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TMI BlogMaster Circular for Mutual FundsX X X X Extracts X X X X X X X X Extracts X X X X ..... ar and the applicable circulars, the contents of the relevant circular shall prevail. 3. Master Circular is a compilation of all the existing/applicable circulars issued by Investment Management Department of SEBI issued to Mutual Funds. Efforts have been made to incorporate certain applicable provisions of existing circulars (as on March 31, 2013) issued by other Departments/Divisions of SEBI relevant to Mutual Funds. INDEX ABBREVIATIONS ............................................................................. 5 CHAPTER 1 .................................................................................... 7 OFFER DOCUMENT FOR SCHEMES ................................................ 7 CHAPTER 2 .................................................................................. 19 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN ........................................................................ 19 CHAPTER 3 .................................................................................. 26 NEW PRODUCTS ........................................................................... 26 CHAPTER 4 ................................................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ....................................172 FORMATS ------------------------------------------- Refer the attachment ANNEXURES --------------------------------------- Refer the attachment ABBREVIATIONS American Depository Receipt ADR Asset Management 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 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 Fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... format. For this purpose, AMC shall be fully responsible for the contents of soft copies of the SID. AMC shall also submit an undertaking to the Board while filing the soft copy of draft SID certifying that the information contained in the soft copy matches exactly with the contents of the hard copy filed with the Board. c. In case of any inaccurate filing, the SID will be returned and refiling will be required. 21 working days Regulation 29(3) of SEBI (Mutual Funds) Regulation 1996 shall be calculated 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 alongwith printed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the scheme shall be as under: a. In case of change in fundamental attributes in terms of Regulation Regulation 18 (15A) of SEBI (Mutual Funds) Regulation, 1996, SID shall be revised and updated immediately after completion of duration of the exit option. b. In case of other changes: 1. The AMC shall be required to issue an addendum and display it on its website. 2. The addendum shall be circulated to the entire distributors/brokers/Investor Service 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Trustees have ensured that the (name of the scheme/Fund) approved by them is a new product offered by (name of the Mutual Fund) and is not a minor modification of any existing scheme/fund/product." 1.4.2 This certification shall be disclosed in the SID along with the date of approval of the scheme by the Trustees. 1.4.3 This certification is not applicable to close ended schemes except for those close ended schemes which have the option of conversion into open 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. 1.5.3 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and confirm the same to SEBI in the half yearly trustee report. 1.9 Selection of Benchmarks EBI Circular No. MFD/CIR/4/51/2000 dated June 5, 2000, SEBI Circular No. MFD/CIR/16/400/02 dated March 26, 2002, SEBI Circular No. MFD/CIR/01/071/02 April 15, 2002. 1.9.1 In case of equity oriented schemes, mutual funds may appropriately select any of the indices available, (e.g. BSE (Sensitive) Index, S&P CNX Nifty, BSE 100, BSE 200 or S&P CNX 500 etc.) as a benchmark index depending on the investment objective and portfolio. 1.9.2 Benchmarks for debt oriented and balanced fund schemes SEBI Circular No. MFD/CIR/01/071/02 dated April 15, 2002. developed by research and rating agencies recommended by the AMFI on a regular basis shall be used by the Mutual Funds. 1.9.3 In case of sector or industry specific schemes, Mutual Funds may select any sectoral indices as published by the Stock Exchanges and other reputed agencies. 1.9.4 These benchmark indices may be decided by the AMC(s) and Trustees. Any change at a later date in the benchmark index shall be recorded and reasonably justified SEBI Circular No. MFD/CIR/16/400/02 dated March 26, 2002. Also please note that for review of scheme per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. CIR/IMD/DF/02/2013 dated February 6, 2013. 1.11 Discontinuation of the nomenclature - 'Liquid Plus Scheme(s)' SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009 1.11.1 The nomenclature "Liquid Plus Scheme(s)" has been discontinued from January 2009 since it gives a wrong impression of added liquidity. 1.12 Fundamental Attributes SEBI Circular No- IIMARP/MF/CIR/01/294/98 dated February 4, 1998 1.12.1 The words "fundamental attributes" Clause (d) of sub-regulation (15) of Regulation 18 of SEBI (Mutual Funds) Regulations, 1996 are elaborated below: 1.12.1.1 Type of a scheme a. Open ended/Close ended/Interval scheme b. Sectoral Fund/Equity Fund/Balance Fund/Income Fund/Debt Fund/Index Fund/Any other type of Fund 1.12.1.2 Investment Objective(s) a. Main Objective - Growth/Income/Both. b. Investment pattern - The tentative Equity/Debt/Money Market portfolio break-up with minimum and maximum asset allocation, while retaining the option to alter the asset allocation for a short term period on defensive considerations. 1.12.1.3 Terms of Issue a. Liquidity provisions such as listing, repurchase, redemption. b. Aggregate fees and expenses charged to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to ensure that all important disclosures are made to the investors of the schemes sought to be consolidated or merged and their interests are protected; Mutual Funds shall take the following steps: 2.2.2.1 Approval by the Board of the AMC and Trustee(s): a. The proposal and modalities of the consolidation or merger shall be approved by the Board of the AMC and Trustee(s), after they ensure that the interest of unit holders under all the concerned schemes have been protected in the said proposal. 