten years experience in the securities markets in the sale and/ or distribution of mutual fund products as on May 31, 2010, will be given the option of obtaining the certification either by passing the NISM certification examination or qualifying for Continuing Professional Education (CPE) by obtaining such classroom credits as may be specified by NISM from ti .....

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Master Circular for Mutual Funds - SEBI

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..... ll investor/ unit holders documents in terms of the AML/ CFT, including KYC documents/ PoA as applicable 16.1.2.3 Take immediate steps to obtain all supporting documents in respect of the past transactions. 16.1.2.4 On a one time basis, send statement of holdings and all transactions since inception of that folio in duplicate to the investor and seek confirmation from the unit holders on the duplicate copy. 16.1.2.5 Set up a separate customer services mechanism to handle/ address queries and grievance of the above mentioned unitholders. 16.1.3 Pending completion of documentation, exercise great care and be satisfied of investor bonafides before authorizing any transaction, including redemption, on such accounts/ folios. 16.1.4 The Trustees were required forthwith to confirm to Board that the steps had been taken to address the above and also send a status to the Board as and when process was completed to their satisfaction. 16.1.5 All mutual funds/ AMCs are directed that SEBI Circular No Cir /IMD/DF/9 / 2010 dated August 12, 2010: 16.1.5.1 All new folios/ accounts shall be opened only after ensuring that all investor related documents including account opening documents, PAN, KYC, .....

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Master Circular for Mutual Funds - SEBI

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..... Regiatration of Mutual Funds intermediaries. 16.2.4.2 Time stamping a. Time stamping as evidenced by confirmation slip given by stock exchange mechanism to be considered sufficient compliance with clause for cut-off timing for liquid scheme and plans, cut-off timing for other schemes and plans and time stamping provisions mandated by Board Please refer to Chapter 8 - Net Asset Value for details on cut off timing provisions. 16.2.4.3 Statement of Account a. Where investor desires to hold units in dematerialised form, demat statement given by depository participant would be deemed to be adequate compliance with requirements for account statement prescribed by SEBI For details on dispatch of statement of accountts. refer to Chapter 14- Investor Rights and services. 16.2.4.4 Investor grievance mechanism a. Stock exchanges shall provide for investor grievance handling mechanism to the extent they relate to disputes between brokers and their client. 16.2.4.5 Dematerialization of existing units held by investors a. In case investors desire to convert their existing physical units (represented by statement of account) into dematerialized form, mutual funds / AMCs shall take such steps in .....

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Master Circular for Mutual Funds - SEBI

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..... r dated November 13, 2009 for stock brokers Viz. AMFI /NISM certification, code of conduct prescribed by SEBI for Intermediaries of Mutual Fund, shall be applicable for such Clearing members and Depository participants as well. b. Stock exchanges and Depositories shall provide investor grievance handling mechanism to the extent they relate to disputes between their respective regulated entity and their client and shall also monitor the compliance of code of conduct specified SEBI Circulars MFD/CIR/20/23230/02 dated November 28, 2002 and SEBI/IMD/08/174648/2009 dated August 27, 2009 regarding empanelment and code of conduct for intermediaries of Mutual Funds. 16.2.4.11 The respective stock exchanges and Depositories would provide detailed operating guidelines to facilitate the above and ensure that timelines 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. 16.2.4.12 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 .....

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Master Circular for Mutual Funds - SEBI

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