SECURITIES AND EXCHANGE BOARD OF CONTENTS 1. Short title,
application and commencement CHAPTER II:
REGISTRATION OF MUTUAL FUND 3. Application for
registration 4. Application fee to
accompany the application 5. Application to
conform to the requirements 8. Consideration of
application 9. Grant of
Certificate of Registration 10. Terms and
conditions of registration 13. Failure to pay
service fee CHAPTER III:
CONSTITUTION AND MANAGEMENT OF MUTUAL FUND AND OPERATION OF TRUSTEES, ETC 14. Trust Deed to be
registered under the Registration Act 16. Disqualification
from being appointed as trustees
17. Approval of the
Board for appointment of trustee
18. Rights and
obligations of the trustees CHAPTER IV:
CONSTITUTION AND MANAGEMENT OF ASSET MANAGEMENT COMPANY AND CUSTODIAN 19. Application by an
asset management company 20. Appointment of an
asset management company 21. Eligibility
criteria for appointment of asset management company 22. Terms and
conditions to be complied with 23. Procedure where
approval is not granted 24. Restrictions on
business activities of the asset management company 25. Asset Management
Company and its obligations CHAPTER V: SCHEMES OF
MUTUAL FUND 28. Procedure for
launching of schemes 29. Disclosures in
the offer document 32. Listing of close
ended schemes 33. Repurchase of
close ended schemes 35. Allotment of
Units and refunds of moneys 36. Unit certificates
or Statement of Accounts 41. Procedure and
Manner of winding up CHAPTER VI: INVESTMENT
OBJECTIVES AND VALUATION POLICIES
44. Investment,
borrowing, restriction, etc. 46. Underwriting of
Securities 47. Method of
valuation of investments 48. Computation of
Net Asset Value CHAPTER VII: GENERAL
OBLIGATIONS 50. To maintain
proper books of accounts and records, etc. 52. Limitation on
fees and expenses on issue of schemes 53. Dispatch of
warrants and proceeds 56. Mailing of Annual
Report and summary thereof 57. Annual Report to
be forwarded to the Board 58. Periodic and
continual disclosures 60. Disclosures to
the investors CHAPTER VIII:
INSPECTION AND AUDIT 61. Board ‘s right to
inspect and investigation 62. Notice before
inspection and investigation 63. Obligation on
inspection and investigation 64. Submission of
report to the Board 65. Action on
inspection or investigation report
67. Payment of
inspection fees to the Board CHAPTER IX: PROCEDURE
FOR ACTION IN CASE OF DEFAULT 68. Liability for
action in case of default 69. [Deleted] 70. [Deleted] 71. [Deleted] 72. [Deleted] 73. [Deleted] 74. [Deleted] 75. Action against
intermediaries 77. Power of Board
to issue clarifications FORM A -
APPLICATION FOR THE GRANT OF REGISTRATION OF MUTUAL FUND FORM B -
CERTIFICATE OF REGISTRATION FORM C -
TRUSTEESHIP OF THE MUTUAL FUND FORM D - ASSET
MANAGEMENT COMPANY SCHEDULE III:
CONTENTS OF THE TRUST DEED SCHEDULE IV: CONTENTS
OF THE INVESTMENT AGREEMENT SCHEDULE VI:
ADVERTISEMENT CODE SCHEDULE VII:
RESTRICTIONS ON INVESTMENTS SCHEDULE VIII:
INVESTMENT VALUATION NORMS SCHEDULE IX:
ACCOUNTING POLICIES AND STANDARDS
SCHEDULE X: INITIAL
ISSUE EXPENSES SCHEDULE XII:
HALF-YEARLY FINANCIAL RESULTS THE GAZETTE OF SECURITIES
AND EXCHANGE BOARD OF S.O.No.856(E) In exercise of the powers
conferred by section 30 read with clause (c) of sub-section (2) of section 11
of the Securities and Exchange Board of India, Act 1992, (15 of 1992) the
Securities and Exchange Board of India hereby makes the following regulations. PRELIMINARY Short title, application
and commencement 1. (1) These regulations may be called the
Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. (2) They shall come into force on the date
of their publication in the Official Gazette. 2. In these regulations, unless the context
otherwise requires: - (a)
"Act" means the Securities and Exchange Board of India Act 1992, (15
of 1992); (b)
"advertisement" includes every form of advertising, whether in a
publication, by display of notices, signs, labels or by means of circulars,
catalogues or other documents, by an exhibition of pictures or photographic
films, by way of sound broadcasting or television, or in any other manner; (c)
"associate" includes a person - (i)
who directly or indirectly, by himself, or in combination with relatives,
exercises control over the asset management company or the trustee as the case
may be, or (ii) in respect of
whom the asset management company or the trustee, directly or indirectly, by
itself, or in combination with other persons exercises a control or (iii) whose
director, officer or employee is a director, officer or employee of the asset
management company; (d)
"asset management company" means a company formed and registered
under the Companies Act, 1956 (1 of 1956) and approved as such by the Board
under sub-regulation (2) of regulation 21; (e)
"broker" means a stock broker as defined in Securities & Exchange
Board of India (Stock Broker) Rules, 1992; (f)
"close-ended scheme" means any scheme of a mutual fund in which the
period of maturity of the scheme is specified; (g)
"control" means, - (i)
in case of a company any person or combination of persons who directly or
indirectly own, control or hold shares carrying not less than 10% of the voting
rights of such company; or (ii) as between two
companies, if the same person or combination of persons directly or indirectly,
own control or hold shares carrying not less than 10% of the voting rights of
each of the two companies; or (iii) majority of
the directors of any company who are in a position to exercise control over the
asset management company. (h)
"custodian" means a person who has been granted a certificate of
registration to carry on the business of custodian of securities under the
Securities and Exchange Board of India (Custodian of Securities) Regulations,
1996; (i)
"depository" means a body corporate as defined in the Depositories
Act, 1996 (22 of 1996); (j) "economic
offence" means an offence to which the Economic Offences (Limitation of
Prosecution) Act, 1974 (12 of 1974) applies for the time-being; 1*[******] (l)
"form" means any of the forms specified as such in the First
Schedule; (m)
"fraud", for the purpose of these regulations has the same meaning as
is assigned to it in section 17 of the Indian Contract Act, 1872 (9 of 1872); 2*[(ma) ‘fund of funds scheme’ means a mutual fund
scheme that invests primarily in other schemes of the same mutual fund or other
mutual funds.] 3* “(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
instruments having gold as underlying, as may be specified by the Board from
time to time” 4*[(mm) "group" means a group as defined in
clause (ef) of section 2 of the Monopolies and Restrictive Trade Practices Act,
1969 (54 of 1969)]; (n)
"inspecting officer" means any person appointed as such by the Board
under Chapter VIII; (o) "money
market instruments" includes commercial papers, commercial bills, treasury
bills, Government securities having an unexpired maturity upto one year, call
or notice money, certificate of deposit, usance bills, and any other like
instruments as specified by the Reserve Bank of India from time to time; (p) "money
market mutual fund" means a scheme of a mutual fund which has been set up
with the objective of investing exclusively in money market instruments; (q) "mutual
fund" means a fund established in the form of a trust to raise monies
through the sale of units to the public or a section of the public under one or
more schemes for investing in securities, including money market instruments 5*[or
gold or gold related instruments]; (r) "offer
document" means any document by which a mutual fund invites public for
subscription of units of a scheme; (s)
"open-ended scheme" means a scheme of a mutual fund which offers
units for sale without specifying any duration for redemption; (t)
"relative" means a person as defined in section 6 of the Companies
Act, 1956 (1 of 1956); (u)
"scheme" means a scheme of a mutual fund launched under Chapter V; (v)
"schedule" means any of the schedules annexed to these regulations; (w)
"securities laws" means the Securities & Exchange Board of India
Act, 1992 (15 of 1992), the Securities Contracts (Regulation) Act, 1956 (42 of
1956) and the Depositories Act, 1996 (22 of 1996) including their amendments
and such other laws as may be enacted from time to time; (x)
"sponsor" means any person who, acting alone or in combination with
another body corporate, establishes a mutual fund; 6*[(y) "trustee" means the Board of Trustees
or the Trustee Company who hold the property of the Mutual Fund in trust for
the benefit of the unit holders.] (z)
"unit" means the interest of the unitholders in a scheme, which
consists of each unit representing one undivided share in the assets of a
scheme; (i)
"unit holder" means a person holding unit in a scheme of a mutual
fund. Foot notes 1. Following clause "k" in regulation 2 was
omitted by SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing
Penalty) Regulations 2002 published in the Official Gazette of India dated
27.09.2002 (k)
"enquiry officer" means any person appointed as such by the Board
under Chapter IX; 2.Clause "ma" in regulation 2 was inserted
by SEBI (Mutual Fund) (Amendment)
Regulations, 2003, published in the Official Gazette of 3. Clause “mb” and “mc” in regulation 2 was inserted by SEBI
(Mutual Funds) (Amendment) Regulations, 2006, published in the Official Gazette
of India 12.01.2006 4.
Clause "mm" in regulation 2 was inserted by SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of 5. Inserted by
SEBI (Mutual Funds) (Amendment) Regulations, 2006 published in the Official
Gazette of 6. Following clause "y" in regulation 2 was
substituted by SEBI (Mutual Fund) (Amendment) Regulations, 1999 published in
the Official Gazette of "trustee" means
a person who holds the property of the mutual fund in trust for the benefit of
the unitholders and includes a trustee company and the directors of the trustee
company" CHAPTER II
3.
An application for registration of a mutual fund shall be made to the Board in
Form A by the sponsor. Application
fee to accompany the application 4.
Every application for registration under regulation 3 shall be accompanied by
non-refundable application fee as specified in the Second Schedule. Application
to conform to the requirements 5.
An application, which is not complete in all respects, shall be liable to be
rejected. Provided that,
before rejecting any such application, the applicant shall be given an
opportunity to complete such formalities within such time as may be specified
by the Board. 6.
The Board may require the sponsor to furnish such further information or
clarification as may be required by it. 7.
For the purpose of grant of a certificate of registration, the applicant has to
fulfill the following, namely: - (a)
the sponsor should have a sound track record and general reputation of fairness
and integrity in all his business transactions; Explanation: For the
purposes of this clause "sound track record" shall mean the sponsor
should, - (i)
be carrying on business in financial services for a period of not less than
five years; and (ii) the networth
is positive in all the immediately preceding five years; and (iii) the networth
in the immediately preceding year is more than the capital contribution of the
sponsor in the asset management company; and (iv) the sponsor
has profits after providing for depreciation, interest and tax in three out of
the immediately preceding five years, including the fifth year. 7*[(aa) the applicant is a fit and proper person] (b) in the case of
an existing mutual fund, such fund is in the form of a trust and the trust deed
has been approved by the Board; (c) the sponsor
has contributed or contributes at least 40% to the networth of the asset
management company; Provided that any
person who holds 40% or more of the net worth of an asset management company shall
be deemed to be a sponsor and will be required to fulfil the eligibility
criteria specified in these regulations; (d) the sponsor or
any of its directors or the principal officer to be employed by the mutual fund
should not have been guilty of fraud or has not been convicted of an offense
involving moral turpitude or has not been found guilty of any economic offence.
(e) appointment of
trustees to act as trustees for the mutual fund in accordance with the
provisions of the regulations; (f) appointment of asset
management company to manage the mutual fund and operate the scheme of such
funds in accordance with the provisions of these regulations; (g) appointment of
a custodian in order to keep custody of the securities 8*(or gold or gold
related instruments) and carry out the custodian activities as may be
authorised by the trustees. 9* “applicability
of Securities and Exchange Board of India (Criteria for Fit and Proper Person)
Regulations, 2004 7A. The provisions
of the Securities and Exchange Board of India (Criteria for Fit and Proper
Person) Regulations, 2004 shall, as for as may be, apply to all applicants or the mutual funds
under these regulations”. 8.
The Board may on receipt of all information decide the application. Grant of
Certificate of Registration
Terms
and conditions of registration
(a)
the trustees, the sponsor, the asset management company and the custodian shall
comply with the provisions of these regulations; (b) the mutual
fund shall forthwith inform the Board, if any information or particulars
previously submitted to the Board was misleading or false in any material
respect; (c) the mutual
fund shall forthwith inform the Board, of any material change in the
information or particulars previously furnished, which have a bearing on the
registration granted by it; (d) payment of
fees as specified in the regulations and the Second Schedule. 11.
Where the sponsor does not satisfy the eligibility criteria mentioned in
regulation 7, the Board may reject the application and inform the applicant of
the same. 12.
A mutual fund shall pay before the 15th April each year a service fee as
specified in the Second Schedule for every financial year from the year
following the year of registration. Provided that the
Board may, on being satisfied with the reasons for the delay permit the mutual
fund to pay the service fee at any time before the expiry of two months from
the commencement of the financial year to which such fee relates. 13.
The Board may not permit a mutual fund who has not paid service fee to launch
any scheme. Foot notes 7.
Clause
"aa" in regulation 7 was inserted by SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of 8.
Inserted by
SEBI (Mutual Fund) (Amendment) Regulations, 2006, published in the Official
Gazette of India dated 12.01.2006. 9.
Regulation 7A was
inserted by SEBI (Criteria for Fit and Proper Person Regulations, 2004,
published in the Official Gazette of India dated 10.03.2004 CHAPTER
III Trust Deed to be
registered under the Registration Act
15.
(1) The trust deed shall contain such clauses as are mentioned in the Third
Schedule and such other clauses, which are necessary for safeguarding the
interests of the unit holders. (2) No trust deed
shall contain a clause, which has the effect of- (i) limiting or
extinguishing the obligations and liabilities of the trust in relation to any
mutual fund or the unit holders; or (ii) indemnifying
the trustees or the asset management company for loss or damage caused to the
unit holders by their acts of negligence or acts of commissions or omissions. Disqualification
from being appointed as trustees 16.