2.2.2.2 Disclosures: a. Subsequent to approval from the Board of the AMC and Trustee(s), Mutual Funds shall file the proposal with the Board, along with the draft SID, requisite fees (if a new scheme emerges after such consolidation or merger) and draft of the letter to be issued to the unit holders of all the concerned schemes. b. The letter addressed to the unit holders, giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 SEBI have been incorporated and final copies of the same have been filed with SEBI. PART III - LAUNCH OF ADDITIONAL PLANS SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15, 2009 2.3 Launch of Additional Plans 2.3.1 Additional plans sought to be launched under existing open ended schemes which differ substantially from that scheme in terms of portfolio or other characteristics shall be launched as separate schemes in accordance with the regulatory provisions. 2.3.2 However, plan(s) which are consistent with the characteristics of the scheme may be launched as additional plans as part of existing schemes by issuing an addendum. Such proposal should be approved by the Board(s) of AMC and Trustees. In this regard please note that: 2.3.2.1 The addendum shall contain information pertaining to salient features like applicable entry/exit loads, expenses or such other details which in the opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall, with the approval of trustees, 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 unit holders 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. 3.2.1 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: 3.2.1.1 Gold and 3.2.1.2 Gold related instruments Regulations 2(mc) of the Mutual Funds Regulations introduced vide Gazette Notification No. 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. 3.2.1.3 Gold Deposit Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf yearly basis. 3.2.6.2 The confirmation on physical verification of gold as above shall also form part of half yearly report Please refer to the section on Formats for the disclosures in the Half Yearly Trustee Report w.r.t physical verification of Gold. This will be effective from the half yearly report ending April 2011 by Trustees to SEBI. by trustees to SEBI. 3.3 Capital Protection Oriented Scheme SEBI Circular No. SEBI/IMD/CIR No.9/74364/06 dated August 14, 2006. 3.3.1 The SID, KIM and advertisements pertaining to Capital Protection Oriented Scheme Regulation 2(ea), 33(2A) and 38A of the Mutual Funds Regulations introduced vide Gazette Notification No. S.O. 1254(E) dated August 3, 2006. shall disclose that the scheme is "oriented towards protection of capital" and not "with guaranteed returns." It shall also be indicated that the orientation towards protection of capital originates from the portfolio structure of the scheme and not from any bank guarantee, insurance cover etc. 3.3.2 The proposed portfolio structure indicated in the SID and KIM shall be rated by a Credit Rating Agency from the view point of assessing the degree of certainty for achieving the objective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led through depository mechanism and therefore RGESS compliant. b. AMCs shall disclose that the concerned RGESS eligible Exchange Traded Funds and Mutual Fund schemes is in compliance with the provisions of RGESS guidelines notified by Ministry of Finance vide notification no. 51/2012 F. No. 142/35/2012-TPL dated November 23, 2012, in Scheme Information Document (SID), in case of new fund offer, or by way of addendum, in case of existing RGESS eligible Exchange Traded Funds and Mutual Fund schemes. c. Para 6(c) of the notification states that the eligible securities brought into the demat account will automatically be subject to lock-in during the first year, unless the new investor specifies otherwise and for such specifications, the new retail investors shall submit a declaration indicating that such securities are not to be included within the above limit of investment. It is clarified that such declaration shall be submitted by an investor to its Depository Participant within a period of one month from the date of transaction. d. For transactions undertaken by investors through their RGESS designated demat account, Depositories may seek necessary transactional details fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Funds: 4.2.3.1 Mutual Funds shall adopt these practices as a part of their due diligence exercise after considering the size of their operations. 4.3 Implementation of the Risk Management System 4.3.1 Mutual Funds shall adopt the following approach to implement the Risk Management System: 4.3.2 Identification of observance of each recommendation: 4.3.2.1 Mutual Funds shall identify areas of current adherence as well as non-adherence of various Risk Management practices under each of the three categories. They shall examine the areas where development or improvement of systems is required. 4.3.2.2 After identifying the same, Mutual Funds shall review the progress made on implementation of the systems on a monthly 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): 4.3.3.1 The 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 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.8/132968/2008 dated July 24, 2008 5.3.1 The publication of the unaudited half-yearly results shall be made in line with provisions of the Regulations Regulation 59 of SEBI (Mutual Funds) Regulations, 1996, in the format prescribed in Twelfth Schedule. 5.3.2 The half yearly disclosures SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 of the unaudited financial results on respective website should be made in a user-friendly and downloadable format (preferably in a spreadsheet). 5.4 Mailing of Schemewise Annual Report or Abridged Summary SEBI Circular No. IMD/CIR No.8/132968/2008 dated July 24, 2008 and Circular No.Cir/IMD/DF/16/2011 dated September 8, 2011 5.4.1 Mailing of Schemewise Annual Reports For format of abridged s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 their respective websites & to AMFI and AMFI shall disclose industry wide figures on its website. 5.7 Commission disclosure SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011 5.7.1 Mutual Funds / AMCs shall disclose on their respective websites the total commission and expenses paid to distributors who satisfy one or more of the following conditions with respect to noninstitutional (retail and HNI) investors:- 5.7.1.1 Multiple point of presence (More than 20 locations) 5.7.1.2 AUM raised over `100 crore across industry in the non institutional category but including high networth individuals (HNIs). 