THE GAZETTE OF INDIA

EXTRAORDINARY

PART �II � SECTION 3 � SUB SECTION (ii)

PUBLISHED BY AUTHORITY

SECURITIES AND EXCHANGE BOARD OF INDIA

NOTIFICATION

Mumbai, the 12^th January, 2006

SECURITIES AND EXCHANGE BOARD OF INDIA

(MUTUAL FUNDS) (AMENDMENT) REGULATIONS, 2006

S.O No.38(E). � In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to further amend the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, namely :-

�

1. These Regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2006.

2. They shall come into force on the date of their publication in the Official Gazette.

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

(i) in regulation 2 �

(a) after clause (ma) the following clauses shall be inserted, namely:-

�(mb) �gold exchange traded fund scheme� shall mean a mutual fund scheme that invests primarily in gold or gold related instruments;

�(mc) �gold related instrument� shall mean such instrument having gold as underlying, as may be specified by the Board from time to time;�

(b) in clause (q), after the words �including money market instruments� and before the semi-colon, the words �or gold or gold related instruments� shall be inserted;

(ii) in regulation 7, in clause (g), after the words �keep custody of the securities�, the words �or gold and gold related instruments� shall be inserted;

(iii) in regulation 26, after sub-regulation (1), the following proviso shall be inserted, namely:-

�Provided that in case of a gold exchange traded fund scheme, the assets of the scheme being gold or gold related instruments may be kept in custody of a bank which is registered as a custodian with the Board.�

(iv) regulation 43 shall be substituted with the following, namely:-

�Investment objective

43. (1) Subject to other provisions of these regulations, a mutual fund may invest moneys collected under any of its schemes only in �

(a) securities;

(b) money market instruments;

(d) securitised debt instruments, which are either asset backed or mortgage backed securities; or

(e) gold or gold related instruments.

(2) Any investment made under sub-regulation (1) shall be in accordance with the investment objective of the relevant mutual fund scheme.

(3) Moneys collected under any money market scheme of a mutual fund shall be invested only in money market instruments.

(4) Moneys collected under any gold exchange traded fund scheme shall be invested only in gold or gold related instruments, in accordance with sub-regulation (5) of regulation 44.�

�� (v) in regulation 44 �

(a) after sub-regulation (1), the following proviso shall be inserted, namely:

�Provided that nothing in the Seventh Schedule shall apply to a gold exchange traded fund scheme.�

(b) after sub-regulation (4), the following sub-regulation shall be inserted, namely:

�(5) A gold exchange traded fund scheme shall be subject to the following investment restrictions:

(a) the initial issue expenses in respect of any such scheme shall not exceed six percent of the funds raised under that scheme;

(b) the funds of any such scheme shall be invested only in gold or gold related instruments in accordance with its investment objective, except to the extent necessary to meet the liquidity requirements for honouring repurchases or redemptions, as disclosed in the offer document; and

(c) pending deployment of funds in accordance with clause (b), the mutual fund may invest such funds in short term deposits of scheduled commercial banks.�

(vi) in regulation 52, in sub-regulation (4), in clause (b):-

(a) in sub-clause (xii), the word �and� appearing at the end thereof, shall be omitted;

(b) after sub-clause (xii), the following sub-clause shall be inserted, namely,

�(xii-a) in case of a gold exchange traded fund scheme, recurring expenses incurred towards storage and handling of gold; and,�

F.No. SEBI/LAD/DOP/ 25601 /2006

M. DAMODARAN

CHAIRMAN

SECURITIES AND EXCHANGE BOARD OF INDIA

Footnotes:

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

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

(a) on April 15, 1997 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1997 vide S.O. No.327(E).

(b) on January 12, 1998 by the Securities and Exchange Board of India� (Mutual Funds) (Amendment) Regulations, 1998 vide S.O. No.32(E).

(c) on December 08, 1999 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1999 vide S.O. No.1223(E).

(d) on March 14, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2000 vide S.O. No.235 (E).

(e) on March 28, 2000 by the Securities and Exchange Board of India (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O. No.278(E).

(f) on May 22, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2000 vide S.O. No.484 (E).

(g) on January 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2001 vide S.O. No.69 (E).

(h) on May 29, 2001 by the Securities and Exchange Board of India (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide S.O. No.476(E).

(i) on July 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2001 vide S.O. No.698(E).

(j) on February 20, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2002 vide S.O. No.219 (E).

(k) on June 11, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2002 vide S.O. No.625 (E).

(l) on July 30, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2002 vide S.O. No.809(E).

(m) on September 9, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2002 vide S.O. No.956(E).

(n) on September 27, 2002 by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide S.O. No.1045(E).

(o) on May 29, 2003 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2003 vide S.O.No. 632(E).

(p) on January 12, 2004 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2004 vide F.No SEBI\LAD\DOP\4\2004.