(1) A mutual fund shall appoint trustees in accordance with these regulations. (2)
No person shall be eligible to be appointed as a trustee unless- (a)
he is a person of ability, integrity and standing; and (b) has not been
found guilty of moral turpitude; and (c) has not been
convicted of any economic offence or violation of any securities laws; and (d) has furnished
particulars as specified in Form C. (3)
An asset management company or any of its officers or employees shall not be
eligible to act as a trustee of any mutual fund. (4) No person who
is appointed as a trustee of a mutual fund can be appointed as a trustee of any
other mutual fund unless - (a)
such a person is an independent trustee referred to in sub-regulation (5); and (b) prior approval
of the mutual fund of which he is a trustee has been obtained for such an
appointment. 10*[(5) Two thirds of the trustees shall be independent
persons and shall not be associated with the sponsors or be associated with
them in any manner whatsoever] (6) In case a
company is appointed as a trustee then its directors can act as trustees of any
other trust provided that the object of the trust is not in conflict with the
object of the mutual fund. Approval
of the Board for appointment of trustee
11*[***] (2) The existing
trustees of any mutual fund may form a trustee company to act as a trustee with
the prior approval of the Board. Rights
and obligations of the trustees
(2)
The investment management agreement shall contain such clauses as are mentioned
in the Fourth Schedule and such other clauses as are necessary for the purpose
of making investments. (3) The trustees
shall have a right to obtain from the asset management company such information
as is considered necessary by the trustees. (4) The trustees
shall ensure before the launch of any scheme that the asset management company
has; -
12*[(d) appointed a compliance officer who shall be
responsible for monitoring the compliance of the Act, rules and regulations,
notifications, guidelines instructions etc issued by the Board or the Central
Government and for redressal of investors' grievances;] (e) appointed
registrars and laid down parameters for their supervision; (f) prepared a
compliance manual and designed internal control mechanisms including internal
audit systems; (g) specified
norms for empanelment of brokers and marketing agents. 13*[(4a) The compliance officer appointed under clause
(d) of sub-regulation (4) shall immediately and independently report to the
Board any non-compliance observed by him.] (5) The trustees
shall ensure that an asset management company has been diligent in empanelling
the brokers, in monitoring securities transactions with brokers and avoiding
undue concentration of business with any broker. (6) The trustees
shall ensure that the asset management company has not given any undue or
unfair advantage to any associates or dealt with any of the associates of the
asset management company in any manner detrimental to interest of the
unitholders. (7) The trustees
shall ensure that the transactions entered into by the asset management company
are in accordance with these regulations and the scheme. (8) The trustees
shall ensure that the asset management company has been managing the mutual
fund schemes independently of other activities and have taken adequate steps to
ensure that the interest of investors of one scheme are not being compromised
with those of any other scheme or of other activities of the asset management
company. (9) The trustees
shall ensure that all the activities of the asset management company are in
accordance with the provisions of these regulations. (10) Where the
trustees have reason to believe that the conduct of business of the mutual fund
is not in accordance with these regulations and the scheme they shall forthwith
take such remedial steps as are necessary by them and shall immediately inform
the Board of the violation and the action taken by them. 14*[(11) Each trustee shall file the details of his
transactions of dealing in securities with the Mutual Fund on a quarterly
basis.] (12) The trustees
shall be accountable for, and be the custodian of, the funds and property of
the respective schemes and shall hold the same in trust for the benefit of the
unit holders in accordance with these regulations and the provisions of trust
deed. (13) The trustees
shall take steps to ensure that the transactions of the mutual fund are in
accordance with the provisions of the trust deed. (14) The trustees
shall be responsible for the calculation of any income due to be paid to the
mutual fund and also of any income received in the mutual fund for the holders
of the units of any scheme in accordance with these regulations and the trust
deed. (15) The trustees
shall obtain the consent of the unitholders - (a)
whenever required to do so by the Board in the interest of the unit-holders; or
(b) whenever
required to do so on the requisition made by three-fourths of the unit holders
of any scheme; or (c) when the
majority of the trustees decide to wind up or prematurely redeem the units; or 15*[***] 16*[15A. The trustees shall ensure that no change in the
fundamental attributes of any scheme or the trust or fees and expenses payable
or any other change which would modify the scheme and affects the interest of
unitholders, shall be carried out unless, - (i)
a written communication about the proposed change is sent to each unitholder
and an advertisement is given in 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; and (ii) the
unitholders are given an option to exit at the prevailing Net Asset Value
without any exit load.] (16)
The trustees shall call for the details of transactions in securities by the
key personnel of the asset management company in his own name or on behalf of
the asset management company and shall report to the Board, as and when
required. (17) The trustees
shall quarterly review all transactions carried out between the mutual funds,
asset management company and its associates. (18) The trustees
shall 17*[quarterly]
review the networth of the asset management company and in case of any
shortfall, ensure that the asset management company make up for the shortfall
as per clause (f) of sub-regulation (1) of regulation 21. (19) The trustees
shall periodically review all service contracts such as custody arrangements,
transfer agency of the securities and satisfy itself that such contracts are
executed in the interest of the unitholders. (20) The trustees
shall ensure that there is no conflict of interest between the manner of
deployment of its networth by the asset management company and the interest of
the unitholders. (21) The trustees
shall periodically review the investor complaints received and the redressal of
the same by the asset management company. (22) The trustees
shall abide by the Code of Conduct as specified in the Fifth Schedule. (23) The trustees
shall furnish to the Board on a half yearly basis, - (a)
a report on the activities of the mutual fund; (b) a certificate
stating that the trustees have satisfied themselves that there have been no
instances of self dealing or front running by any of the trustees, directors
and key personnel of the asset management company; (c) a certificate
to the effect that the asset management company has been managing the schemes
independently of any other activities and in case any activities of the nature
referred to in sub-regulation (2) of regulation 24 have been undertaken by the
asset management company and has taken adequate steps to ensure that the
interest of the unitholders are protected.
19*[(25)
Trustees shall exercise due diligence as under: General Due
Diligence: (i) the Trustees
shall be discerning in the appointment of the directors on the Board of the
asset management company. (ii) Trustees
shall review the desirability of continuance of the asset management company if
substantial irregularities are observed in any of the schemes and shall not allow
the asset management company to float new schemes. (iii) The trustee
shall ensure that the trust property is properly protected, held and
administered by proper persons and by a proper number of such persons. (iv) The trustee
shall ensure that all service providers are holding appropriate registrations
from the Board or concerned regulatory authority. (v) The Trustees
shall arrange for test checks of service contracts. (vi) Trustees
shall immediately report to Board of any special developments in the mutual
fund. B.
Specific Due Diligence: The Trustees
shall: (i) obtain
internal audit reports at regular intervals from independent auditors appointed
by the Trustees. (ii) obtain
compliance certificates at regular intervals from the asset management company.
(iii) hold meeting
of trustees more frequently. (iv) consider the
reports of the independent auditor and compliance reports of asset management
company at the meetings of trustees for appropriate action. (v) maintain
records of the decisions of the Trustees at their meetings and of the minutes
of the meetings. (vi) prescribe and
adhere to a code of ethics by the Trustees, asset management company and its
personnel. (vii) communicate
in writing to the asset management company of the deficiencies and checking on
the rectification of deficiencies. (26)
Notwithstanding anything contained in sub-regulations (1) to (25), the trustees
shall not be held liable for acts done in good faith if they have exercised
adequate due diligence honestly. (27) The
independent directors of the trustees or asset management company shall pay
specific attention to the following, as may be applicable, namely:- (i)
the Investment Management Agreement and the compensation paid under the
agreement. (ii) service contracts
with affiliates - whether the asset management company has charged higher fees
than outside contractors for the same services. (iii) selection of
the asset management company's independent directors (iv) securities
transactions involving affiliates to the extent such transactions are
permitted. (v) selecting and
nominating individuals to fill independent directors vacancies. (vi) code of
ethics must be designed to prevent fraudulent, deceptive or manipulative
practices by insiders in connection with personal securities transactions. (vii) the
reasonableness of fees paid to sponsors, asset management company and any
others for services provided. (viii) principal
underwriting contracts and their renewals. any service
contract with the associates of the asset management company.] Foot notes 10
Substituted for the following by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998 published in the Official Gazette of "At
least 50 % of the trustees shall be independent persons and no such trustees
shall be an associate or a subsidiary or associated in any manner with the
sponsor." 11.. Following proviso deleted by
the SEBI (Mutual Fund) (Amendment) Regulations, 1998 published in the Official
Gazette of "Provided
further if any trustee resigns or retires a new trustee shall be appointed
within a period of three months with the prior approval of the Board." 12 Substituted for the following by the SEBI
(Investment Advise by Intermediaries) (Amendment) Regulations, 2001, published
in the Official Gazette of "appointed
a compliance officer to comply with regulatory requirement and to redress
investor grievances". 13. Clause "4a" inserted by the SEBI
(Investment Advise by Intermediaries) (Amendment) Regulations, 2001, published
in the Official Gazette of 14.
Substituted for the following by the SEBI (Mutual Fund) (Amendment) Regulations,
1999 published in the Official Gazette of "Each
trustee shall file the details of his holdings in securities on a half yearly
basis with the trust." 15. Following clause (d) along with proviso
deleted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2000
published in the Official Gazette of "(d)
when any change in the fundamental attributes of any scheme or the trust or
fees and expenses payable or any other change which would modify the scheme or
affect the interest of the unitholders is proposed to be carried out unless the
consent of not less than three-fourths of the unit holders is obtained: 9a*[Provided that no such change shall be carried out
unless three fourths of the unit holders have given their consent and the unit
holders who do not give their consent are allowed to redeem their holdings in
the scheme. Provided
further that in case of an open ended scheme, the consent of the unitholders
shall not be necessary if: (i) the change in
fundamental attribute is carried out after one year from the date of allotment
of units. (ii) the
unitholders are informed about the proposed change in fundamental attribute by
sending individual communication and an advertisement is given in English daily
newspaper having nationwide circulation and in a newspaper published in the
language of the region where the head office of the mutual fund is situated. (iii) the
unitholders are given an option to exit at the prevailing Net Asset Value
without any exit load] Explanation:
For the purposes of this clause "fundamental attributes" means the
investment objective and terms of a scheme." 16."Clause
15A" inserted by the SEBI (Mutual Fund) (Second Amendment) Regulations,
2000 published in the Official Gazette of 17.Substituted for "continuously" by the SEBI (Mutual Fund)
(Amendment) Regulations, 1998 published in the Official Gazette of 18"Clause 24" inserted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998 published in the Official Gazette of 19. "Clause 25" inserted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1999 published in the Official Gazette of CHAPTER IV Application by an asset management company 19. (1) The
application for the approval of the asset management company shall be made in
Form D. (2)
The provisions of regulations 5, 6
and 8
shall, so far as may be, apply to the application made under sub-regulation (1)
as they apply to the application for registration of a mutual fund.
20. (1) The sponsor
or, if so authorised by the trust deed, the trustee shall, appoint an asset
management company, which has been approved by the Board under sub-regulation
(2) of regulation 21. (2)
The appointment of an asset management company can be terminated by majority of
the trustees or by seventy five per cent of the unit-holders of the scheme. (3) Any change in
the appointment of the asset management company shall be subject to prior
approval of the Board and the unitholders.
21. (1) For grant
of approval of the asset management company the applicant has to fulfil the
following: - (a)
in case the asset management company is an existing asset management company it
has a sound track record, general reputation and fairness in transactions; Explanation: For
the purpose of this clause sound track record shall mean the networth and the
profitability of the asset management company. 20*[(aa) the asset management company is a fit and
proper person.] (b) the directors
of the asset management company are persons having adequate professional
experience in finance and financial services related field and not found guilty
of moral turpitude or convicted of any economic offence or violation of any
securities laws; (c) the key
personal of the asset management company21*[have
not been found guilty of moral turpitude or convicted of economic offence or
violation of securities laws] 22*[or
worked] for any asset management company or mutual fund or any intermediary23*[during
the period when its] registration has been suspended or cancelled at any time
by the Board; (d) the board of
directors of such asset management company has at least fifty percent
directors, who are not associate of, or associated in any manner with, the
sponsor or any of its subsidiaries or the trustees; (e) the Chairman
of the asset management company is not a trustee of any mutual fund; (f) the asset
management company has a networth of not less than rupees ten crores: Provided that an asset
management company already granted approval under the provisions of Securities
and Exchange Board of India (Mutual Funds) Regulations, 1993 shall within a
period of twelve months from the date of notification of these regulations
increase its networth to rupees ten crores. 24*[Provided that the period specified in the first
proviso may be extended in appropriate cases by the Board upto three years for
reasons to be recorded in writing. Provided further
that no new schemes shall be allowed to be launched or managed by such asset
management company till the net worth has been raised to Rupees ten crores]. 25*[Explanation: For the purposes of this clause,
"net worth" means the aggregate of the paid up capital and free
reserves of the asset management company after deducting therefrom
miscellaneous expenditure to the extent not written off or adjusted or deferred
revenue expenditure, intangible assets and accumulated losses]. (2)
The Board may, after considering an application with reference to the matters
specified in sub-regulation (1), grant approval to the asset management
company.
22. The approval
granted under sub-regulation (2) of regulation 21 shall be subject to the
following conditions, namely: - (a)
any director of the asset management company shall not hold the office of the
director in another asset management company unless such person is an
independent director referred to in clause (d) of sub-regulation (1) of
regulation 21 and approval of the board of asset management company of which
such person is a director, has been obtained; (b) the asset
management company shall forthwith inform the Board of any material change in
the information or particulars previously furnished, which have a bearing on
the approval granted by it; (c) no appointment
of a director of an asset management company shall be made without prior
approval of the trustees; (d) the asset
management company undertakes to comply with these regulations; 26*[(e) no change in the controlling interest of the
asset management company shall be made unless, - (i)
prior approval
of the trustees and the Board is obtained; (ii) a written
communication about the proposed change is sent to each unitholder and an
advertisement is given in one English daily newspaper having nationwide circulation
and in a newspaper published in the language of the region where the Head
Office of the mutual fund is situated; and (iii) the
unitholders are given an option to exit on the prevailing Net Asset Value
without any exit load] 27*[Provided that in case of an open ended scheme, the
consent of the unitholders shall not be necessary if; (i)
the change in control takes place after one year from the date of allotment of
units (ii) the
unitholders are informed about the proposed change in the controlling interest
of asset management company by sending individual communication and an
advertisement is given in one English daily newspaper having nationwide
circulation and in a newspaper published in the language of the region where
the head office of the mutual fund is situated. (iii) the
unitholders are given an option to exit at the prevailing Net Asset Value
without any exit load." (f)
The asset management company shall furnish such information and documents to
the trustees as and when required by the trustees.
23. Where an
application made under regulation 19 for grant of approval does not satisfy the
eligibility criteria laid down in regulation 21, the Board may reject the
application. Restrictions
on business activities of the asset management company 24. The asset
management company shall (1)
not act as a trustee of any mutual fund; (ii) (2) not undertake any other business activities except activities in the nature of 28*[portfolio management services] management and advisory services to offshore funds, pension funds, provident funds, venture capital funds, management of insurance funds, financial consultancy and exchange of research on commercial basis if any of such activities are not in conflict with the activities of the mutual fund; Provided that the
asset management company may itself or through its subsidiaries undertake such
activities if it satisfies the Board that the key personnel of the asset
management company, the systems, back office, bank and securities accounts are
segregated activity wise and there exist systems to prohibit access to inside
information of various activities. Provided further
that asset management company shall meet capital adequacy requirements, if any,
separately for each such activity and obtain separate approval, if necessary
under the relevant regulations.] (3) the asset
management company shall not invest in any of its schemes unless full
disclosure of its intention to invest has been made in the offer
documents 29*[in
case of schemes launched after the notification of these regulations.] Provided that an
asset management company shall not be entitled to charge any fees on its
investment in that scheme.
25.
(1) The asset management company shall take all reasonable steps and exercise
due diligence to ensure that the investment of funds pertaining to any scheme
is not contrary to the provisions of these regulations and the trust deed. (2) The asset
management company shall exercise due diligence and care in all its investment
decisions as would be exercised by other persons engaged in the same business. (3) The asset
management company shall be responsible for the acts of commissions or
omissions by its employees or the persons whose services have been procured by
the asset management company. (4) The asset
management company shall submit to the trustees quarterly reports of each year
on its activities and the compliance with these regulations. (5) The trustees
at the request of the asset management company may terminate the assignment of
the asset management company at any time: Provided that such
termination shall become effective only after the trustees have accepted the
termination of assignment and communicated their decision in writing to the asset
management company. (6)
Notwithstanding anything contained in any contract or agreement or termination,
the asset management company or its directors or other officers shall not be
absolved of liability to the mutual fund for their acts of commission or
omissions, while holding such position or office. 30*[(6A)
The Chief Executive Officer (whatever his designation may be) of the asset
management company shall ensure that the mutual fund complies with all the
provisions of the regulations and the guidelines or circulars issued in
relation thereto from time to time and that the investments made by the fund
managers are in the interest of the unit holders and shall also be responsible
for the overall risk management function of the mutual fund. Explanation: For
the purpose of this sub-regulation, the words ‘these regulations’ shall mean
and include the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996 as amended from time to time. (6B) The fund
manager (whatever the designation may be) shall ensure that the funds of the
schemes are invested to achieve the objectives of the scheme and in the
interest of the unit holders.] 31*{(7) (a) An asset management company shall not
through any broker associated with the sponsor, purchase or sell securities,
which is average of 5% or more of the aggregate purchases and sale of
securities made by the mutual fund in all its schemes. Provided that for
the purpose of this sub-regulation, aggregate purchase and sale of securities
shall exclude sale and distribution of units issued by the mutual fund. Provided further
that the aforesaid limit of 5% shall apply for a block of any three months. (b)
An asset management company shall not purchase or sell securities through any
broker [other than a broker referred to in clause (a) of sub-regulation (7)]
which is average of 5% or more of the aggregate purchases and sale of
securities made by the mutual fund in all its schemes, unless the asset
management company has recorded in writing the justification for exceeding the
limit of 5% and reports of all such investments are sent to the trustees on a
quarterly basis. Provided that the
aforesaid limit shall apply for a block of three months.} (8)
An asset management company shall not utilise the services of the sponsor or
any of its associates, employees or their relatives, for the purpose of any
securities transaction and distribution and sale of securities: Provided that an
asset management company may utilise such services if disclosure to that effect
is made to the unit holders and the brokerage or commission paid is also
disclosed in the half yearly annual accounts of the mutual fund. 32*[Provided further that the mutual funds shall
disclose at the time of declaring half-yearly and yearly results; (i)
any underwriting obligations undertaken by the schemes of the mutual funds with
respect to issue of securities associate companies, (ii) devolvement,
if any, (iii) subscription
by the schemes in the issues lead managed by associate companies (iv) subscription
to any issue of equity or debt on private placement basis where the sponsor or
its associate companies have acted as arranger or manager]. (9)
The asset management company shall file with the trustees the details of
transactions in securities by the key personnel of the asset management company
in their own name or on behalf of the asset management company and shall also
report to the Board, as and when required by the Board. (10) In case the
asset management company enters into any securities transactions with any of
its associates a report to that effect shall be sent to the trustees 33*[***] 34*[at
its next meeting]. (11) In case any
company has invested more than 5 per cent of the net asset value of a scheme,
the investment made by that scheme or by any other scheme of the same mutual
fund in that company or its subsidiaries shall be brought to the notice of the
trustees by the asset management company and be disclosed in the half yearly
and annual accounts of the respective schemes with justification for such
investment 35*[provided
the latter investment has been made within one year of the date of the former
investment calculated on either side.] (12) The asset
management company shall file with the trustees and the Board – (a)
detailed bio-data of all its directors along with their interest in other companies
within fifteen days of their appointment; and (b) any change in
the interests of directors every six months. 36*[(c) a quarterly report to the trustees giving
details and adequate justification about the purchase and sale of the
securities of the group companies of the sponsor or the asset management
company as the case may be, by the mutual fund during the said quarter.] 37*[(13) Each director of the Asset Management
Company shall file the details of his transactions of dealing in securities
with the trustees on a quarterly basis in accordance with the guidelines issued
by the Board.] (14) The asset
management company shall not appoint any person as key personnel who has been
found guilty of any economic offence or involved in violation of securities
laws. (15) The asset
management company shall appoint registrars and share transfer agents who are registered
with the Board. Provided if the
work relating to the transfer of units is processed in-house, the charges at
competitive market rates may be debited to the scheme and for rates higher than
the competitive market rates, prior approval of the trustees shall be obtained
and reasons for charging higher rates shall be disclosed in the annual
accounts. (16) The asset
management company shall abide by the Code of Conduct as specified in the Fifth
Schedule. 26.