5.7.1.3 Commission received of over `1 crore p.a. across industry 5.7.1.4 Commission received of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, as part of the Report of the Trustees. 5.11 Brokerage and commission paid to associates SEBI Circular No. SEBI/IMD/CIR No 18/198647/2010 dated March 15, 2010 5.11.1 Regulations Regulation 25 (8) of SEBI (Mutual Funds) Regulations, 1996 govern payment of brokerage or commission if any, to the sponsor or any of its associates, employees or their relatives. 5.11.2 Disclosures on brokerage and commission paid to associates/related parties/group companies of sponsor/Asset Management Company in the unaudited half yearly financial results, the abridged scheme wise annual report and the SAI, shall be made in the format as prescribed Please refer to the section on Formats. PART II - REPORTS 5.12 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. 5.12.1 Date and Mode of Submission: 5.12.1.1 MCR For format of MCR please refer to section 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. 5.12.2 Other Guidelines: 5.12.2.1 Detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to time. 5.15 Annual Statistical Report (ASR) IIMARP/CIR /08/845/97 DATED May 7,1997, MFD/CIR/02/110/02 dated April 26,2002, SEBI Cir No- IMD/CIR No 6/72245/06 dated July 20,2006, 5.15.1 AMC should submit the annual statistical report to SEBI in the prescribed format by 30th of April each year For format of ASR refer the section on Formats Quarterly Movement of Net Assets- SEBI CIR - IIMARP/MF/CIR/05/788/97 dated April 28, 1997 required mutual funds to submit the statement for quarterly movement of net assets. However, SEBI circular MFD/CIR/12/16588/02 dated August 28,2002 stated that such Statement of movement of net assets /portfolios are no more to be submitted. 5.16 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 5.16.1 All Mutual Funds shall submit details of transactions in secondary market on daily basis in the prescribed format For format of daily transaction report, please refer the section on formats. Accordingly, Mutual Funds are advised to make necessary arrangements with their custodians for the submission of reports on a daily basis. The report is to be submitted to the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a furnished to them is complete and accurate in all respects. It is therefore advised that to re-check the accuracy of the data furnished by your office and ensure that all the columns are correctly filledin and submit a 'Supplementary Information Report', if need be, to the Income Tax Department. 5.18.1 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). 5.18.2 Some common errors in these returns have been pointed out by the Directorate of Income Tax (Systems) as: 5.18.2.1 Not mentioning PAN or mentioning invalid PAN. 5.18.2.2 Entering incomprehensible/ incomplete names of transacting parties, e.g. names of 2 or 3 letters. 5.18.2.3 Entering incomprehensible/ incomplete addresses of transacting parties, e.g. 'Nil', 'N/A', '_', in all address fields, incomplete postal addresses, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board of the AMC and Independent Trustees SEBI Circular No. MFD/CIR/11/354/2001 dated December 20, 2001, SEBI Circular No. MFD/CIR/13/16799/2002 dated August 29, 2002, SEBI Circular No. MFD/CIR/17/21105/2002 dated October 28, 2002 6.3.1 An Independent Trustee shall not be associated in any manner with the Sponsor(s) Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996.. The independent directors on the Board of the AMC shall not be associate of, or associated in any manner with, the sponsor or any of its subsidiaries or the trustees Regulation 21(d) of the SEBI (Mutual Funds) Regulations, 1996.. 6.3.2 An 'associate' shall be defined as: 6.3.2.1 Relatives As defined under Section 6 of the Companies Act 1956. of Sponsor(s) or directors of the Sponsor Company or relatives of Associate Directors of the AMC(s) and Trustee. 6.3.2.2 Persons providing any type of professional service to the Mutual Funds, the AMC and the Trustees and the Sponsor(s). Also, persons 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 Spon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a member of HUF. 6.4.3.2 The objectives and principles of these Guidelines are: a. To ensure that all securities transactions made by employees in their personal capacity are conducted in consonance with these Guidelines and in such manner as to avoid any actual or potential conflict of interest or any abuse of an individual's position of trust and responsibility. b. The employees of AMC(s) and Trustees especially Access Persons shall not take undue advanta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.. e. If a transaction approved by Compliance Officer has not been effected within seven SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009 calendar days from the date of its approval, the access person shall be required to obtain approval once again from Compliance Officer prior to effecting the transaction. f. All employees shall refrain from profiting from the purchase and sale or sale and purchase of any security within a period of 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. If the shares and/or debentures and/or bonds and/or warrants of the company or derivatives specified by the access person are not held by any scheme of the Mutual Fund of which the AMC is the investment manager; 2. If such shares and/or debentures and/or bonds and/or warrants of the company or derivatives specified by the employee are held by any scheme of the Mutual Fund of which the AMC is the investment manager, there should be a "cooling off" period of 15 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring 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 scheme, the employees may report only at the time of making the first installment of the SIP. 6.4.6.3 Notwithstanding anything mentioned earlier, in the following cases employees of AMC & Trustees shall not purchase or sell /or repurchase or redeem units of any scheme, including Money Market Mutual Fund scheme of their Mutual Fund: a. There is a likelihood of a change in the investment objectives of the concerned Mutual Fund Scheme(s) and this has not been communicated to the investors; b. There is a like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, asset management companies and their employees and directors. 