(q) on March 10, 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398(E).

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THE GAZETTE OF INDIA EXTRAORDINARY PART �II � SECTION 3 � SUB SECTION (ii) PUBLISHED BY AUTHORITY SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 12^th January, 2006 SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) (AMENDMENT) REGULATIONS, 2006 S.O No.38(E). � In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to further amend the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, namely :- � 1. These Regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2006. 2. They shall come into force on the date of their publication in the Official Gazette. 3. In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996: (i) in regulation 2 � (a) after clause (ma) the following clauses shall be inserted, namely:- �(mb) �gold exchange traded fund scheme� shall mean a mutual fund scheme that invests primarily in gold or gold related instruments; �(mc) �gold related instrument� shall mean such instrument having gold as underlying, as may be specified by the Board from time to time;� (b) in clause (q), after the words �including money market instruments� and before the semi-colon, the words �or gold or gold related instruments� shall be inserted; (ii) in regulation 7, in clause (g), after the words �keep custody of the securities�, the words �or gold and gold related instruments� shall be inserted; (iii) in regulation 26, after sub-regulation (1), the following proviso shall be inserted, namely:- �Provided that in case of a gold exchange traded fund scheme, the assets of the scheme being gold or gold related instruments may be kept in custody of a bank which is registered as a custodian with the Board.� (iv) regulation 43 shall be substituted with the following, namely:- �Investment objective 43. (1) Subject to other provisions of these regulations, a mutual fund may invest moneys collected under any of its schemes only in � (a) securities; (b) money market instruments; (c) privately placed debentures; (d) securitised debt instruments, which are either asset backed or mortgage backed securities; or (e) gold or gold related instruments. (2) Any investment made under sub-regulation (1) shall be in accordance with the investment objective of the relevant mutual fund scheme. (3) Moneys collected under any money market scheme of a mutual fund shall be invested only in money market instruments. (4) Moneys collected under any gold exchange traded fund scheme shall be invested only in gold or gold related instruments, in accordance with sub-regulation (5) of regulation 44.� �� (v) in regulation 44 � (a) after sub-regulation (1), the following proviso shall be inserted, namely: �Provided that nothing in the Seventh Schedule shall apply to a gold exchange traded fund scheme.� (b) after sub-regulation (4), the following sub-regulation shall be inserted, namely: �(5) A gold exchange traded fund scheme shall be subject to the following investment restrictions: (a) the initial issue expenses in respect of any such scheme shall not exceed six percent of the funds raised under that scheme; (b) the funds of any such scheme shall be invested only in gold or gold related instruments in accordance with its investment objective, except to the extent necessary to meet the liquidity requirements for honouring repurchases or redemptions, as disclosed in the offer document; and (c) pending deployment of funds in accordance with clause (b), the mutual fund may invest such funds in short term deposits of scheduled commercial banks.� (vi) in regulation 52, in sub-regulation (4), in clause (b):- (a) in sub-clause (xii), the word �and� appearing at the end thereof, shall be omitted; (b) after sub-clause (xii), the following sub-clause shall be inserted, namely, �(xii-a) in case of a gold exchange traded fund scheme, recurring expenses incurred towards storage and handling of gold; and,� F.No. SEBI/LAD/DOP/ 25601 /2006 M. DAMODARAN CHAIRMAN SECURITIES AND EXCHANGE BOARD OF INDIA Footnotes: (1) The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the Principal Regulations were published in the Gazette of India on December 9, 1996 vide S.O. No. 856(E). (2) The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 were subsequently amended � (a) on April 15, 1997 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1997 vide S.O. No.327(E). (b) on January 12, 1998 by the Securities and Exchange Board of India� (Mutual Funds) (Amendment) Regulations, 1998 vide S.O. No.32(E). (c) on December 08, 1999 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1999 vide S.O. No.1223(E). (d) on March 14, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2000 vide S.O. No.235 (E). (e) on March 28, 2000 by the Securities and Exchange Board of India (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O. No.278(E). (f) on May 22, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2000 vide S.O. No.484 (E). (g) on January 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2001 vide S.O. No.69 (E). (h) on May 29, 2001 by the Securities and Exchange Board of India (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide S.O. No.476(E). (i) on July 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2001 vide S.O. No.698(E). (j) on February 20, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2002 vide S.O. No.219 (E). (k) on June 11, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2002 vide S.O. No.625 (E). (l) on July 30, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2002 vide S.O. No.809(E). (m) on September 9, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2002 vide S.O. No.956(E). (n) on September 27, 2002 by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide S.O. No.1045(E). (o) on May 29, 2003 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2003 vide S.O.No. 632(E). (p) on January 12, 2004 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2004 vide F.No SEBI\LAD\DOP\4\2004. (q) on March 10, 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398(E).