(1) The mutual fund shall appoint a custodian to carry out the custodial
services for the schemes of the fund and sent intimation of the same to the
Board within fifteen days of the appointment of the custodian. 38*
“Provided that in case of a gold or 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 (2) No custodian
in which the sponsor or its associates hold 50% or more of the voting rights of
the share capital of the custodian or where 50% or more of the directors of the
custodian represent the interest of the sponsor or its associates shall act as
custodian for a mutual fund constituted by the same sponsor or any of its
associate or subsidiary company. 27. The mutual fund
shall enter into a custodian agreement with the custodian, which shall contain
the clauses, which are necessary for the efficient and orderly conduct of the
affairs of the custodian. Provided that the
agreement, the service contract, terms and appointment of the custodian shall
be entered into with the prior approval of the trustees. Foot notes 20 Clause "aa" inserted
by the SEBI (Mutual Fund) (Amendment) Regulations, 1998, published in the
Official Gazette of 21 "have not been found guilty of moral turpitude or
convicted of economic offence or violation of securities laws" inserted by
the SEBI (Mutual Fund) (Amendment) Regulations, 1998, published in the Official
Gazette of India dated 12.01.1998. 22. Substituted for "has not been
working" by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette of 23 Substituted
for "whose" by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette of 24 Proviso inserted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of 25
Substituted for the following Explanation by the SEBI (Mutual Fund) (Amendment)
Regulations, 1999 published in the Official Gazette of "Explanation
for the purposes of this clause, "networth" means the paid up capital
and free reserves of the company"
"(e)
any change in controlling interest of the asset management company shall be
only with prior approval of trustees, the Board and the unit holders. [Provided that
in case of an open ended scheme, the consent of the unitholders shall not be
necessary if: (i)
the change in control takes place after one year from the date of allotment of
units. (ii) the unit
holders are informed about the proposed change in the controlling interest of
asset management company by sending individual communication and an
advertisement is given in one English daily newspaper having nationwide
circulation and in a newspaper published in the language of the region where
the head office of the mutual fund is situated. (iii) the
unitholders are given an option to exit at the prevailing Net Asset Value
without any exit load]
28
"portfolio management services" inserted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1999 published in the Official Gazette dated 08.12.1999. 29.
"in case of schemes launched after the notification of these
regulations" inserted by the SEBI (Mutual Fund) (Amendment) Regulations,
1998, published in the Official Gazette dated 12.01.1998. 30.
Sub-regulation 6A in regulation 25 was inserted by the SEBI (Mutual Funds)
Regulations, 2003 published in the Official Gazette of 31. Substituted for the following sub regulation (7) by the SEBI (Mutual
Fund) (Amendment) Regulations, 1998, published in the Official Gazette dated
12.01.1998 "No asset
management company shall deal in securities through any broker associated with
the sponsor or a firm which is an associate of a sponsor beyond 5% of the daily
gross business of the mutual fund." 32. Proviso inserted by the SEBI (Mutual Fund) (Amendment) Regulations,
1999 published in the Official Gazette dated 08.12.1999. 33..
"immediately" omitted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette dated 12.01.1998. 34. "at its next meeting" inserted by the SEBI (Mutual
Fund) (Amendment) Regulations, 1998, published in the Official Gazette dated
12.01.1998. 35.
Proviso inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette dated 12.01.1998. 36.
Clause (c) inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette dated 12.01.1998. 37. Substituted for the following by the SEBI (Mutual Funds) (Second
Amendment) Regulations, 2001, published in the Official Gazette dated
23.07.2001 "A
statement of holdings in securities of the directors of the asset management
company shall be filed with the trustees with the dates of acquisition of such
securities at the end of each financial year". 38.
Proviso inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 2006,
published in the Official Gazette dated 12.01.2006 CHAPTER V Procedure for launching of schemes 28.
(1) No scheme shall be launched by the asset management company unless such
scheme is approved by the trustees and a copy of the offer document has been
filed with the Board. (2)
Every mutual fund shall along with the offer document of each scheme pay filing
fees as specified in the Second Schedule.
29.
(1) The offer document shall contain disclosures which are adequate in order to
enable the investors to make informed investment decision39*[including the disclosure on maximum investments
proposed to be made by the scheme in the listed securities of the group
companies of the sponsor]. (2) The Board may
in the interest of investors require the asset management company to carry out
such modifications in the offer document as it deems fit. (3) In case no
modifications are suggested by the Board in the offer document within 21 40*[working]
days from the date of filing, the asset management company may issue the offer
document. 41*[(4) No one shall issue any form of application for
units of a mutual fund unless the form is accompanied by the memorandum
containing such information as may be specified by the Board.] 42*[Nomination 29A (1) The
asset management company shall provide an option to the unitholder to nominate,
in the manner specified in Fourth Schedule, a person in whom the units
held by him shall vest in the event of his death. (2)
Where the units are held by more than one person jointly, the joint unitholders
may together nominate a person in whom all the rights in the units shall vest
in the event of death of all the joint unit holders. Advertisement
material 30.
(1) Advertisements in respect of every scheme shall be in conformity with the
Advertisement Code as specified in the Sixth Schedule and shall be submitted to
the Board within 7 days from the date of issue. (2) The
advertisement for each scheme shall disclose 43*[investment objective for each scheme] 31. The offer
document and advertisement materials shall not be misleading or contain any
statement or opinion, which are incorrect or false. Listing
of close ended schemes 32. Every close
ended scheme shall be listed in a recognized stock exchange within six months
from the closure of the subscription. Provided that
listing of close ended scheme shall not be mandatory - (a)
if the said scheme provides for periodic repurchase facility to all the
unitholders with restriction, if any, on the extent of such repurchase; or (b) if the said
scheme provides for monthly income or caters to special classes of persons like
senior citizens, women, children, widows or physically handicapped or any
special class of persons providing for repurchase of units at regular
intervals; or (c) if the details
of such repurchase facility are clearly disclosed in the offer document; or (d) if the said
scheme opens for repurchase within a period of six months from the closure of
subscription.
33.
(1) The asset management company may at its option repurchase or reissue the
repurchased units of a close ended scheme. (2) The units of
close ended schemes referred to in the proviso to regulation 32 may be open for
sale or redemption at fixed pre-determined intervals if the maximum and minimum
amount of sale or redemption of the units and the periodicity of such sale or
redemption have been disclosed in the offer document 44*[******].
(3) The units of
close ended scheme may be converted into open ended scheme, - (a)
if the offer document of such scheme discloses the option and the period of
such conversion; or 45*[(b) the unitholders are provided with an option to
redeem their units in full.] (4)
A close ended scheme shall be fully redeemed at the end of the maturity
period 46*[***].
47*[Provided that a close ended scheme may be allowed to
be rolled over if the purpose, period and other terms of the roll over and all
other material details of the scheme including the likely composition of assets
immediately before the roll over, the net assets and net asset value of the
scheme, are disclosed to the unitholders and a copy of the same has been filed
with the Board. Provided further,
that such roll over will be permitted only in case of those unitholders who
express their consent in writing and the unitholders who do not opt for the
roll over or have not given written consent shall be allowed to redeem their
holdings in full at net asset value based price.] 34. No scheme of a
mutual fund other than the 48*[initial]
offering period of any equity linked savings schemes shall be open for
subscription for more than 45 days. Allotment
of Units and refunds of moneys 35.
(1) The asset management company shall specify in the offer document, - (a)
the minimum subscription amount it seeks to raise under the scheme; and (b) in case of
over subscription the extent of subscription it may retain. Provided that
where the asset management company retains the over subscription referred to in
clause (b), all the applicants applying upto five thousand units shall be given
full allotment subject to the oversubscription mentioned in clause (b). (2)
The mutual fund and asset management company shall be liable to refund the
application money to the applicants, - (i)
if the mutual fund fails to receive the minimum subscription amount referred to
in clause (a) of sub-regulation (1); (ii) if the moneys
received from the applicants for units are in excess of subscription as
referred to in clause (b) of sub-regulation (1). (3)
Any amount refundable under sub-regulation (2) shall be refunded within a
period of six weeks from the date of closure of subscription list, by
Registered A.D and by cheque or demand draft marked "A/C Payee" to
the applicants. (4) In the event
of failure to refund the amounts within the period specified in sub-regulation
(3), the asset management company shall be liable to pay interest to the
applicants at a rate of fifteen percent per annum on the expiry of six weeks
from the date of closure of the subscription list.
36. The asset
management company shall issue to the applicant whose application has been
accepted, unit certificates or a statement of accounts specifying the number of
units allotted to the applicant as soon as possible but not later than six
weeks from the date of closure of the 49*[initial
subscription list and or from the date of receipt of the request from the unit
holders in any open ended scheme]. Provided that if an
applicant so desires, the asset management company shall issue the unit
certificates to the applicant within six weeks of the receipt of request for
the certificate. 37.
(1) An unit certificate unless otherwise restricted or prohibited under the
scheme, shall be freely transferable by act of parties or by operation of law. (2) The asset
management company shall, on production of instrument of transfer together with
relevant unit certificates, register the transfer and return the unit
certificate to the transferee within thirty days from the date of such
production. Provided
that if the units are with the depository such units will be transferable in
accordance with the provisions of the Securities and Exchange Board of India
(Depositories and Participants) Regulations, 1996. 38. No guaranteed
return shall be provided in a scheme, - (a)
unless such returns are fully guaranteed by the sponsor or the asset management
company; (b) unless a
statement indicating the name of the person who will guarantee the return, is
made in the offer document; (c) the manner in
which the guarantee to be met has been stated in the offer document. 39.
(1) A close-ended scheme shall be wound up on the expiry of duration fixed in
the scheme on the redemption of the units unless it is rolled-over for a
further period under sub-regulation (4) of regulation 33. (2)
A scheme of a mutual fund may be wound up, after repaying the amount due to the
unitholders, - (a)
on the happening of any event which, in the opinion of the trustees, requires
the scheme to be wound up; or (b) if seventy
five per cent of the unit holders of a scheme pass a resolution that the scheme
be wound up; or (c) if the Board
so directs in the interest of the unit-holders. (3)
Where a scheme is to be wound up under 50*[***]
sub-regulation (2), the trustees shall give notice disclosing the circumstances
leading to the winding up of the scheme: - (a)
to the Board; and (b) in two daily
newspapers having circulation all over 40. On and from the
date of the publication of notice under clause (b) of sub-regulation (3) of
regulation 39, the trustee or the asset management company as the case may be,
shall- (a)
cease to carry on any business activities in respect of the scheme so wound up;
(b) cease to
create or cancel units in the scheme; (c) cease to issue
or redeem units in the scheme.
41.
(1) The trustee shall call a meeting of the unit holders to approve by simple
majority of the unit holders present and voting at the meeting resolution for
authorising the trustees or any other person to take steps for winding up of
the scheme. Provided that a
meeting of the unit holders shall not be necessary if the scheme is wound up at
the end of maturity period of the scheme. (2)
(a) The trustee or the person authorised under sub-regulation (1) shall dispose
of the assets of the scheme concerned in the best interest of the unit holders
of that scheme. (b)
The proceeds of sale realised under clause (a), shall be first utilised towards
discharge of such liabilities as are due and payable under the scheme and after
making appropriate provision for meeting the expenses connected with such
winding up, the balance shall be paid to the unit holders in proportion to
their respective interest in the assets of the scheme as on the date when the
decision for winding up was taken. (3)
On the completion of the winding up, the trustee shall forward to the Board and
the unit holders a report on the winding up containing particulars such as
circumstances leading to the winding up, the steps taken for disposal of assets
of the fund before winding up, expenses of the fund for winding up, net assets
available for distribution to the unitholders and a certificate from the
auditors of the fund. (4) Notwithstanding
anything contained in this regulation, the provisions of these regulations in
respect of disclosures of half yearly reports and annual reports shall continue
to be applicable 51*[until
winding up is completed or the scheme ceases to exist.] 42. After the
receipt of the report under sub-regulation (3) of Regulation 41, if the Board
is satisfied that all measures for winding up of the scheme have been complied
with, the scheme shall cease to exist. Foot notes 39.
"including the disclosure on maximum investments proposed to be made by
the scheme in the listed securities of the group companies of the sponsor"
inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1998, published in
the Official Gazette of 40.
"working" inserted by the SEBI (Mutual Fund) (Amendment) Regulations,
1998, published in the Official Gazette dated 12.01.1998. 41.
Sub-regulation (4) inserted by the SEBI (Mutual Fund) Amendment Regulations,
1998, published in the Official Gazette of 42. Regulation 29A inserted by the SEBI (Mutual Fund) Amendment
Regulations, 1998, published in the Official Gazette of
43. Substituted for "in addition to the investment objective, the
method and periodicity or valuation of the investment, the method and
periodicity of sales and repurchases" by the SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of 44.
"without listing" deleted by the SEBI (Mutual Fund)(Amendment)
Regulations, 1998, published in the Official Gazette of 45
Substituted for the following clause (b) by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of "The
majority of the unitholders gives a consent to that effect." 46.. "unless a majority of the unitholders
otherwise decide for its rollover by passing a resolution" omitted by the
SEBI (Mutual Fund) (Amendment) Regulations, 1998, published in the Official
Gazette of 47.
Substituted for the following proviso by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of "Provided
the unitholders not opting for the rollover shall be allowed to redeem their
holdings in the scheme." 48. "initial" inserted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of 49.
Substituted for "subscription list" by the SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of 50.
"sub-regulation (1) or" deleted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of 51. "initial subscription list and or from the
date of receipt of the request from the unit holders in any open ended
scheme" inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette of CHAPTER VI 43.52* (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)The 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 Investment, borrowing,
restriction, etc. 44.
(1) Any investments to be made under regulation 43 shall be invested subject to
the investment restriction specified in the Seventh Schedule. 53*
“Provided that nothing in the Seventh Schedule shall apply to a gold exchange
traded fund scheme”. 54*[(1A) The mutual fund having an aggregate of
securities which are worth Rs.10 crores or more, as on the latest balance sheet
date, shall subject to such instructions as may be issued from time to time by
the Board settle their transactions entered on or after January 15, 1998 only
through dematerialised securities.] (2) The mutual
fund shall not borrow except to meet temporary liquidity needs of the mutual
funds for the purpose of repurchase, redemption of units or payment of interest
or dividend to the unit holders. Provided that
the mutual fund shall not borrow more than 20% of the net asset of the scheme
and the duration of such a borrowing shall not exceed a period of six months. (3) The mutual
fund shall not advance any loans for any purpose. 55*[(4) The mutual fund may lend securities in
accordance with the Stock Lending Scheme of the Board.] 56* “(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 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” 45. The funds of
a scheme shall not in any manner be used in option trading or in short selling
or carry forward transactions. 57*[Provided that mutual funds shall enter into
derivatives transactions in a recognised stock exchange for the purpose of
hedging and portfolio balancing, in accordance with the guidelines issued by
the Board]. 46.