6.5.2 Review by the Board of Directors of AMC and the Trustee(s) 6.5.2.1 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. 6.6 Responsibilities of AMC & Trustees MFD/CIR/09/014/2000 dated January 5, 2000 6.6.1 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 the Mutual Funds Regulations. AMC(s) shall place correspondence and reports submitted to SEBI before the Trustees. PART II -SCHEM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I (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 each 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 quarter, on the basis of number of investors at the end of the business hours of the scheme on a daily basis. 6.7.3.2 To determine breach of 25% holding limit by an investor, net assets under the scheme shall be calculated daily and the daily holding limit shall be determined accordingly. At the end of the quarter, average daily holding by each investor shall be calculated and any brea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 For the financial years April 2013 - March 2014, the systems audit should be completed by September 30, 2014. 149 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 MFs 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. 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, the actual exercise of their proxy votes in the AGMs/EGMs of the investee companies in respect of the following matters:- 6.17.1 Corporate governance matters, including changes in the state of incorporation, merger and other corporate restructuring, and anti takeover provisions 6.17.2 Changes to capital structure, including increases and decreases of capital and preferred stock issuances. 6.17.3 Stock option plans and other management compensation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the unit holders to facilitate tax benefits linked to payment of Securities Transaction Tax (STT). 7.4 Trading in Exchange Traded Derivatives Contracts SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005; SEBI Circular No. DNPD/Cir-30/2006 dated January 20, 2006, SEBI Circular No. SEBI/DNPD/Cir-31/2006 dated September 22, 2006. 7.4.1 For trading in Exchange Traded Derivatives Contracts, following should be observed:- 7.4.1.1 Mutual Fund schemes can participate in derivatives market as per the guidelines issued by SEBI in this regard from time to time. SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005. 7.4.1.2 The Mutual Funds shall be treated at par with a registered FII in respect of position limits in index futures, index options, stock options and stock futures contracts. The Mutual Funds will be considered as trading members like registered FIIs and the schemes of Mutual Funds will be treated as clients like subaccounts of FIIs. 7.4.1.3 Appropriate disclosures shall be made in the offer document regarding the extent and manner of participation of the schemes of the Mutual Funds in derivatives and the risk factors, which should be explained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 an asterisk to indicate the one day time lag/or the actual time lag. 8.1.4 Delay beyond 10 a.m. of the following business day in case of Fund of Fund schemes and 9 p.m. on the same day for all other schemes shall be explained in writing to AMFI and the Board and shall also be reported in the CTR(s) For format of CTR, please refer to section on formats in terms of number of days of non adherenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 8.3.4.1 above. 8.3.4.3 AMCs shall compensate any loss occasioned to any investor or to the scheme and/or plan on account of non compliance with Clause 8.3.4.2 above. 8.3.5 Cut-off Timings for liquid fund schemes and plans For determining the applicable NAV SEBI Circular No SEBI/IMD/DF/15/2010 dated November 26, 2010: 8.3.5.1 The following cut-off timings shall be observed by a mutual fund in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication 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: 8.3.6.2.1 Where the application is received up to 3.00 pm with a local cheque or demand draft payable at par at the place where it is received - closing NAV of the day on which the application is received; 8.3.6.2.2 Where the application is received after 3.00 pm with a local cheque or demand draft payable at par at the place where it is received - closing NAV of the next business day; and 8.3.6.2.3 Where the application is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 at such official points of acceptance. 8.3.8.3 Time stamping machines at all official points of acceptance shall be in compliance with the requirements mentioned in Section 8.4. 8.3.9 Compliance Reporting 8.3.9.1 Status of compliance with these Guidelines shall be reported to the Board in the CTR(s) for CTR format, please refer to the section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 required by the Board or auditors appointed by the Board. 8.5 Uniformity in calculation of sale and repurchase price SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002 & SEBI Circular No. SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009 8.5.1 The following method is being prescribed 8.5.1.1 To streamline the calculation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not more than thirty days prior to valuation date. 9.2.1.2 When a debt security (other than Government Securities) is not traded on any Stock Exchange on any particular valuation day, the value at which it was traded on the principal Stock Exchange or any other Stock Exchange, as the case may be, on the earliest pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch 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 60 SEBI Circular 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 upto 60 days shall be valued at the 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 on amortization basis. It is further clarified that in case of floating rate securities with floor and caps on coupon rate and residual maturity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency 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 Yield203 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 which the benchmark GOI matrix is built to effectively link the corporate matrix with the GOI securities matrix. Accordingly: a. All trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties 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 withduration upto 2 years 100 bps 50 bps Rated instruments withduration 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 2years Discretionary discount of upto +50 bps over and above mandatory discount of +50 bps Unrated instrumentswith duration over 2years 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties above 15 per cent. 