Mutual funds may enter into underwriting agreement after obtaining a
certificate of registration in terms of the Securities and Exchange Board of Explanation:
(1) For the purpose of these regulations, the underwriting obligation will be
deemed as if investments are made in such securities. (2) The capital
adequacy norms for the purpose of underwriting shall be the net asset of the
scheme. Provided
that the underwriting obligation of a mutual fund shall not at any time exceed
the total net asset value of the scheme. Method of
valuation of investments 47. Every mutual
fund shall compute and carry out valuation of its investments in its portfolio
and publish the same in accordance with the valuation norms specified in Eighth
Schedule. Computation of Net Asset Value 48.
(1) Every mutual fund shall compute the Net Asset Value of each scheme by
dividing the net assets of the scheme by the number of units outstanding on the
valuation date. (2) The Net
Asset Value of the scheme shall be calculated and published at least in two daily
newspapers at intervals of not exceeding one week: Provided that
the Net Asset Value of any scheme for special target segment or any monthly
income scheme which are not mandatorily required to be listed in any stock
exchange under Regulation 32, may publish the Net Asset Value at monthly or
quarterly intervals as may be permitted by the Board. 49.
(1) The price at which the units may be subscribed or sold and the price at
which such units may at any time be repurchased by the mutual fund shall be
made available to the investors. (2) The mutual
fund, in case of open ended scheme, shall at least once a week publish in a
daily newspaper of all (3) While
determining the prices of the units, the mutual fund shall ensure that the
repurchase price is not lower than 93% of the Net Asset Value and the sale
price is not higher than 107% of the Net Asset Value. Provided that
the repurchase price of the units of a close ended scheme shall not be lower
than 95% of the Net Asset Value: Provided
further that the difference between the repurchase price and the sale price of
the unit shall not exceed 7% calculated on the sale price. (4) The price
of units shall be determined with reference to the last determined Net Asset
Value as mentioned in sub-regulation (3) unless, (a)
the scheme announces the Net Asset Value on a daily basis; and 58*[(b) the sale price is determined with or without a
fixed premium added to the future net asset value which is declared in
advance.] Foot notes 52. Substituted for the following by the SEBI (Mutual Fund) (Amendment)
Regulations, 2006, published in the Official Gazette of The moneys
collected under any scheme of a mutual fund shall be invested only in
transferable securities in the money market or in the capital market or in
privately placed debentures or securitised debts. Provided that
moneys collected under any money market scheme of a mutual fund shall be
invested only in money market instruments in accordance with directions issued
by the Reserve Bank of Provided further
that in case of securitised debts such fund may invest in asset backed
securities 47*[and]
mortgaged backed securities. Substituted for the word "excluding"
by the SEBI (Mutual Fund) (Second Amendment) Regulations, 2000, published in
the Official Gazette of 53* Proviso
inserted by the SEBI (Mutual Fund) (Amendment) Regulation 2006, published in
the Official Gazette dated 12.01.2006 54. "Sub-regulation 1A" inserted by the SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of 55.
Sub-regulation (4) inserted by the SEBI (Mutual Fund) (Amendment) Regulations,
1998, published in the Official Gazette of 56.
Sub-regulation (5) inserted by the SEBI (Mutual Fund) (Amendment)
Regulations,2006, published in the Official Gazette of 57.. Proviso
inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1999 published in
the Official Gazette of 58. Substituted for the following clause (b) by
the SEBI (Mutual Fund) (Amendment) Regulations, 1998, published in the Official
Gazette of "the
sale price is determined by adding to the future Net Asset Value a fixed
premium which is declared in advance"
To maintain proper books of accounts and records, etc. 50.
(1) Every asset management company for each scheme shall keep and maintain
proper books of accounts, records and documents, for each scheme so as to
explain its transactions and to disclose at any point of time the financial
position of each scheme and in particular give a true and fair view of the
state of affairs of the fund and intimate to the Board the place where such
books of accounts, records and documents are maintained. (2) Every asset
management company shall maintain and preserve for a period of 59*[eight]
years its books of accounts, records and documents. (3) The asset
management company shall follow the accounting policies and standards as
specified in Ninth Schedule so as to provide appropriate details of the scheme
wise disposition of the assets of the fund at the relevant accounting date and
the performance during that period together with information regarding
distribution or accumulation of income accruing to the unitholder in a fair and
true manner. 51. The
financial year for all the schemes shall end as of March 31 of each year. Provided
that, for a new scheme commenced during a financial year, the disclosure and
reporting requirements would apply for the period beginning from the date of
its commencement and ending on March 31st of the 60*[that
financial year]. Limitation on
fees and expenses on issue of schemes 52.
(1) All expenses should be clearly identified and appropriated in the
individual schemes. (2) The Asset
Management Company may charge the mutual fund with investment and advisory fees
which are fully disclosed in the offer document subject to the following
namely: - (i)
One and a quarter of one per cent of the weekly average net assets outstanding
in each accounting year for the scheme concerned, as long as the net assets do
not exceed Rs. 100 crores, and (ii) One per
cent of the excess amount over Rs. 100 crores, where net assets so calculated
exceed Rs. 100 crores. (3)
For schemes launched on a no load basis, the asset management company shall be
entitled to collect an additional management fee not exceeding 1% of the weekly
average net assets outstanding in each financial year. (4) In addition
to the fees mentioned in sub-regulation (2), the asset management company may
charge the mutual fund with the following expenses namely: - (a)
initial expenses of launching schemes.
(b) recurring
expenses including:- (i)
marketing and selling expenses including agents' commission, if any; (ii) brokerage
and transaction cost; (iii) registrar
services for transfer of units sold or redeemed; (iv) fees and
expenses of trustees; (v) audit fees; (vi) custodian
fees; and 61*[(vii) costs related to investor communication; (viii) costs of
fund transfer from location to location; (ix) cost of
providing account statements and dividend/redemption cheques and warrants; (x) insurance
premium paid by the fund; (xi) winding up
costs for terminating a fund or a scheme; (xii) costs of
statutory advertisements;] 62* [***] 63* (xii-a) in
case of a gold exchange traded fund scheme, recurring expenses incurred towards
storage and handling of gold; and, 64*[(xiii) such other costs as may be approved by the
Board.] (5)
Any expense other than those specified in sub-regulation (2) and (4) shall be
borne by the asset management company 65*[or
trustee or sponsors]. Provided that
initial expenses of floating the scheme shall not exceed six percent of the
initial resources raised under that scheme and such expenses shall be accounted
in the books of accounts of the scheme as specified in the Tenth Schedule. 66*[Provided further that any excess over the 6% initial
issue expense shall be borne by the asset management company]. (6) The total
expenses of the scheme excluding issue or redemption expenses, whether initially
borne by the mutual fund or by the asset management company, but including the
investment management and advisory fee shall be subject to the following
limits: - (i)
On the first Rs. 100 crores of the average weekly net assets 2.5% (ii) On the next
Rs. 300 crores of the average weekly net assets 2.25% (iii)
On the
next Rs. 300 crores of the average weekly net assets 2.0% (iv) On the
balance on the assets 1.75% Provided that
such recurring expenses shall be lesser by at least 0.25% of the weekly average
net assets outstanding in each financial year in respect of a scheme investing
in bonds. Provided
further that in case of a fund of funds scheme, the total expenses of the
scheme including the management fees shall not exceed 0.75% of the daily on
weekly average net assets, depending upon whether the NAV of the scheme is
calculated on daily or weekly basis.
(7)
Any expenditure in excess of the limits specified in sub-regulation (6) shall
be borne by the asset management company 67*[or
by the trustee or sponsors]. (8) The
provisions of sub-regulations (3), (4), (5) and (6) will come into effect68*[from
53. Every mutual
fund and asset management company shall, (a)
dispatch to the unitholders the dividend warrants within 69*[30
days] of the declaration of the dividend. (b) dispatch
the redemption or repurchase proceeds within 10 working days from the date of
redemption or repurchase. 70*[(c) In the event of failure to dispatch the
redemption or repurchase proceeds within the period specified in sub-clause
(b), the asset management company shall be liable to pay interest to the
unitholders at such rate as may be specified by Board for the period of such
delay. (d)
Notwithstanding payment of such interest to the unitholders under sub-clause
(c), the asset management company may be liable for penalty for failure to
dispatch the redemption or repurchase proceeds within the stipulated time.] Annual Report 54. Every mutual
fund or the asset management company shall prepare in respect of each financial
year an annual report and annual statement of accounts of the schemes and the
fund as specified in Eleventh Schedule. 55. (1) Every
mutual fund shall have the annual statement of accounts audited by an auditor
who is not in any way associated with the auditor of the asset management
company. Explanation: For
the purposes of this sub-regulation and regulation 66 "auditor" means
a person who is qualified to audit the accounts of a company under section 224
of the Companies Act, 1956 (1 of 1956). (2)
An auditor shall be appointed by the trustees. (3) The auditor
shall forward his report to the trustees and such report shall form part of the
Annual Report of the mutual fund. (4) The
auditor's report shall comprise of the following: - (a)
a certificate to the effect that:- (i)
he has obtained all information and explanations which, to the best of his
knowledge and belief, were necessary for the purpose of the audit; (ii) the
balance sheet and the revenue account give a fair and true view of the scheme,
state of affairs and surplus or deficit in the Fund for the accounting period
to which the Balance Sheet or, as the case may be the Revenue Account relates; (iii) the
statement of account has been prepared in accordance with accounting policies
and standards as specified in the Ninth Schedule. 71*[Mailing] of Annual Report and summary thereof 56.
(1) The schemewise Annual Report of a mutual fund or an abridged summary
thereof 72*[***73*(***)
shall be mailed to all unitholders] as soon as may be possible but not later
than six months from the date of closure of the relevant accounts year. (2)
The Annual Report and abridged summary thereof shall contain details as
specified in the Eleventh Schedule and such other details as are necessary for
the purpose of providing a true and fair view of the operations of the mutual
fund. 74*[Provided that the abridged scheme wise annual report
mailed to unitholders need not contain full portfolio disclosure but must
contain details on group company investments such as the name of the company,
the amount of investment made in each company of the group by each scheme and
the aggregate investments made by all schemes in the group companies of the
sponsor. 75*(***)] (3) The report
if 76*[mailed
in abridged summary form as per sub regulation (1)] shall carry a note
that 77*[for
unitholders of a scheme] full Annual Report shall be available for inspection
at the Head Office of the mutual fund and a copy thereof shall be made
available to the unit holder on payment of such nominal fees as may be
specified by the mutual fund.
57. Every mutual
fund 78*[***]
shall within six months from the date of closure of each financial year forward
to the Board a copy of the Annual Report and other information including
details of investments and deposits held by the mutual fund so that the entire
scheme wise portfolio of the mutual funds is disclosed to the Board. Periodic and continual disclosures 58.
(1) The mutual fund, the asset management company, the trustee, custodian,
sponsor of the mutual fund shall make such disclosures or submit such documents
as they may be called upon to do so by the Board. (2)
Without prejudice to the generality of sub-regulation (1), the mutual
fund 79*[***]
shall furnish the following periodic reports to the Board namely: - (a)
copies of the duly audited annual statements of accounts including the balance
sheet and the profit and loss account for the fund and in respect of each
scheme, once a year; (b) a copy of
six monthly unaudited accounts; (c) a quarterly
statement of movements in net assets for each of the schemes of the fund; (d)
a quarterly portfolio statement, including changes from the previous periods,
for each scheme. 59. A mutual
fund and asset management company shall before the expiry of 80*[one
month] from the close of each half year that is on 31st March and on 30th
September, publish its unaudited financial results in one English daily
newspaper circulating in the whole of India and in a newspaper published in the
language of the region where the Head Office of the mutual fund is
situated. 81*[The
half-yearly results must be printed in at least 7 point Times Roman font with
proper spacing for easy reading.] Provided that
the half-yearly unaudited report referred in this sub-regulation shall contain
details as specified in Twelfth Schedule and such other details as are
necessary for the purpose of providing a true and fair view of the operations
of the mutual fund. 82*[59A. A mutual fund shall before the expiry of one
month from the close of each half year (i.e., 31st March and 30th September),
send to all unitholders a complete statement of its scheme portfolio. Provided that
statement of scheme portfolio may not be sent to the unitholders, if the
statement is published, by way of an advertisement, in one English daily
circulating in the whole of India and in a newspaper published in the language
of the region where the head office of the mutual fund is situated.] 60. The trustees
shall be bound to make such disclosures to the unit holders as are essential in
order to keep them informed about any information, which may have an adverse bearing
on their investments. Foot notes 59. Substituted for "ten years" by SEBI
(Mutual Fund) (Amendment) Regulations, 1998, published in the Official Gazette
dated 12.01.1998. 60. Substituted for "following year" by SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette dated
12.01.1998. 61 Clauses (vii)
to (xii) inserted by SEBI (Mutual Fund) (Amendment) Regulations, 1998, or
trustee or sponsors dated 12.01.1998.
62. “and” omitted
by SEBI (Mutual Funds) (Amendment) Regulations, 2006, published in the Official
Gazette of India dated 12.01.2006 63. Sub clause
“xii-a” inserted by SEBI (Mutual Funds) (Amendment) Regulations, 2006,
published in the Official Gazette of India dated 12.01.2006 64.
Clause (vii) renumbered as sub clause (xiii) by SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette dated 12.01.1998. 65
"or trustee or sponsors" inserted by SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette dated 12.01.1998. 66. Proviso inserted by SEBI
(Mutual Fund) (Amendment) Regulations, 1998, published in the Official Gazette
dated 12.01.1998. 67 "or by the trustee or sponsors" inserted by SEBI (Mutual
Fund) (Amendment) Regulations, 1998, published in the Official Gazette dated
12.01.1998. 68.
Substituted for "after three months from the date of notification of these
regulations" by SEBI (Mutual Fund) Amendment Regulations, 1997, published
in the Official Gazette dated 15.04.1997. 69. Substituted for "45 days" by SEBI
(Mutual Fund) Amendment Regulations, 2001, published in the Official Gazette
dated 23.07.2001. 70.
Clauses (c) and (d) inserted by SEBI (Mutual Fund) Amendment Regulations, 2000,
published in the Official Gazette dated 14.03.2000. 71.
Substituted for "Publication" inserted by SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of 72. The sub-regulation (1) of regulation 56 as in SEBI (Mutual Fund)
Regulations, 1996 read as follows "(1)
The scheme wise Annual Report of a mutual fund or an abridged summary
thereof shall be published through an advertisement as soon as may be
possible but not later than six months from the date of closure of the relevant
accounts year. "and an
abridged scheme wise annual report shall be mailed to all unitholders" was
inserted by SEBI (Mutual Fund) Amendment Regulations, 1998, published in the
Official Gazette dated 12.01.1998. After which the regulation read as follows "(1)
The scheme wise Annual Report of a mutual fund or an abridged summary
thereof shall be published through an advertisement and an abridged
scheme wise annual report shall be mailed to all unitholders as soon as may be
possible but not later than six months from the date of closure of the relevant
accounts year.
74.
Proviso inserted by SEBI (Mutual Fund) Amendment Regulations, 1998, published
in the Official Gazette of 75.
Following part of the proviso deleted by SEBI (Mutual Funds) (Amendment)
Regulations, 2002 published in the Official Gazette of "provided
further that full portfolio disclosure is not required if the full accounts are
published in newspapers" 76. Substituted for "if published in summary form", by SEBI
(Mutual Funds) (Amendment) Regulations, 2002 published in Official Gazette of 77. "for unitholders of a scheme" inserted by SEBI (Mutual
Fund) (Amendment) Regulations, 1998, published in Official Gazette of 78.
"and asset management company" deleted by SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in Official Gazette of 79."and asset management company" deleted by SEBI (Mutual
Fund) (Amendment) Regulations, 1998, published in Official Gazette of 80.
Substituted for "two months" by SEBI (Mutual Funds) (Second Amendment)
Regulations, 2001 published in Official Gazette of 81.
"The half-yearly results must be printed in at least 7 point Times Roman
font with proper spacing for easy reading" inserted by SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in Official Gazette of India dated
20.02.2002. 82 Regulation 59A was inserted by SEBI (Mutual Fund)
(Amendment) Regulations, 2000, published in the Official Gazette of CHAPTER VIII Board's right to inspect and investigation 61.
(1) The Board may appoint one or more persons as inspecting officer to
undertake the inspection of the books of accounts, records, documents and
infrastructure, systems and procedures or to investigate the affairs of a
mutual fund, the trustees and asset management company for any of the following
purposes, namely: (a) to ensure
that the books of accounts are being maintained by the mutual fund, the
trustees and asset management company in the manner specified in these
regulations; (b) to
ascertain whether the provisions of the Act and these regulations are being
complied with by the mutual fund, the trustees and asset management company; (c) to
ascertain whether the systems, procedures and safeguards followed by the mutual
fund are adequate; (d) to
ascertain whether the provisions of the Act or any rules or regulations made
thereunder have been violated; (e) to
investigate into the complaints received from the investors or any other person
on any matter having a bearing on the activities of the mutual funds, trustees
and asset management company; (f)
to suo-motu ensure that the affairs of the mutual fund, trustees or asset
management company are being conducted in a manner which are in the interest of
the investors or the securities market. Notice before
inspection and investigation 62.
(1) Before ordering an inspection or investigation under regulation 61 the
Board shall give not less than ten days notice to the mutual fund, asset
management company or trustees as the case may be. (2)
Notwithstanding anything contained in sub-regulation (1), where the Board is
satisfied that in the interest of the investors no such notice should be given,
it may, by an order in writing direct that such inspection or investigation be
taken up without such notice. (3) During the
course of inspection or investigation, the mutual fund, trustees or asset
management company against whom the inspection or investigation is being carried
out shall be bound to discharge his obligations as provided in regulation 63.
63.
(1) It shall be the duty of the mutual fund, trustees or asset management
company whose affairs are being inspected or investigated, and of every
director, officer and employee thereof, to produce to the inspecting officer
such books, accounts, records, and other documents in its custody or control
and furnish him such statements and information relating to the activities as
mutual funds, trustees or asset management company, as the inspecting officer
may require, within such reasonable period as the inspecting officer may
specify. (2) The mutual
fund, trustees or asset management company shall allow the inspecting officer
to have a reasonable access to the premises occupied by it or by any other
person on its behalf and also extend reasonable facility for examining any
books, records, documents, and computer data in the possession of the mutual
fund, trustees and asset management company or such other person and also
provide copies of documents or other materials which in the opinion of the
inspecting officer are relevant for the purpose of the inspection. (3) The
inspecting officer, in the course of inspection or investigation, shall be
entitled to examine or record the statements of any director, officer, or
employee of the mutual fund, trustees and asset management company. (4) It shall be
the duty of every director, officer, or employee of the mutual fund, asset
management company or trustee to give to the inspecting officer all assistance
in connection with the inspection or investigation, which the inspecting
officer may reasonably require.
64. The
inspecting officer shall, as soon as possible, on completion of the inspection
or investigation submit a report to the Board: Provided that if
directed to do so by the Board, he may submit interim reports. 83*[Action on inspection or
investigation report 65. The Board or
the Chairman shall after consideration of inspection or investigation report
take such action as the Board or chairman may deem fit and appropriate
including action under the Securities and Exchange Board of India (Procedure
for Holding Enquriy by Enquiry Officer and Imposing Penalty) Regulations,
2002.] 66. Without
prejudice to the provisions of regulation 55, the Board shall have the power to
appoint an auditor to inspect or investigate, as the case may be, into the
books of accounts or the affairs of the mutual fund, trustee or asset
management company: Provided that
the Auditor so appointed shall have the same powers of the inspecting officer
as stated in Regulation 61 and the obligation of the mutual fund, asset
management company, trustee, and their respective employees in regulation 63,
shall be applicable to the investigation under this regulation. Payment of inspection fees to the Board 67. The Board
shall be entitled to recover such expenses including fees paid to the auditors
as may be incurred by it for the purposes of inspecting the books of accounts,
records and documents of the mutual fund, the trustees and the asset management
company. Foot notes 83.
Following regulation 65 was substituted by SEBI (Procedure for Holding Enquriy
by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the
Official Gazette of Communications of findings, etc. 65. (1) The Board shall, after consideration of the inspection report or
investigation report referred to in regulation 64, communicate the findings of
the inspecting officer to the mutual fund, trustees or asset management company
as the case may be, and give him an opportunity of being heard: Provided
that if any proceedings under Chapter VIII are initiated the procedure under
Chapter VIII shall be followed. (2) On receipt of the reply if any, from the mutual fund, trustees or
asset management company, as the case may be, the Board may call upon the
trustees or asset management company to take such measures as the Board may
deem fit in the interest of the investors, securities market and for due
compliance with the provisions of these regulations.
84*[Liability for action in case of default 68. A mutual
fund which –
Explanation – For the
purpose of this clause "unfair trade practices" has the same meaning
as in the Securities and Exchange Board of India (Prohibition of Fraudulent and
Unfair Trade Practices relating to Securities Market) Regulations, 1995; (i)
is guilty
of misconduct or improper or unbusinesslike or unprofessional conduct sepcified
in the Fifth Schedule; (j) asset management company fails to
maintain the net worth in accordance with the provisions of regulation 21; (k) fails to pay fees; (l) violates the conditions of
registration Foot notes 84.
Following regulation 68 was substituted by SEBI (Procedure for Holding Enquriy
by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in the
Official Gazette of Suspension of certificate
68. The Board may suspend a certificate granted to a mutual fund if such
mutual fund : - (a)
contravenes any of the provisions of the Act and these regulations; (b) fails to
furnish any information or furnishes wrong information relating to its activity
as a mutual fund as required under these regulations; (c) fails to
submit periodical returns as required under these regulations; (d) does not
co-operate in any inquiry or inspection conducted by the Board; (e) fails to
comply with any directions of the Board issued under the provisions of the Act
or the regulations; (f) fails to
resolve the complaints of the investors or fails to give a satisfactory reply
to the Board in this behalf; (g) indulges
in unfair trade practices in securities; Explanation:
For the purpose of this clause "unfair trade practices" has the same
meaning as in Securities & Exchange Board of (h) is guilty
of misconduct or improper or unbusinesslike or unprofessional conduct which is
not in accordance with the Code of Conduct specified in the Fifth Schedule; (i) asset
management company fails to maintain the networth in accordance with the
provisions of regulation 21; (j) fails to pay any fees; (m) mutual fund, asset management company
or trustees of that mutual fund does not carry out its obligations as specified
in these regulations,shall be deal with in the manner provided under the
Securities and Exchange Board of India (Procedure for Holding Enquriy by
Enquiry Officer and Imposing Penalty) Regulations, 2002.] 85*[******] 75. The Board
may initiate action for suspension or cancellation of registration of an
intermediary holding a certificate of registration under section 12 of the Act
who fails to exercise due diligence or to comply with the obligations under
these regulations: Provided that no
such certificate of registration shall be suspended or cancelled unless the
procedure specified in the regulations applicable to such intermediary is
complied with. 76.
(1) The Board may for the offences specified in sections 15 A to 15 E of the
Act initiate action under section 15 I of the Act and in case of violation of
any of the provisions of the Act or the regulations, initiate action under
sections 11, 11B or section 24 of the Act. (2) The Board
may in addition to suspension or cancellation of certificate, order suspension
of launching of any scheme of a mutual fund for a period not exceeding one year
for violation of any of the provisions of these regulations after following
procedure under this Chapter. (3) The Board
may during the pendency of any proceeding of suspension or cancellation under
this Chapter also order suspension for launching of any scheme not exceeding
three months without following procedure under this Chapter. Provided
that no order shall be passed without giving an opportunity of hearing. Foot notes 84. Following
regulation 68 was substituted by SEBI (Procedure for Holding Enquriy by Enquiry
Officer and Imposing Penalty) Regulations, 2002 published in the Official
Gazette of Suspension of certificate
68. The Board may suspend a certificate granted to a mutual fund if such
mutual fund : - (a)
contravenes any of the provisions of the Act and these regulations; (b) fails to
furnish any information or furnishes wrong information relating to its activity
as a mutual fund as required under these regulations; (c) fails to
submit periodical returns as required under these regulations; (d) does not
co-operate in any inquiry or inspection conducted by the Board; (e) fails to
comply with any directions of the Board issued under the provisions of the Act
or the regulations; (f) fails to
resolve the complaints of the investors or fails to give a satisfactory reply
to the Board in this behalf; (g) indulges
in unfair trade practices in securities; Explanation:
For the purpose of this clause "unfair trade practices" has the same
meaning as in Securities & Exchange Board of (h) is
guilty of misconduct or improper or unbusinesslike or unprofessional conduct
which is not in accordance with the Code of Conduct specified in the Fifth
Schedule; (i) asset
management company fails to maintain the networth in accordance with the
provisions of regulation 21; (j) fails to pay any fees; (k) violates
the conditions of registration; (l) mutual
fund, asset management company or trustees of that mutual fund does not carry
out its obligations as specified in these regulations. 85.
Following regulations 69 to 74 were omitted by SEBI (Procedure for Holding
Enquriy by Enquiry Officer and Imposing Penalty) Regulations, 2002 published in
the Official Gazette of Cancellation of certificate
69. The Board may cancel the certificate of registration granted to a
mutual fund, if such mutual fund
(a) is
guilty of fraud, or has been convicted of an economic offence; (b) has been
guilty of repeated defaults of the nature specified in regulation 68; (c) the
mutual fund, asset management company, trustee of that mutual fund indulges in
price manipulation or price rigging or cornering activities affecting the
securities market and the investors interest; (d) the
financial position of the mutual fund deteriorates to such an extent that the
Board is of the opinion that its continuance is not in the interest of
unitholders and other mutual funds.
70. No order
of suspension or cancellation of certificate or the approval, as the case may
be, shall be made by the Board against a mutual fund, trustees, asset
management company except after holding an enquiry in accordance with the
procedure specified in regulation 71. Manner of
holding enquiry before suspension or cancellation 71. (1) For
the purpose of holding an enquiry, under regulation 70 the Board may appoint
one or more enquiry officers. (2) The enquiry officer shall issue to the mutual fund, asset management
company or the trustee, as the case may be, at its registered office or the
principal place of its business, a notice setting out the grounds on which
action is proposed to be taken against it and calling upon it to show cause
against such action within a period of fourteen days from the date of receipt
of the notice. (3) The
mutual fund, asset management company or trustee shall within fourteen days of
the date of receipt of such notice, furnish to the enquiry officer a written
reply, together with copies of documentary or other evidence relied on by it or
sought by the Board from the mutual fund, trustees, or asset management
company. (4) The
enquiry officer shall give a reasonable opportunity of hearing to the mutual
fund, trustees, or asset management company, to enable it to make submissions
in support of its reply made under sub-regulation (3). (5) Before
the enquiry officer, the mutual fund, trustees or asset management company may
either appear in person or through any person duly authorised by the mutual
fund, trustees or asset management company. Provided
that no lawyer or advocate shall be permitted to represent the mutual fund,
trustees or asset management company at the enquiry: Provided
further that where a lawyer or an advocate has been appointed by the Board as a
presenting officer under sub-regulation (6), it shall be lawful for the mutual fund,
asset management company or trustee to present its case through a lawyer or
advocate. (6) The
enquiry officer may if he considers it necessary, ask the Board to appoint a
presenting officer to present its case. (7) The
enquiry officer shall, after taking into account all relevant facts and
submissions made by the mutual fund, trustees or asset management company
submit a report to the Board and recommend the action, if any, to be taken
against the mutual fund, trustees or asset management company as also the
grounds on which the penal action is justified.
72. (1) On receipt of the report from the enquiry officer, the Board
shall consider the same and issue to the mutual fund, trustees or asset management company, a show-cause notice. (2) The
mutual fund, asset management company or trustee, shall within fourteen days of
the date of the receipt of the show-cause notice, send a reply to the Board. (3) The
Board, after considering the reply of the mutual fund, trustees or asset
management company, if any, shall as soon as possible pass such order as it
deems fit. (4) The
Board shall send to the mutual fund, trustees, or asset management company, a
copy of the order made under sub-regulation (3).
73. (1) On and from the date of the suspension of the certificate or the
approval, as the case may be, the mutual fund, trustees or asset management
company, shall cease to carry on any activity as a mutual fund, trustee or
asset management company, during the period of suspension, and shall be subject
to the directions of the Board with regard to any records, documents, or
securities that may be in its custody or control, relating to its activities as
mutual fund, trustees or asset management company. (2) On and
from the date of cancellation of the certificate or the approval, as the case
may be, the mutual fund, trustees or asset management company shall with
immediate effect, cease to carry on any activity as mutual fund, trustees or
asset management company, as the case may be. (3) The
Board may in the interest of the unit holders issue directions with regard to
the transfer of any records, documents or securities that may be in its custody
or control, relating to its activities as mutual fund, trustees or asset
management company. (4) The
Board may in order to protect the interest of the unit holders order the
transfer of records, document, securities, etc. to any person specifically
appointed for the purpose or to any other trustee or asset management company. Provided
that the Board shall while appointing such a person determine the terms and
conditions of such an appointment.
74. The order of
suspension or cancellation passed under sub-regulation (3) of regulation 72,
may be published by the Board in two newspapers. CHAPTER X Power of the Board to issue clarifications 77. In order to
remove any difficulties in the application or interpretation of these
regulations, the Board shall have the power to issue clarifications and
guidelines in the form of notes or circulars which shall be binding on the
sponsor, mutual funds, trustees, asset management companies and custodians. 78.