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. 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. 9.7.4.3 Book value for the purpose of provisioning for NPAs shall be taken as a value determined as per the prescribed valuation method. 9.7.4.4 This can be explained by an illustration: a. Let us consider that interest income is due on a half yearly basis and the due date falls on 30.06.2000 and the interest is not received till 1st quarter after due date i.e. 30.09.2000. The provisioning will be done in the following phased manner: 10% provision 01.01.2001 6 months past due date of interest i.e. 3 months from the date of classification of asset as NPA (01.10.2000) 20% provision 01.04.2001 20% provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 classified as NPA. 9.7.7.3 Full provision can be made if the rating comes down to Grade 'D' (or its equivalent). 9.7.8 Reschedulement of an asset 9.7.8.1 In case a company defaults in payment of either interest or principal amount and the Mutual Fund has accepted a rescheduling of the schedule of payments, then the following practice shall be adhered to: a. In case it is a first 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 servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 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 calculation in (c) below. b. Average capitalisation 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 capitalisation rate (P/E ratio). Earnings per share (EPS) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 valuation of such securities gets covered in the valuation framework within six weeks from the date of receipt of such intimation from mutual fund. 9.9.3 In the interim period, till AMFI makes provisions to cover such securities in the valuation of securities framework, the mutual funds shall value such securities using their proprietary model which has been approved by their independent trustees 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws: Daily net assets X 30 basis points X New inflows from beyond top 15 cities 365* X Higher of (a) or (b) above * 366, wherever applicable. The top 15 cities shall mean top 15 cities based on Association of Mutual Funds in India (AMFI) data on 'AUM by Geography - Consolidated Data for Mutual Fund Industry' as at the end of the previous financial year. 10.1.3 The additional TER on account of inflows from beyond top 15 cities so charged shall be clawed back in case the same is redeemed within a period of 1 year from the date of investment. 10.1.4 Mutual funds/AMCs shall make complete disclosures in the half yearly report of Trustees to SEBI regarding the efforts undertaken by them to increase geographical penetration of mutual funds and the details of opening of new branches, especially at locations beyond top 15 cities. 10.1.5 Brokerage and transaction cost SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 & SEBI Circular No. CIR/IMD/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 broke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulation, 1996 and SEBI Circular No. SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009. 10.1.10.2 Mutual Fund Schemes to be launched including those for which observation letter have been issued under Regulation Regulation 29 of SEBI (Mutual Funds) Regulations, 1996 would be required to carry out the changes in SID and file the same with SEBI before the launch. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 2009 and the other to reflect accretions since August 01, 2009. b. However, not more than one- third of load balance as on July 31, 2009 shall be used in any financial year. It is clarified though the unutilized balances can be carried forward, yet in no financial year the total spending can be more than one third of the load balances on July 31, 2009. The accretions 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. 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. 10.4.1.4 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 sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion charge on subscription below `10,000/- 10.5.1.9 In case of SIPs, the transaction charge shall be applicable only if the total commitment through SIPs amounts to `10,000/- and above. In such cases the transaction charge shall be recovered in 3-4 installments. 10.5.1.10 There shall be no transaction charge on transactions other than purchases/ subscriptions relating to new inflows. 10.5.2 Mutual Funds shall institute systems to 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 Dividend231 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 Board250 10.7 Exit load parity 10.7.1 While charging exit loads, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 calender 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 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Funds in accordance with the Stock Lending & Borrowing Scheme. Regulation 44(4) of the SEBI (Mutual Funds) Regulations, 1996. 12.5.2 Disclosure Requirements 12.5.2.1 The following information shall be disclosed in the SID to enable the investors and unit holders to take an informed decision: a. Intention to lend securities belonging to a particular Mutual Fund scheme in accordance with the guidelines on securities lending and borrowing scheme issued by SEBI from time to time. SEBI Circular No - SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009 b. Exposure limit with regard to securities lending, both for the scheme as well as for a single intermediary. c. Risks factors such as loss, bankruptcy etc. associated with such transactions. 12.5.3 Reporting Requirement 12.5.3.1 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. 12.5.3.2 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RBI are however exempt from these limits. 12.9 Investment Restrictions for Securitised Debt SEBI Circular No. SEBI/IMD/CIR No.6/63715/06 dated March 29, 2006. 12.9.1 For investments made in Securitised Debt (mortgage backed securities and asset backed securities), restrictions as per Clause 1 of Seventh Schedule Clause I of Schedule VII of SEBI (Mutual Fund), Regulations, 1996 shall not apply at the originator level. 12.10 Investments in Short Term Deposits of Scheduled Commercial Banks SEBI Circulars No. SEBI/IMD/CIR No.9/20306/03 dated November 12, 2003, SEBI Circular No. SEBI/IMD/Cir No.1/91171/07 dated April 16, 2007, SEBI and Clause 8 of Seventh Schedule of Mutual Funds Regulations, 1996. 