(1) The Securities & Exchange Board of (2)
Notwithstanding such repeal: (a)
anything done or any action taken or purported to have been done or taken,
including registration or approval granted, fees collected, scheme announced,
registration or approval, suspended or cancelled, any inquiry or investigation
commenced under the said regulations, shall be deemed to have been done or
taken under the corresponding provisions of these regulations; (b) any
application made to the Board under the said regulations and pending before it
shall be deemed to have been made under the corresponding provisions of these
regulations; (c)
any appeals preferred to the Central Government under the said regulations and
pending before it shall be deemed to have been preferred under the
corresponding provisions of these regulations. F.NO. SEBI/LE/23/96 SECURITIES
AND EXCHANGE BOARD OF APPLICATION
FOR THE GRANT OF REGISTRATION OF MUTUAL FUND NAME OF APPLICANT
______________________________________________________________ CONTACT PERSON/
__________________________________ NAME OF THE COMPLIANCE OFFICER TELEPHONE NO. : ______________________
FAX NO. INSTRUCTION FOR FILLING UP FORM:- 1. Applicants must submit a completed
application form together with appropriate supporting documents to the Board. 2. It is important that this application
form should be filled in accordance with the regulations. 3. An application which is not complete
is liable to be rejected. 4. Answers must be typed and legible. 5. Information which needs to be supplied
in more details may be given on separate sheets which should be attached to the
application form. 6. The application must be signed by the
competent person having authority to do so and all signatures must be in
original. APPLICATION BY SPONSOR OF THE MUTUAL FUND
FOR REGISTRATION 1] NAME OF THE SPONSOR 2]
ADDRESS OF THE REGISTERED TELEPHONE NOS. TELEX NOS. FAX NOS. 3] NAME OF THE CONTACT PERSON 4] DATE AND PLACE OF 5] OBJECTS OF THE SPONSOR MAIN OBJECTS ANCILLARY OBJECTS 6] CAPITAL STRUCTURE AND 7] PRESENT LINE OF BUSINESS NUMBER OF YEARS IN THAT LINE 8] CONDENSED FINANCIAL INFORMATION 9] ACCOUNTING POLICIES 10] SYSTEMS AND PROCEDURES 11]
NAMES OF THE ASSOCIATE COMPANIES/SUBSIDIARIES, ETC. 12] MANAGEMENT OF THE SPONSOR Names of key personnel Organisational structure Board of Directors of associate
organisations, 13] NAMES AND ADDRESSES OF THE 14] NAMES AND ADDRESSES OF THE 15] COURT CASES/LITIGATIONS IN WHICH 16] AN APPLICATION FOR REGISTRATION OF
MUTUAL FUND A) DRAFT TRUST DEED; B) DRAFT INVESTMENT MANAGEMENT AGREEMENT;
AND C) DRAFT CUSTODIAN AGREEMENT (A) INCOME STATEMENT Dividend EXPENSES: Director's remuneration Gross Profit Depreciation (B) ASSETS AND LIABILITIES
YEARS
(Rs) Fixed Assets LESS Current Liabilities
and REPRESENTED BY: Issued and Paid up
capital TOTAL *provide full particulars of investments FORM B CERTIFICATE
OF REGISTRATION In exercise of the powers conferred by
Section 30 of the Securities and Exchange Board of II. Registration Code for the Mutual Fund
is MF/ / / Date By order Sd/-
TRUSTEESHIP
OF THE MUTUAL FUND 1] IF THE TRUSTEESHIP OF THE MUTUAL [a] the draft Articles
and Memorandum [b] Objects of the
Trust Company [c] Board of Directors
of the trustee company with age, experience and [d] Key personnel [e] Systems and
procedures, record [f] Names of auditors
and bankers 2] IF THE TRUSTEESHIP OF THE MUTUAL [a] Name of the
Institution [b] Address/telephone/telex/fax
nos [c] Name of the
contact person [d] Background
information i.e. (number 3] IF THE TRUSTEESHIP OF THE MUTUAL FUND
IS WITH [a] Names of the
members of the Board [b] Age, experience, qualification [c] Relationship of
the members of the 4] DRAFT TRUST DEED The draft trust deed should inter alia [a] Responsibilities,
obligations and [b] A statement that
investments should [c] Responsibilities,
obligations and [d] Policies for
investments, creation, [e] Policies for
disclosures of scheme [f] Right of the
trustees to obtain [g] Right to make spot
checks on the [h] Public
availability of the trust deed 5] INSTRUCTION FOR FILLING UP THE FORM FORM D ASSET
MANAGEMENT COMPANY 1] NAME OF THE ASSET MANAGEMENT COMPANY 2] PROPOSED REGISTERED OFFICE/ TELEPHONE NOS. TELEX NOS. FAX NOS. 3] NAME OF THE CONTACT PERSON 4] PROPOSED OBJECTS OF THE ASSET
MANAGEMENT COMPANY MAIN OBJECTS ANCILLARY OBJECTS 5] a] PROPOSED CAPITAL STRUCTURE b] THE NET WORTH OF THE COMPANY 6] PROPOSED SYSTEMS AND PROCEDURES 7] NAMES OF THE ASSOCIATE 8] MANAGEMENT OF THE ASSET MANAGEMENT
COMPANY IN CASE ASSET MANAGEMENT COMPANY IS AN
EXISTING COMPANY 1] NAME OF THE ASSET MANAGEMENT COMPANY 2] ADDRESS OF THE REGISTERED TELEPHONE NOS. TELEX NOS. FAX NOS. 3] NAME OF THE CONTACT PERSON 4] DATE AND PLACE OF INCORPORATION OF THE ASSET MANAGEMENT
COMPANY 5] OBJECTS OF THE ASSET MANAGEMENT
COMPANY MAIN OBJECTS ANCILLARY OBJECTS 6] CAPITAL STRUCTURE AND NET WORTH OF THE COMPANY TO BE REPRESENTED BY 7] PRESENT LINE(S) OF BUSINESS 8] CONDENSED FINANCIAL INFORMATION 9] ACCOUNTING POLICIES 10] SYSTEMS AND PROCEDURES 11] NAMES OF THE ASSOCIATE 12] MANAGEMENT OF THE ASSET MANAGEMENT
COMPANY 13] NAMES AND ADDRESSES OF THE 14] NAMES AND ADDRESSES OF THE 15] COURT CASES/LITIGATIONS IN 16] INSTRUCTION FOR FILLING UP THE FORM CONDENSED FINANCIAL INFORMATION (A) INCOME STATEMENT
YEARS
(Rs) Dividend EXPENSES: Director's
remuneration Depreciation (B) ASSETS AND LIABILITIES
YEARS
(Rs) Fixed Assets CURRENT ASSETS LESS Current Liabilities
and NET WORTH REPRESENTED BY: TOTAL *provide full particulars of investments SECOND SCHEDULE FEES I. A. APPLICATION FEES PAYABLE BY MUTUAL
FUNDS Rupees Twenty five Thousand B. REGISTRATION FEES PAYABLE BY MUTUAL
FUNDS Rupees Twenty-Five lacs C. SERVICE FEES PAYABLE BY MUTUAL FUNDS
Rupees Two lacs Fifty-Thousand D. FILING FEES FOR OFFER DOCUMENT
RupeesTwenty-Five Thousand II. The fees referred to in clause I
above, shall be paid by means of a bank draft payable to `The Securities and
Exchange Board of India' at Mumbai. THIRD SCHEDULE CONTENTS
OF THE TRUST DEED The Trust Deed shall contain the
following clauses namely:- 1. i) A trustee in carrying out his
responsibilities as a member of the Board of Trustees or of trustee company,
shall maintain arms' length relationship with other companies, or institutions
or financial intermediaries or any body corporate with which he may be
associated. ii) No trustee shall participate in the
meetings of the Board of Trustees or trustee company when any decisions for
investments in which he may be interested are taken. iii) All the trustees shall furnish to
the board of trustees or trustee company particulars of interest which he may
have in any other company, or institution or financial intermediary or any
corporate by virtue of his position as director, partner or with which he may
be associated in any other capacity.
2. Minimum number of trustees must be
mentioned in the Trust Deed. 3. The Trust Deed must provide that the
trustees shall take into their custody, or under their control all the property
of the schemes of the mutual fund and hold it in trust for the unitholders. 4. The Trust Deed must specifically
provide that unitholders would have beneficial interest in the trust property
to the extent of individual holding in respective schemes only. 5. The Trust Deed shall provide that it
would be the duty of the trustees to act in the interest of the unit holders. 6. The Trust Deed shall provide that it
is the duty of trustees to provide or cause to provide information to
unitholders and Board as may be specified by the Board. 7. The Trust Deed shall provide that the
trustees shall appoint an asset management company approved by the Board, to
float schemes for the mutual fund after approval by the trustees and Board, and
manage the funds mobilised under various schemes, in accordance with the
provisions of the Trust Deed and Regulations. The trustees shall enter into an
Investment Management Agreement with the asset management company for this
purpose, and shall enclose the same with the Trust Deed. 8. The Trust Deed shall provide for the
duty of the trustee to take reasonable care to ensure that the funds under the
schemes floated by and managed by the asset management company are in
accordance with the Trust Deed and Regulations. 9. The Trust Deed must provide for the
power of the trustees to dismiss the asset management company under the
specific events only with the approval of Board in accordance with the
Regulations. 10. The Trust Deed shall provide that the
trustees shall appoint a custodian and shall be responsible for the supervision
of its activities in relation to the mutual fund and shall enter into a
Custodian Agreement with the custodian for this purpose. 11. The Trust Deed shall provide that the
auditor for the mutual fund shall be different from the Auditor of the asset
management company. 12. The Trust Deed shall provide for the
responsibility of the trustees to supervise the collection of any income due to
be paid to the scheme and for claiming any repayment of tax and holding any
income received in trust for the holders in accordance with the Trust Deed,
Regulations. 13. Broad policies regarding allocation
of payments to capital or income must be indicated in the Trust Deed. 14. The Trust Deed shall also explicitly
forbid the acquisition of any asset out of the trust property which involves
the assumption of any liability which is unlimited or shall not result in
encumbrance of the trust property in any way. 15. The Trust Deed shall forbid the
mutual fund 86*[***] to make or guarantee loans or take up any
activity not in contravention of the Regulations. 16. Trusteeship fee, if any, payable to
trustees shall be provided in the Trust Deed. 17. The Trust Deed shall provide that no
amendment to the Trust Deed shall be carried out without the prior approval of
the Board and unitholders is obtained. Provided however that in case a Board of
trustees is converted into a trustee company subsequently such conversion shall
not require the approval of unitholders. 18. The removal of the trustee in all cases
would require the prior approval of the Board. 19. The Trust Deed shall lay down the
procedure for seeking approval of the unitholders under such circumstances as
are specified in the Regulations. 87*[88*(20.
The Trust Deed shall state that a meeting of the trustees shall be held atleast
once in every two calendar months and at least six such meetings shall be held
in every year) 21. The trust deed shall specify the quorum
for a meeting of the trustees. Provided that the quorum for a meeting of
the trustees shall not be constituted unless one independent trustee or
director is present at the meeting. 22. The trust deed shall state that the
minimum number of trustees shall be four.] Foot notes 86.
"and the asset management company" deleted by the SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of 87.
Clauses 20, 21 and 22 inserted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1999 published in the Official Gazette of 88. Substituted
for the following clause by the SEBI (Mutual Fund) (Third Amendment)
Regulations, 2002 published in the Official Gazette of "The trust deed shall state that a
meeting of the trustees shall be held at least once in every three months and
at least four such meetings shall be held in every year." FOURTH SCHEDULE CONTENTS
OF THE INVESTMENT MANAGEMENT AGREEMENT The Investment Management Agreement shall
contain the following provisions for the duties and responsibilities of the
asset management company namely:- i) the asset management company appointed by
the trustees with the prior approval of the Board shall be responsible for
floating schemes for the mutual fund after approval of the same by the trustees
and managing the funds mobilised under various schemes, in accordance with the
provisions of the Trust Deed and Regulations; ii) the asset management company shall not
undertake any other business activity other than activities specified
under 89*[sub-regulation
(2) of regulation 24] and management of mutual funds and such other activities
as financial services consultancy, exchange of research and analysis on
commercial basis as long as these are not in conflict with the fund management
activity itself without the prior approval of the trustees and Board; iii) the asset management company shall invest
the funds raised under various schemes in accordance with the provisions of the
Trust Deed and the Regulations; iv) the asset management company shall not
acquire any of the assets out of the scheme property which involves the
assumption of any liability which is unlimited or which may result in
encumbrance of the scheme property in any way; v) the asset management company shall
not 90*[***] take up any activity
in contravention of the Regulations; vi) no loss or damage or expenses incurred
by the asset management company or Officers of asset management company or any
person delegated by the asset management company, shall be met out of the trust
property; vii) the asset management company shall
ensure that no 91*[offer
document of a scheme, key information memorandum, abridged half yearly results
and annual results] is issued or published without the trustees' prior approval
in writing, and contains any statement or matter extraneous to the Trust Deed
or Offer Document scheme particulars approved by the trustees and Board; 92*[vii-a) the asset management company shall provide an
option of nomination to the unitholders in terms of regulation 29A, in the form
prescribed hereunder". "FORM FOR NOMINATION / CANCELLATION OF
NOMINATION I / We ___________ and ____________________
* do hereby nominate the person more particularly described hereunder/ and /
cancel the nomination made by me / us on the ___________ day of ___________ in
respect of the units bearing No. __________ . Name and Address of Nominee Name: ……………………………………………………………………. Address: …………………………………………………………………. Date of Birth: ……………………………………………………………. *The Nominee is a minor whose guardian is:
………………………… Address of the Guardian ………………………………………………
.……………………………………………………………………………… Signature of the guardian:
……………………………………………… Unit holder (s) 1) Signature:
……………………………….. 2) Signature: ……………………………… Instructions: 1. The nomination can be made only by
individuals applying for / holding units on their own behalf singly or
jointly. Non-individuals including society, trust, body corporate,
partnership firm, Karta of Hindu Undivided Family, holder of Power ofAttorney
cannot nominate. If the units are held jointly, all joint holders will
sign the nomination form. Space is provided as a specimen, if there are more
joint holders more sheets can be added for signatures of holders of units and
witnesses. 2. A minor can be nominated and in that
event, the name and address of the guardian of the minor nominee shall be
provided by the unit holder. 93* “Nomination can also be in favour of the
Centarl Government, State Government, a local authority, any person designed by
virtue of his office or a religious or charitable trust.” 3. The Nominee shall not be a trust, 94*
[other than a religious or charitable trust, society] society, body corporate,
partnership firm, Karta of Hindu Undivided Family or a Power of Attorney
holder. A non-resident Indian can be a Nominee subject to the exchange
controls in force, from time to time. 4. Nomination in respect of the units stands
rescinded upon the transfer of units. 5. Transfer of units in favour of a Nominee
shall be valid discharge by the asset management company against the legal
heir. 6. The cancellation of nomination can be
made only by those individuals who hold units on their own behalf singly or
jointly and who made the original nomination. 7. On cancellation of the nomination, the
nomination shall stand rescinded and the asset management company shall not be
under any obligation to transfer the units in favour of the Nominee.] viii) the asset management company shall
disclose the basis of calculating the repurchase price and NAV of the various
schemes of the fund in the scheme particulars and disclose the same to the
investors at such intervals as may be specified by the trustees and Board; ix) the trustees shall have the right to
obtain from the asset management company all information concerning the
operations of the various schemes of the mutual fund managed by the asset
management company at such intervals and in such a manner as required by the
trustees to ensure that the asset management company is complying with the
provisions of the Trust Deed, and Regulations; x) the asset management company shall submit
quarterly report on the functioning of the schemes of the mutual fund to the
trustees or at such intervals as may be required by the trustees or Board; xi) the trustee shall have the power to
dismiss the asset management company under the specific events only with the
approval of Board in accordance with the Regulations. Foot notes 89. Substituted
for "regulation 23" by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of 90
"give or guaruntee loans or" omitted by the SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of 91. Substituted
for "application form or sales literature or other printed matter issued
to prospective buyers, or advertisements or report and / or announcement (other
than an announcement of prices and yeilds) addressed to the general body of unitholders,
or to the press, or other communications media" by the SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of India dated
12.01.1998. 92.
"Clause vii - a)" inserted by the SEBI (Mutual Fund) (Third
Amendment) Regulations, 2002, published in the Official Gazette of 93.Proviso inserted by SEBI (Mutual Fund)
(Amendment) Regulations, 2004, published in the Official Gazette of India dated
12.01.2004 94. Inserted by SEBI (Mutual Funds) (Amendment)
Regulations, 2004, published in the Official Gazette of India dated 12.01.2004 FIFTH SCHEDULE CODE
OF CONDUCT 1. Mutual fund schemes should not be
organised, operated, managed or the portfolio of securities selected, in the
interest of sponsors, directors of asset management companies, members of Board
of trustees or directors of trustee company, associated persons 95*[as]
in the interest of special class of unitholders rather than in the interest of
all classes of unitholders of the scheme. 2. Trustees and asset management companies
must ensure the dissemination to all unitholders of adequate, accurate,
explicit and timely information fairly presented in a simple language about the
investment policies, investment objectives, financial position and general
affairs of the scheme. 3. Trustees and asset management companies
should avoid excessive concentration of business with broking firms, affiliates
and also excessive holding of units in a scheme among a few investors. 4. Trustees and asset management companies
must avoid conflicts of interest in managing the affairs of the schemes and
keep the interest of all unitholders paramount in all matters. 5. Trustees and asset management companies
must ensure schemewise segregation of 96*[bank
accounts] and securities accounts. 6. Trustees and asset management companies
shall carry out the business and invest in accordance with the investment
objectives stated in the offer documents and take investment decision solely in
the interest of unitholders. 7. Trustees and asset management companies
must not use any unethical means to sell; market or induce any investor to buy
their schemes. 97*[8. Trustees and the asset management company shall
maintain high standards of integrity and fairness in all their dealings and in
the conduct of their business (9) Trustees and the asset management
company shall render at all times high standards of service, exercise due
diligence, ensure proper care and exercise independent professional judgment. (10) The asset management company shall not
make any exaggerated statement, whether oral or written, either about their
qualifications or capability to render investment management services or their
achievements]. 98*[(11) (a) The sponsor of the mutual fund, the
trustees or the asset management company or any of their employees shall not
render, directly or indirectly any investment advice about any security in the
publicly accessible media, whether real – time or non real-time, unless a
disclosure of his interest including long or short position in the said
security has been made, while rendering such advice. (b) In case, an employee of the sponsor, the
trustees or the asset management company is rendering such advice, he shall
also disclose the interest of his dependent family members and the employer
including their long or short position in the said security, while rendering such
advice.] Foot notes 95.
Substituted for "or" by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of Inida dated 12.01.1998. 96. Substituted
for "bank accounts" by the SEBI (Mutual Fund)( Amendment) Regulations,
1998, published in the Official dated 12.01.1998. 97. Clauses
8, 9 and 11 inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1999
published in the Official Gazette of 98.
Clause 11 inserted by the SEBI (Investment Advise by Intermediaries)
(Amendment) Regulations, 2001, published in the Official Gazette of SIXTH SCHEDULE ADVERTISEMENT
CODE 1. An advertisement shall be truthful, fair
and clear and shall not contain a statement, promise or forecast which is
untrue or misleading. 2. An advertisement shall be considered to
be misleading if it contains - (a) Misleading Statements:- Representations
made about the performance or activities of the mutual fund in the absence of
necessary explanatory or qualifying statements, and which may give an
exaggerated picture of the performance or activities, than what it really is. (b) An inaccurate portrayal of a past
performance or its portrayal in a manner which implies that past gains or
income will be repeated in the future. (c) Statements promising the benefits of
owning units or investing in the schemes of the mutual funds without
simultaneous mention of material risks associated with such investments. 3. The advertisement shall not be so
designed in content and format or in print as to be likely to be misunderstood,
or likely to disguise the significance of any statement. Advertisements shall
not contain statements which directly or by implication or by omission may
mislead the investor. 4. The sales literature may contain only
information, the substance of which is included in the Funds' current
advertisements in accordance with this Code. 5. Advertisements shall not be so framed as
to exploit the lack of experience or knowledge of the investors. As the
investors may not be sophisticated in legal or financial matters, care should
be taken that the advertisement is set forth in a clear, concise, and understandable
manner. Extensive use of technical or legal terminology or complex language and
the inclusion of excessive details which may detract the investors should be
avoided. 6. The advertisement shall not contain
information, the accuracy of which is to any extent dependent on assumptions.99*[Any
advertisement that makes claims about the performance of the fund shall be
supported by relevant figures.] 7. The advertisement shall not compare one
fund with another, implicitly or explicitly, unless the comparison is fair and
all information relevant to the comparison is included in the advertisement. 8. The Funds which advertises yield must use
standardised computations such as annual dividend on face value, annual yield
on the purchase price, and annual compounded rate of return. 9. Mutual funds shall indicate in all
advertisements, the names of the Settlor, Trustee, Manager and or Financial
Advisor to the Fund, bringing out clearly their legal status and liability of
these entities 100*[***].
101*[9A. All advertisements containing information
regarding performance, advertising yield, return or any scheme detail or
inviting subscription to the scheme shall contain disclosures of all the risk
factors.] 10. All advertisements shall also make a
clear statement to the effect that all mutual funds and securities investments
are subject to market risks, and there can be no assurance that the fund's
objectives will be achieved. 11. If however, in any Advertisement a
mutual fund guarantees or assures any minimum rate of return or yield to
prospective investors, resources to back such a guarantee shall also be
indicated. 12. If any existing mutual fund indicates
the past performance of the fund in advertisements, the basis for computing the
rates of return/yield and adjustments made (if any) must be expressly indicated
with a statement that, such information is not necessarily indicative of future
results and may not necessarily provide a basis for comparison with other
investments. 102*[Any advertisement containing information regarding
performance, NAV, yield or returns shall give such data for the past three
years, wherever applicable]. 13. All advertisements issued by a mutual
fund or its sponsor or asset management company, shall state "all
investments in mutual funds and securities are subject to market risks and the
NAV of the schemes may go up or down depending upon the factors and forces
affecting the securities market. 14. All advertisement launched in connection
with the scheme should also disclose prominently the risks factors as stated in
the offer document along with the following warning statements :- (a) ...... is only the name of the scheme
and does not in any manner indicate either the quality of the scheme, its
future prospects or returns; and, (b) please read the offer document before
investing. 103*[14A. Any advertisement reproducing or purporting to
reproduce any information contained in a offer document shall reproduce such
information in full and disclose all relevant facts and not be restricted to
select extracts relating to that item which could be misleading. 14B. No celebrities shall form part of the
advertisement.] 15. No name can be given to a scheme with a
view to subtly indicate any assurance of return, except in the cases of
guaranteed return scheme in accordance with regulation 38. 16. No advertisement shall be issued stating
that the scheme has been subscribed or oversubscribed during the period the
scheme is open for subscription. 17. If a corporate advertisement is issued
by the sponsor or any of the companies in the Group, or an associate company of
the sponsor during the subscription period, no reference shall be made to the
scheme of the mutual fund or mutual fund itself; otherwise it will be treated
as an issue advertisement. 18. If a corporate advertisement of a
sponsor issued prior to the launch of a scheme makes a reference to the mutual
fund sponsored by it or any of its schemes launched/to be launched, it shall
contain a statement to the effect that the performance of the sponsor has no
bearing on the expected performance of the mutual fund or any of its schemes. 19. Advertisements on the performance of a
mutual fund or its Asset management company shall compare the past performances
only on the basis of per unit of statistics as per these Regulations.
Advertisements for NAVs must indicate the past as well as the latest NAV of a
scheme. The yield calculations will be made as provided in these regulations. Foot notes 99.
"Any advertisement that makes claims about the performance of the fund
shall be supported by relevant figures" inserted by the SEBI (Mutual Fund)
(Amendment) Regulations, 1999 published in the Official Gazette of 100. "distinction
between each of them, both legally and in terms of their functions,
responsibilities and obligations" deleted by the SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of 101. "Clause
9A" inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette of 102
"Any advertisement containing information regarding performance, NAV,
yield or returns shall give such data for the past three years, wherever
applicable" inserted by the SEBI (Mutual Fund) (Amendment) Regulations,
1999 published in the Official Gazette of 103 "Clause 14A
& 14B" inserted by the SEBI (Mutual Fund) (Amendment) Regulations,
1999 published in the Official Gazette of SEVENTH SCHEDULE RESTRICTIONS
ON INVESTMENTS 104*{1. A mutual fund scheme shall not invest more than
15% of its NAV in debt instruments issued by a single issuer which are rated
not below investment grade by a credit rating agency authorised to carry out
such activity under the Act. Such investment limit may be extended to 20% of
the NAV of the scheme with the prior approval of the Board of Trustees and the
Board of asset management company. Provided that such limit shall not be
applicable for investments in government securities and money market
instruments. 105*[Provided further that investment within such limit
can be made in mortgaged backed securitised debt which are rated not below
investment grade by a credit rating agency registered with the Board.] 1A. A mutual fund scheme shall not invest
more than 10% of its NAV in unrated debt instruments issued by a single issuer
and the total investment in such instruments shall not exceed 25% of the NAV of
the scheme. All such investments shall be made with the prior approval of the
Board of Trustees and the Board of asset management company.} 2. No mutual fund under all its schemes
should own more than ten per cent of any company's paid up capital carrying
voting rights. 3. Transfers of investments from one scheme
to another scheme in the samemutual fund shall be allowed only if, - (a) such transfers are done at the
prevailing market price for quoted instruments on spot basis. 106*[Explanation - "spot basis" shall have same
meaning as specified by stock exchange for spot transactions.] (b) the securities so transferred shall be
in conformity with the investment objective of the scheme to which such
transfer has been made. 4. A scheme may invest in another scheme
under the same asset management company or any other mutual fund without
charging any fees, provided that aggregate interscheme investment made by all
schemes under the same management or in schemes under the management of any
other asset management company shall not exceed 5% of the net asset value of
the mutual fund. 107*["Provided that this clause shall not apply to
any fund of funds scheme.] 5. The initial issue expenses in respect of
any scheme may not exceed six per cent of the funds raised under that scheme. 6. Every mutual fund shall buy and sell
securities on the basis of deliveries and shall in all cases of purchases, take
delivery of relative securities and in all cases of sale, deliver the
securities and shall in no case put itself in a position whereby it has to make
short sale or carry forward transaction or engage in badla finance. 108*[Provided that mutual funds shall enter into
derivatives transactions in a recognised stock exchange for the purpose of
hedging and portfolio balancing, in accordance with the guidelines issued by
the Board.] 7. Every mutual fund shall, get the
securities purchased or transferred in the name of the mutual fund on account
of the concerned scheme, wherever investments are intended to be of long term
nature. 8. Pending deployment of funds of a scheme
in securities in terms of investment objectives of the scheme a mutual fund can
invest the funds of the scheme in short term deposits of scheduled commercial
banks. 109*{9. No mutual fund 110*[scheme]
shall make any investment in; (a) any unlisted security of an associate or
group company of the sponsor; or (b) any security issued by way of private
placement by an associate or group company of the sponsor; or (c) the listed securities of group companies
of the sponsor which is in excess of 25% of the net assets 111*[***]}
112*[9A. No scheme of a mutual fund shall make any
investment in any fund of fund scheme.] 113*{10. No mutual fund scheme shall invest more than 10
per cent of its NAV in the equity shares or equity related instruments of any
company. Provided that, the limit of 10 per cent
shall not be applicable for investments 114*[in
case of] index fund or sector or industry specific scheme. 115*[11.A mutual fund scheme shall not invest more than
5% of its NAV in the unlisted equity shares or equity related instruments in
case of open ended scheme and 10% of its NAV in case of close ended scheme.]} 116*[12. A fund of funds scheme shall be subject to the
following investment restrictions: a. A fund of funds scheme shall not invest
in any other fund or funds scheme; b. A fund of funds scheme shall not invest
its assets other than in schemes of mutual funds, except to the extent of funds
required for meeting the liquidity requirements for the purpose of repurchases
or redemptions, as disclosed in the offer document of fund of funds scheme. Foot notes "Investment
in debt instruments should be only in rated debt instruments not below
investment grade rated by a credit rating agency authorised to carry such
activity under the Act. Provided that
the debt instrument is not rated, the specific approval of the Board of asset
management company should be taken for investment." 105.
Proviso inserted by the SEBI (Mutual Funds) (Second Amendment) Regulations,
2000, published in the Official of 106.
Explanation inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official of 107. Proviso to clause 4 in Schedule VII
was inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 2003, published
in the Official of 108. Proviso
inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1999, published in
the Official of 109 Clause
(9) inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1998, published
in the Official of 110.
"scheme" inserted by the SEBI (Mutual Fund) (Amendment) Regulations,
1999, published in the Official of 111.
"of all the schemes of a mutual fund" deleted by the SEBI(Mutual
Fund) (Amendment) Regulations, 1999, published in the Official of 112. Clause 9A in
Schedule VII was inserted by theSEBI (Mutual Fund) (Amendment) Regulations,
2003, published in the Official of 113
Clauses 10 & 11 inserted by the SEBI (Mutual Fund) (Amendment) Regulations,
1999, published in the Official of 114
Substituted for "in" by the SEBI (Mutual Fund) (Amendment)
Regulations, 1999, published in the Official of 115
Substituted for the following clause 11 by the SEBI (Mutual Fund) (Second
Amendment) Regulations, 2000, published in the Official of "11. A mutual fund scheme shall not
invest more than 5% of its NAV in the 103a*[unlisted]
equity shares or equity related 103b*[instruments]
in case of open ended scheme and 10% of its NAV in case of close ended
scheme." 103a.
unlisted insertedby the SEBI (Mutual Fund) (Amendment) Regulations, 1999,
published in the Official of 103b.
Substituted for "investments" by the SEBI (Mutual Fund) (Amendment)
Regulations, 1999, published in the Official of 116.Clause 12 in Schedule
VII was inserted by the SEBI (Mutual Fund) (Amendment) Regulations,
2003, published in the Official of EIGHTH SCHEDULE INVESTMENT
VALUATION NORMS Mutual Fund shall value its investments
according to the following valuation norms: NAV of a scheme as determined by dividing
the net assets of the scheme by the number of outstanding units on the
valuation date. 1. Traded Securities:- (i) The securities shall be valued at the
last quoted closing price on the stock exchange. (ii) When the securities are traded on more
than one recognised stock exchange, the securities shall be valued at the last
quoted closing price on the stock exchange where the security is principally
traded. It would be left to the asset management company to select the
appropriate stock exchange, but the reasons for the selection should be
recorded in writing. There should however be no objection for all scrips being
valued at the prices quoted on the stock exchange where a majority in value of
the investments are principally traded. (iii) Once a stock exchange has been
selected for valuation of a particular security, reasons for change of the
exchange shall be recorded in writing by the asset management company. (iv) When on a particular valuation day, a
security has not been traded on the selected stock exchange; the value at which
it is traded on another stock exchange may be used. (v) When a security is not traded on any
stock exchange on a particular valuation day, the value at which it was traded
on the selected stock exchange or any other stock exchange, as the case may be,
on the earliest previous day may be used provided such date is not more than 117*[thirty]
days prior to the valuation date. 2. `Non-traded Securities':- (i) When a security is not traded on any
stock exchange for a period of 118*[thirty]
days prior to the valuation date, the scrip must be treated as a `non-traded'
scrip. (ii) Non-traded securities shall be valued
"in-good faith" by the asset management company on the basis of
appropriate valuation methods based on the principles approved by the Board of
the asset management company. Such decision of the Board must be documented in
the Board minute and the supporting data in respect of each security so valued
must be preserved. The methods used to arrive at values "in-good
faith" shall be periodically reviewed by the trustees and reported upon by
the auditors as "fair and reasonable" in their report on the annual
accounts of the fund. For the purpose of valuation of non-traded securities,
the following principles should be adopted:- (a) equity instruments shall generally be
valued on the basis of capitalization of earnings solely or in combination with
the net asset value, using for the purposes of capitalization, the price or
earning ratios of comparable traded securities and with an appropriate discount
for lower liquidity; (b) debt instruments shall generally be
valued on a yield to maturity basis, the capitalization factor being determined
for comparable traded securities and with an appropriate discount for lower
liquidity; 119*[(c) while investments in call money, bills purchased
under rediscounting scheme and short term deposits with banks shall be valued
at cost plus accrual; other money market instruments shall be valued at the
yield at which they are currently traded. For this purpose, non-traded
instruments that is instruments not traded for a period of seven days will be
valued at cost plus interest accrued till the beginning of the day plus the
difference between the redemption value and the cost spread uniformly over the
remaining maturity period of the instruments; (cc) government securities will be valued at
yield to maturity based on the prevailing market rate.] (d) In respect of convertible debentures and
bonds, the non-convertible and convertible components shall be valued
separately. The non-convertible component should be valued on the same basis as
would be applicable to a debt instrument. The convertible component should be
valued on the same basis as would be applicable to an equity instrument. If,
after conversion the resultant equity instrument would be traded pari passu
with an existing instrument which is traded, the value of the latter instrument
can be adopted after an appropriate discount for the non-tradability of the
instrument during the period preceding the conversion. While valuing such
instruments, the fact whether the conversion is optional should also be
factored in; (e) In respect of warrants to subscribe for
shares attached to instruments, the warrants can be valued at the value of the
share which would be obtained on exercise of the warrant as reduced by the
amount which would be payable on exercise of the warrant. A discount similar to
the discount to be determined in respect of convertible debentures (as referred
to in sub-paragraph (d) above) must be deducted to account for the period which
must elapse before the warrant can be exercised; (f) Where instruments have been bought on
`repo' basis, the instrument must be valued at the resale price after deduction
of applicable interest upto date of resale. Where an instrument has been sold
on a `repo' basis, adjustment must be made for the difference between the
repurchase price (after deduction of applicable interest upto date of
repurchase) and the value of the instrument. If the repurchase price exceeds
the value, the depreciation must be provided for and if the repurchase price is
lower than the value, credit must be taken for the appreciation. 3. Until they are traded, the value of the
"rights" shares should be calculated as: Vr =n x (Pex – Pof) m Where Vr = Value of rights n = no. of rights offered m = no. of original shares held Pex = Ex-rights price Pof = Rights Offer Price Where the rights are not treated pari-passu
with the existing shares, suitable adjustment should be made to the value of
rights. Where it is decided not to subscribe for the rights but to renounce
them and renunciations are being traded, the rights can be valued at the
renunciation value. 4. All expenses and incomes accrued upto the
valuation date shall be considered for computation of net asset value. For this
purpose, while major expenses like management fees and other periodic expenses
should be accrued on a day to day basis, other minor expenses and income need
not be so accrued, provided the non-accrual does not affect the NAV
calculations by more than 1%. 5. Any changes in securities and in the
number of units be recorded in the books not later than the first valuation
date following the date of transaction. If this is not possible given the
frequency of the Net Asset Value disclosure, the recording may be delayed upto
a period of seven days following the date of the transaction, provided that as
a result of the non-recording, the Net Asset Value calculations shall not be
affected by more than 120*[1%].
121*[6. In case the Net Asset Value of a scheme
differs by more than 1%, due to non - recording of the transactions, the
investors or scheme/s as the case may be, shall be paid the difference in
amount as follows:- (i) If the investors
are allotted units at a price higher than Net Asset Value or are given a price
lower than Net Asset Value at the time of sale of their units, they shall be
paid the difference in amount by the scheme. (ii) If the
investors are charged lower Net Asset Value at the time of purchase of their
units or are given higher Net Asset Value at the time of sale of their units,
asset management company shall pay the difference in amount to the scheme. The
asset management company may recover the difference from the investors.] 122*[6.Thinly traded securities as defined in the
guidelines shall be valued in the manner as specified in the guidelines issued
by the Board 7. The aggregate value of illiquid
securities as defined in the guidelines shall not exced 15% of the total assets
of the scheme and any illiquid securities held above 15% of the total assets
shall be valued in the manner as specified in the guidelines issued by Board] Foot notes 117. Substituted
for the word "sixty", by the SEBI (Mutual Funds) (Amendment)
Regulations, 2001, published in the Official Gazette of 118 Substituted for
the word "sixty", by the SEBI (Mutual Funds)(Amendment) Regulations,
2001, published in the Official Gazette of 119. Substituted
for Clause c by the SEBI (Mutual Fund) (Amendment) Regulations, 1999, published
in the Official of 120.
Substituted for "2" by the SEBI (Mutual Fund) (Amendment)
Regulations, 1999, published in the Official of 121
"Clause 6" inserted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1999, published in the Official of 122.