12.10.1 The guidelines for deployment of funds in short term deposits of commercial banks for schemes are as under: 12.10.1.1 "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. 12.10.1.2 Such deposits shall be held in the name of the concerned scheme. 12.10.1.3 No mutual fund scheme shall park more than 15% of their net assets in short term deposits of all schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 002. issued to all SGL account holders, to make transactions in government securities transparent, a monthly reconciliation system has been introduced between RBI and Mutual Funds maintaining SGL/CSGL accounts with respect to Government Securities on an ongoing basis. 12.11.2 Mutual Funds shall reconcile the balances reported in the monthly statements furnished by RBI with the transactions undertaken by them. 12.11.3 The reconciliation procedure shall be made part of internal audit and the auditors shall on a continuous basis, check the status of reconciliation and submit a report to the Audit Committee. These reports shall be placed in the meetings of the Board of the AMC and Trustees. Mutual Funds shall submit, on a quarterly basis 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. 12.12 Participation of mutual funds in repo in corporate debt securities SEBI Circular No. CIR/IMD/DF/19/2011 dated November 11, 2011 12.12.1 Mutual funds can participate in repos in corporate debt sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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. 12.13.1.2 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. 12.13.2 Permissible investments: 12.13.2.1 ADR(s) and/or GDR(s) issued by Indian or foreign companies. 12.13.2.2 Equity of overseas companies listed on recognized Stock Exchanges overseas. 12.13.2.3 Initial and Follow on Public Offerings for listing at recognized Stock Exchanges overseas. 12.13.2.4 Foreign debt securities in the countries with fully convertible currencies, short term as well as long term debt instruments with rating not below investment grade by accredited/ registered credit rating agencies. 12.13.2.5 Money Market Instruments rated not below investment grade. 12.13.2.6 Repos in form of investment, where the counterparty is rated not below investment grade; repo shall not however involve any borrowing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). b. Mutual Funds shall disclose the name of the Dedicated Fund Manager for making overseas investments. 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 "Foreign Securities and/or overseas ETF(s)." Scheme wise percentage of investments made in such securities shall be disclosed while publishing Half Yearly Results in the prescribed format For Half Yearly Results, please refer to the section on Formats as a footnote. 12.13.3.4 Investment by Existing Schemes: a. Existing schemes of Mutual Funds where the SID provides for investment in foreign securities and attendant risk factors but which have not yet invested, may invest in foreign securities, consistent with the investment objectives of the schemes, provided a Dedicated Fund Manager has been appointed as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 section 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. 12.14 Investments in Indian Depository Receipts (IDRs) SEBI Circular No. IMD/CIR. No.1/165935/2009 dated June 09, 2009 12.4.1Mutual funds can invest in Indian Depository Receipts Regulation 43(1) of SEBI (Mutual Funds) Regulations, 1996 [Indian Depository Receipts as defined in Companies (Issue of Indian Depository Receipts) Rules, 2004] subject to compliance with SEBI (Mutual Funds) Regulations 1996 and guidelines issued there under, specifically investment restrictions as specified in the Seventh Schedule of the Regulations. 12.15 Investment Restrictions SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000. 12.15.1 All invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidual maturity of less than 91 days may be treated as not creating any exposure. 12.17.1.5 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 Point12.16.1.1. c. Any derivative instrument used to hedge has the same underlying security as the existing position being hedged. d. The quantity of underlying associated with the derivative position taken for hedging purposes does not exceed the quantity of the existing position against which hedge has been taken. 12.17.1.6 Mutual Funds may enter into plain vanilla interest rate swaps for hedging purposes. The counter party in such transactions has to be an entity recognized as a market maker by RBI. Further, the value of the notional principal in such cases must not exceed the value of respective existing assets being hedged by the scheme. Exposure to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the securities shall not be beyond the opening of the immediately following transaction period. 12.19 CDS - mutual funds as users (protection buyers) SEBI Circular No. CIR/IMD/DF/23/2012 dated November 15, 2012. 12.19.1 Mutual funds have been permitted to participate in CDS market, as per the guidelines issued by RBI from time to time , subject to the following conditions: a. Mutual funds shall participate in CDS transactions only as users (protection buyer). Thus, mutual funds are permitted to buy credit protection only to hedge their credit risk on corporate bonds they hold. They shall not be allowed to sell protection and hence not permitted to enter into short positions in the CDS contracts. However, they shall be permitted to exit their bought CDS positions, subject to para (d) below. b. Mutual funds can participate as users in CDS for the eligible securities as reference obligations, constituting from within the portfolio of only Fixed Maturity Plans (FMP) schemes having tenor exceeding one year. c. Mutual funds shall buy CDS only from a market maker approved by the RBI and enter into Master Agreement with the counterparty as stipulated under RBI Guidelines. Expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... February 28, 2012 13.2.1 While advertising pay out of dividends, all advertisements shall disclose the dividends declared or paid in rupees per unit along with the face value of each unit of that scheme and the prevailing NAV at the time of declaration of the dividend. 13.2.2 Impact of Distribution Taxes: While advertising returns by assuming reinvestment of dividends, if distribution taxes are excluded while calculating the returns, this fact shall also be disclosed. 13.2.3 Pay out of Dividend/ Bonus: While advertising pay outs, all advertisements shall disclose, immediately below the pay out figure (in percentage or in absolute terms) that the NAV of the scheme, pursuant to pay out would fall to the extent of payout and statutory levy (if applicable). 13.3 Transparency of Information SEBI Circular No.Cir/IMD/DF/13/2011 dated August 22, 2011 13.3.1 When the scheme has been in existence for more than three years: 13.3.1.1 Point-to-point returns on a standard investment of `10,000/- shall also be shown in addition to CAGR for a scheme in order to provide ease of understanding to retail investors. 13.3.1.2 Performance advertisement shall be provided since inception and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmance of the fund manager is communicated by providing additional disclosures, if required. 13.4 Indicative portfolios and yields in mutual funds schemes SEBI Circular No. IMD/CIR No. 14/1510/2009 dated January 19, 2009 13.4.1 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. 13.4.2 Indicative portfolio or yield in close ended debt oriented mutual fund schemes SEBI Circular No. CIR/IMD/DF/12/2011 dated August 01,2011 Mutual Funds (MFs) / AMCs may make following additional disclosures in the SID/SAI and KIM without indicating the portfolio or yield, directly or indirectly: 13.4.2.1 MFs/AMCs shall disclose their credit evaluation policy for the investments in debt securities. 13.4.2.2 MFs/AMCs shall also disclose the list of sectors they would not be investing. 13.4.2.3 MFs shall disclose the type of instruments which the schemes propose to invest viz. CPs, CDs, Treasury bills etc 13.4.2.4 MFs shall d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uous 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 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 of units allotted to the applicant by way of email and/or SMS's to the applicant's registered email address and/or mobile number as soon as possible but not later than five working days from the date of closure of the initial subscription list and/or from the date of receipt of the request from the unitholders. 14.3.2 Consolidated Account Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of time i.e. after the maturity/ winding up of the scheme(s), these NPAs and illiquid securities may be realized by the Mutual Funds. Mutual Funds shall 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 / 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of Money Laundering Act, 2002 and Rules framed there under; the SEBI Circular(s) on Anti Money Laundering (AML) and other applicable AML rules, regulations and guidelines and (ii) sufficient systems and procedures in place. 14.10.2 Repayment in the form of redemptions, dividend, etc. with respect to aforementioned investments shall be paid only through banking channel. PART III- INVESTOR EDUCATION 14.11 SEBI Investors Education Programme - Investments in Mutual Funds SEBI Cir No. MFD/CIR NO -13/370/02 dated January 16,2002 14.11.1 Board has prepared a brochure in question-answer format explaining the fundamental issues pertaining to mutual funds. The same is enclosed at Annexure 5. The same is also available at our website www.sebi.gov.in under the "Mutual Funds" section. 14.11.2 AMCs are advised to circulate copies of the brochure among their distributors and agents (including brokers, banks, post offices) and the investors. 14.11.3 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. 14.11.4 AMFI may cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g out due diligence process of distributors. SEBI Circular No. Cir/IMD/DF/7/2012 dated February 28, 2012 15.4.1.2 The due diligence process shall be initially applicable for distributors satisfying one or more of the 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 relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip management process, servicing standards, enquiry / grievance handling mechanism. f. Internal/ external audit processes, their comments / observations as it relates to MF distribution business. g. Findings of ongoing review from sample survey of investors. 15.4.2 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 for details on Code of Conduct. All intermediaries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirements for CPE as specified by NISM within the validity period of the certificate obtained by passing the certification examination. However, to facilitate the transition process from AMFI to NISM, it has been decided that a 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. 15.7.4 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. 15.7.5 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance/ completion of the steps enumerated herein. 16.1.2.2 Take immediate steps to obtain all investor/ unit holders documents in terms of the AML/ CFT, including KYC documents/ PoA as applicable. 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. 16.1.2.6 Pending completion of documentation, exercise great care and be satisfied of investor bonafides before authorizing any transaction, including redemption, on such accounts/ folios. 16.1.3 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. 16.1.4 All mutual funds/ AMCs are directed that SEBI Circular No Cir /IMD/DF/9 / 2010 dated August 12, 2010: 16.1.4.1 All new folios/ accounts shall be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... code of conduct specified regarding empanelment of intermediaries by mutual funds Please refer Chapter 15 on Certification and 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 16.2.4.4 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. 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 conver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g mutual funds units through stock brokers and clearing members: a. Investors shall receive redemption amount (if units are redeemed) and units (if units are purchased) through broker/clearing member's pool account. Mutual Funds(MF)/ Asset management Companies(AMC) would pay proceeds to the broker/clearing member (in case of redemption) and broker/clearing member in turn to the respective investor and similarly units shall be credited by MF/AMC into broker/clearing member's pool account (in case of purchase) and broker/clearing member in turn to the respective investor. b. Payment of redemption proceeds to the broker/clearing members by MF/AMC shall discharge MF/AMC of its obligation of payment to individual investor. Similarly, in case of purchase of units, crediting units into broker/clearing member pool account shall discharge MF/AMC of its obligation to allot units to individual investor. 16.2.4.11 The following may be noted in this regard: a. Clearing members and Depository participants 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 and conditions stipulated SEBI Circular dated Nov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Holding MF units in demat account through a SEBI registered depository participant (DP). 17.1.1.2 Indirect route- Holding MF units via Unit Confirmation Receipt (UCR). 17.1.2 The investment through the above mentioned routes shall be subject to the following conditions: 17.1.2.1 Qualified Foreign Investor (QFI) shall mean a person resident in a country that is compliant with Financial Action Task Force (FATF) standards and that is a signatory to International Organization of Securities Commission's (IOSCO's) Multilateral Memorandum of Understanding, Provided that such person is not resident in India, Provided further that such person is not registered with SEBI as Foreign Institutional Investor or Sub-account. Explanation- For the purposes of this clause: (1) the term "Person" shall carry the same meaning under Section 2(31) of the Income Tax Act, 1961 (2) the phrase "resident in India" shall carry the same meaning as in the Income Tax Act, 1961 (3) "resident" in a country, other than India, shall mean resident as per the direct tax laws of that country. 17.1.2.2 MF shall ensure that only QFIs who comply with para 17.1.2.1 are allowed to invest under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compliant with FATF standards and are signatory to MMOU of IOSCO. 17.1.2.10 In case of subscription, MF shall allot units based on the NAV of the day on which funds are realized in the MF's scheme bank account in India and in case of redemption, units shall be redeemed on the day on which transaction slip/instruction is received and time stamped by MF, as per the applicable cut off time. The Scheme information documents of the MF shall clearly mention the applicable cut off time for QFIs and the other requirements / applicable guidelines for QFIs. 17.1.2.11 MF shall ensure that Systematic Investments/ transfer/ withdrawals and switches are not available to the QFIs. QFIs can only subscribe or redeem. 17.1.2.12 MF/ DP shall ensure that units/ UCRs held by QFIs are free from all encumbrances i.e. pledge or lien cannot be created for such units. 17.1.2.13 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 17.1.2.14 MF shall ensure that all the investor related documents/ records of the QFIs are available with them. 17.1.2.15 MF shall ensure compliance with laws (rules and regulations) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsure compliance with para 1.11.3.14. However, MF shall comply with PMLA, FATF standards and SEBI circulars issued in this regard from time to time on an ongoing basis. 17.1.3.6 The qualified DP shall open a separate single rupee pool bank account with a designated AD Category -I bank, exclusively for the purpose of investments by QFIs in India. 17.1.3.7 Process Flow Subscription a. The QFIs shall place a purchase/ subscription order mentioning the name of the scheme/MF with its DP and remit foreign inward remittances through normal banking channel in any permitted currency (freely convertible) directly to the single rupee pool bank account of the DP maintained with a designated AD category - I bank. b. DP in turn shall forward the purchase order to the concerned MF and remits the money to the MF's scheme account on the same day as the receipt of funds from QFIs. In case of receipt of money after business hours, DP shall remit the funds to MF scheme account by next business day. c. If for any reasons, the DP is not able to remit the money to the MF scheme account within the stipulated timeframe as mentioned in para-b, the DP shall immediately return the money to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depository receipts/global custody agency b. The entity is registered with an overseas securities market/ banking regulator. 17.1.4.6 MF shall seek no objection from SEBI before appointing any UCR issuer and furnish the details and information sought by SEBI about the UCR issuer. SEBI reserves the right to seek additional information / clarification and direct action, including non appointment/ revocation of appointment of that UCR Issuing Agent. 17.1.4.7 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 17.1.4.8 Custodians appointed by the MF shall comply with the SEBI (Custodian of Securities) Regulations, 1996, circulars and guidelines issued by SEBI. 17.1.4.9 The rupee denominated units of the MF would be held as underlying by the custodian in India in demat mode against which the UCR issuer would issue UCR to be held by QFIs. 17.1.4.10 MF shall ensure that for every UCR issued by UCR issuer, Custodian in India shall hold corresponding number of units against it i.e., there shall be one unit of MF scheme for every unit of UCR. 17.1.4.11 MF shall receive money from UCR issuer eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall remit the dividend amount proceeds to the UCR issuer which in turn shall remit the dividend amount to the designated bank account of the QFIs. 17.1.6 The investment by the QFIs in MF equity and debt schemes under this scheme shall also be subject to the relevant and extant FEMA regulations and guidelines issued by the Reserve Bank of India under FEMA, 1999 from time to time. 17.2 Clarification SEBI Circular No.Cir/IMD/DF/7/2012 dated February 28, 2012 to Regulation 24 Of SEBI (Mutual Funds) Regulations, 1996 17.2.1 The amended Regulation 24 mandates that AMCs shall appoint separate fund manager for each separate fund managed by it unless the investment objectives and assets allocations are the same and the portfolio is replicated across all the funds managed by the fund manager. 17.2.2 The replication of minimum 70% of portfolio value shall be considered as adequate for the purpose of said compliance, provided that AMC has in place a written policy for trade allocation and it ensures at all points of time that the fund manager shall not take directionally opposite positions in the schemes managed by him. 17.2.3 Wherein a fund manager is common across mutual fund schemes ..... 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