"Clauses 6 & 7" inserted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1999, published in the Official of NINTH SCHEDULE ACCOUNTING
POLICIES AND STANDARDS a. For the purposes of the financial
statements, mutual fund shall mark all investments to market and carry
investments in the balance sheet at market value. However, since the unrealised
gain arising out of appreciation on investments cannot be distributed,
provision has to be made for exclusion of this item when arriving at
distributable income. b. Dividend income earned by a scheme should
be recognised, not on the date the dividend is declared, but on the date the
share is quoted on an ex-dividend basis. For investments which are not quoted
on the stock exchange, dividend income must be recognised on the date of
declaration. c. In respect of all interest-bearing
investments, income must be accrued on a day to day basis as it is earned.
Therefore when such investments are purchased, interest paid for the period
from the last interest due date upto the date of purchase must not be treated
as a cost of purchase but must be debited to Interest Recoverable Account.
Similarly, interest received at the time of sale for the period from the last
interest due date upto the date of sale must not be treated as an addition to
sale value but must be credited to Interest Recoverable Account. d. In determining the holding cost of
investments and the gains or loss on sale of investments, the "average
cost" method must be followed. e. Transactions for purchase or sale of
investments should be recognised as of the trade date and not as of the
settlement date, so that the effect of all investments traded during a
financial year are recorded and reflected in the financial statements for that
year. Where investment transactions take place outside the stock market, for
example, acquisitions through private placement or purchases or sales through
private treaty, the transaction should be recorded, in the event of a purchase,
as of the date on which the scheme obtains in enforceable obligation to pay the
price or, in the event of a sale, when the scheme obtains an enforceable right
to collect the proceeds of sale or an enforceable obligation to deliver the
instruments sold. f. Bonus shares to which the scheme becomes
entitled should be recognised only when the original shares on which the bonus
entitlement accrues are traded on the stock exchange on an ex-bonus basis.
Similarly, rights entitlements should be recognised only when the original
shares on which the right entitlement accrues are traded on the stock exchange
on an ex-rights basis. 123*[g. Where income receivable on investments has
accrued but has not been received for the period specified in the guidelines
issued by the Board, provision shall be made by debiting to the revenue account
the income so accrued in the manner specified by guidelines issued by the
Board.] h. When in the case of an open-ended scheme units are
sold, the difference between the sale price and the face value of the unit, if
positive, should be credited to reserves and if negative is debited to reserve,
the face value being credited to Capital Account. Similarly, when in respect of
such a scheme, units are repurchased, the difference between the purchase price
and face value of the unit, if positive should be debited to reserves
and, if negative, should be credited to reserves, the face value being debited
to the capital account. i. In the case of an open-ended scheme, when
units are sold an appropriate part of the sale proceeds should be credited to
an Equalisation Account and when units are repurchased an appropriate amount
should be debited to Equalisation Account. The net balance on this account
should be credited or debited to the Revenue Account. The balance on the
Equalisation Account debited or credited to the Revenue Account should not
decrease or increase the net income of the fund but is only an adjustment to
the distributable surplus. It should therefore be reflected in the Revenue
Account only after the net income of the fund is determined. j. In a close-ended scheme which provide to
the unit holders the option for an early redemption or repurchase their own
units, the par value of the unit has to be 124*[debited]
to Capital Account and the difference between the purchase price and the par
value, if positive, should be 125*[credited]
to reserves and, if negative, should be 126*[debited]
to reserves. A proportionate part of the unamortized initial issue expenses
should also be transferred to the reserves so that the balance carried forward
on that account is proportional to the number of units remaining outstanding. k. The cost of investments acquired or
purchased should include brokerage, stamp charges and any charge customarily
included in the broker's bought note. In respect of privately placed debt
instruments any front-end discount offered should be reduced from the cost of
the investment. l. Underwriting commission should be
recognised as revenue only when there is no devolvement on the scheme. Where
there is devolvement on the scheme, the full underwriting commission received
and not merely the portion applicable to the devolvement should be reduced from
the cost of the investment. Foot notes 123. Substituted
for the following "clause g" by the SEBI (Mutual Funds) (Amendment)
Regulations, 2001 published in the Official Gazette of "Where income receivable on
investments has been accrued and has not been received for a period of 12
months beyond the due date, provision should be made by debit to the revenue
account for the income so accrued and no further accrual of income should be
made in respect of such investment." 124. Substituted for
"credited" by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette of 125. Substituted for "debited" by the
SEBI (Mutual Fund) (Amendment) Regulations, 1998, published in the Official
Gazette of 126.
Substituted for "credited" by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of
INITIAL
ISSUE EXPENSES Accounting treatment with regard to initial
issue expenses:- (a) Asset management companies may launch
schemes either on a "load" or "no-load basis", or on a
mixed basis with two classes of units in the same scheme-one with load and the
other without load, provided that the implications of such load on the NAV for
the investors shall be clearly explained through a worked-out example in the
offer document. Asset Management Company may also launch "partial
load" schemes in which a part of the load would be borne by the asset
management companies and the balance by the scheme. However such schemes will
not qualify to be "no load" schemes and would be treated in the same
manner as "load" schemes. In case of a no load scheme, the initial
issue expenditure shall be borne by the Asset Management Company 127*[Trustee
Company or Sponsor]. (b) For a closed-ended scheme floated on a
`load' basis, the initial issue expenses shall be amortised on a weekly basis
over the period of the scheme. Provided that in case the schemes provides
for partial redemption during the life of the scheme, the amortisation shall
take into account the number of outstanding units and the aggregate amount
during the relevant periods. (c) For open-ended schemes floated on a
`load' basis, the initial issue expenses may be amortised over a period not
exceeding five years. Issue expenses incurred during the life of an open-ended
schemes shall not be amortised. (d) In case of closed-ended and open-ended
schemes floated on a `load' basis, the unamortised portion of the expenses
shall be included in the calculation of the NAV. However, such portion shall
not be included in the NAV for the purposes of determining the asset management
company's investment management and advisory fees or for determining the
limitation of expenses under regulation 51 of these regulations. (e) For schemes floated on a `no-load'
basis, the asset management company may levy an additional management fee not
exceeding 1% of the NAV. The asset management company may be entitled to levy a
contingent deferred sales charge for redemption during the first four years
after purchase, not exceeding 4% of the redemption proceeds in the first year,
3% in the second year, 2% in the third year and 1% in the fourth year. All subsequent distribution charges must in
the case of load schemes shall be borne by the scheme and in the case of
no-load schemes borne by the asset management company. Foot notes 127.
"Trustee Company or Sponsor" inserted by the SEBI (Mutual Fund)
(Amendment) Regulations, 1998, published in the Official Gazette of ELEVENTH SCHEDULE ANNUAL
REPORT 1. Annual Report The annual report shall contain - (i) Report of the Board of Trustees on
the operations of the various schemes of the fund and the fund as a whole
during the year and the future outlook of the fund; (ii) Balance Sheet and Revenue Account in
accordance with paras 2, 3 and 4 respectively of this schedule; (iii) Auditor's Report in accordance with
the paragraph 5 of this Schedule; (iv) Brief statement of the Board of
Trustees on the following aspects, namely:- (a) Liabilities and responsibilities of
the Trustees and the Settlor; (b) Investment objective of each scheme; (c) Basis and policy of investment
underlying the scheme; (d) If the scheme permits investment
partly or wholly in shares, bonds, debentures and other scrips or securities
whose value can fluctuate, a statement on the following lines: "The price and redemption value of
the units, and income from them, can go up as well as down with the
fluctuations in the market value of its underlying investments;" (e) Comments of the Trustees on the
performance of the scheme, with full justification. (v) Statement giving relevant perspective
historical 'per unit' statistics in accordance with paragraph 6 of this
schedule; (vi) Statement on the following lines: "On written request, present and
prospective unit holder / investors can obtain copy of the trust deed, the
annual report 129*[at a
price] and the text of the relevant scheme." 2. Following accounting policies shall be
followed by Mutual Funds for the preparation of accounts: i. The realised gains or losses on sale
or redemption of investment, as well as unrealised appreciation or depreciation
shall be recognised in all financial statements. For the purpose of all
financial statements, all investments shall be marked to market and investments
shall be carried out in the balance sheet at market value. However, till
necessary guidance notes are issued by the Institute of Chartered Accountants
of India to their members, in the above matter, investments may be continued to
be valued at cost, with the market value shown separately and the
reconciliation statement for the changes in investments valued in the two
different ways, shall be provided. Where the financial statement are
prepared on a marked to market basis, there need not be a separate provision
for depreciation. Since unrealised gain arising out of appreciation on
investments cannot be distributed, provision has to be made for its exclusion
and for calculating distributable income. ii. Non-traded investments shall be
valued in good faith in accordance with the norms specified in Seventh
Schedule. iii. For quoted shares, the dividend
income earned by a scheme shall be recognised, not on the date the dividend is
declared, but on the date the share is quoted on an ex-dividend basis. For
investments in shares which are not quoted on the stock exchanges, the dividend
income must be recognised on the date of declaration. iv. In respect of all interest-bearing
investments, income shall be accrued on a day to day basis as it is earned.
Therefore when such investments are purchased, interest paid for the period
from the last interest due date upto the date of purchase, shall not be treated
as a cost of purchase, but shall be treated to Interest Recoverable Account.
Similarly, interest received at the time of sale for the period from the last
interest due date upto the date of sale must not be treated as an addition to
sale value but shall be credited to Interest Recoverable Account. v. In determining the holding cost of investments
and the gains or loss on sale of investments, the "average cost"
method shall be followed. vi. Transactions for purchase or sale of
investments shall be recognised as of the trade date and not as of the
settlement date, so that the effect of all investments traded during a
financial year are recorded and reflected in the financial statements for that
year. Where investment transactions take place outside the stock market, for
example, acquisitions through private placement or purchases or sales through
private treaty, the transaction shall be recorded, in the event of a purchase,
as of the date on which the scheme obtains in enforceable obligation to pay the
price or, in the event of a sale, when the scheme obtains an enforceable right
to collect the proceeds of sale or an enforceable obligation to deliver the
instruments sold. vii. Bonus shares to which the scheme
becomes entitled shall be recognised only when the original shares on which the
bonus entitlement accrues are traded on the stock exchange on an ex-bonus
basis. Similarly, rights entitlements shall be recognised only when the
original shares on which the right entitlement accrues are traded on the stock
exchange on an ex-rights basis. viii. Where income receivable on
investments has been accrued and has not been received for a period of 12
months beyond the due date, provision shall be made by debit to the revenue
account for the income so accrued and no further accrual of income should be
made in respect of such investment. ix. When the units of an open-ended
scheme are sold, the difference between the sale price and the face value of
the unit, if positive, shall be credited to Reserves and if negative is debited
to reserve, the face value being credited to Capital Account. Similarly, when
units of an open-ended scheme are repurchased, the difference between the
purchase price and face value of the unit, if positive should be debited to
Reserves and, if negative, should be credited to reserves, the face value being
debited to the Capital account. x. (a) In the case of an open-ended
scheme, when units are sold an appropriate part of the sale proceeds shall be
credited to an Equalisation Account and when units are repurchased an
appropriate amount shall be debited to Equalisation Account. The net balance on
this account should be credited or debited to the Revenue Account. The balance
on the Equalisation Account debited or credited to the Revenue Account shall
not decrease or increase the net income of the fund but is only an adjustment
to the distributable surplus. It shall therefore be reflected in the Revenue
Account only after the net income of the fund is determined. (b) The Trustees or the Board of the
Trustee Company may, if necessary, transfer a portion of the distributable
profits to a dividend equalisation reserve. Such a transfer would be
independent of the requirement to operate an Equalisation Account as provided
in (x)(a). xi. In a close-ended scheme which provide
to the unit holders the option for an early redemption or repurchase their own
units, the par value of the unit shall be credited to Capital Account and the
difference between the purchase price and the par value, if positive, should be
debited to reserves and, if negative, should be 130*[debited]
to reserves. A proportionate part of the unamortized initial issue expenses
shall also be transferred to the reserves so that the balance carried forward
on that account is proportional to the number of units remaining outstanding. xii. The cost of investments acquired or
purchased shall 131*[inter
alia] include brokerage, stamp charges and any charge customarily included in
the broker's bought note. In respect of privately placed debt instruments any
front-end discount offered shall be reduced from the cost of the investment. xiii. Underwriting commission shall be
recognised as revenue only when there is no devolvement on the scheme. Where
there is devolvement on the scheme, the full underwriting commission received
and not merely the portion applicable to the devolvement shall be reduced from
the cost of the investment. 3. Contents of Balance Sheet (i) The Balance Sheet shall give schemewise
particulars of its assets and liabilities. These particulars shall contain
information enumerated in Annexures 1A and 1B hereto. It shall also disclose,
inter-alia, accounting policies relating to valuation of investments and other
important areas. (ii) If investments are carried at costs
or written down cost, their aggregate market value shall be stated separately
in respect of each type of investment, such as equity shares, preference
shares, convertible debentures listed on recognised stock exchange,
non-convertible debentures or bonds further differentiating between those
listed on recognised stock exchange and those privately placed. 132*[(iii) The Balance Sheet shall disclose under each
type of investment(s) the aggregate carrying value and market value of
non-performing investments. An investment shall be regarded as non-performing
if it has provided no returns in the form of dividend or interest for a period
specified in the guidelines issued by the Board.] (iv) The Balance Sheet shall indicate the
extent of provision made in the Revenue Account for the depreciation/loss in
the value of non-performing investments. However, if the investments are valued
at market to market, provisions for depreciation shall not be necessary. (v) The Balance Sheet shall disclose the
per-unit net-asset value (NAV) as at the end of the accounting year. (vi) As in case of companies, the Balance
Sheet shall give against each item, the corresponding figures as at the end of
the preceding accounting year. (vii) The notes to the balance sheet
should disclose the following information regarding investments:- (a) All investments shall be grouped
under the major classification given in the balance sheet. (b) Under each major classicisation, the
total value of investments falling under each major industry group (which
constitutes not less than 5% of the total investment in the major
classification) shall be disclosed together with the percentage thereof in
relation to the total investment within the classification. 133*[***] (e) the basis on which management fees
have been paid to the Asset Management Company and the computation thereof. (f) if brokerage, custodial fees or any
other payment for services are paid to or payable to any entity in which the
Asset Management Company or its major shareholders have a substantial interest
(being not less than 10% of the equity capital), the amounts debited to the
revenue account or amounts treated as cost of investment in respect of such
services shall be separately disclosed together with details of the interest of
the Asset Management Company or its major shareholders; (g) aggregate value of purchases and
sales of investments during the year and expressed as a percentage of average
weekly net asset value; (h) where the non traded investments
which have been valued "in good faith" exceed 5% of the NAV at the
end of the year, the aggregate value of such investments; and (i) movement in unit capital should be
stated. An example of the manner in which the
movement in unit capital may be disclosed is given below: - Balance as on Units sold during the
year
127, 50,
000
1275.00 Units repurchased during the
1362, 10,
000
13621.00 134*[(j) the name of the company including the amount of
investment made in each company of the group by each scheme and the aggregate
investments made by all schemes in the group companies of the sponsor.] 135*[(k)] if the investments are marked to market, the
total income of the scheme shall include unrealised depreciation or
appreciation on investment. There should be disclosure and unrealised
appreciation deducted before arriving at the distributable income in the
following manner. e.g. -----------------------------------------------------------------------------------------------------------
Net Income as per Revenue
Account
100 Add: Balance of undistributed income as As on
----- Transfer to
reserve
5 (85) viii. Provisions for doubtful deposits,
doubtful debts and for doubtful outstanding and accrued income shall not be
included under provisions on the liability side of the balance sheet, but shall
be shown as a deduction from the aggregate value of it relevant asset. ix. Disclosure shall be made of all
contingent liabilities showing separately underwriting commitments, uncalled
liability on partly paid shares and other commitments with specifying details. 4. Contents of Revenue Account (i) The Revenue Account shall give
schemewise particulars of the income, expenditure and surplus of the mutual
fund. These particulars shall contain information enumerated in Annexure 2 of
this schedule. (ii) If profit on sale of investments shown
in the Revenue Account includes profit / loss on inter-scheme transfer of
investments within the same mutual fund the aggregate of such profit recognised
as realised, shall be disclosed separately without being clubbed with the
profit / loss on sale of investments to third parties. (iii) Unprovided depreciation in value of
investments representing the difference between their aggregate market value
and their carrying cost shall be disclosed by way of a note forming part of the
Revenue Account. Conversely, unrealised profit on investment representing the
difference between their aggregate market value and carrying cost, shall be
disclosed by way of note to accounts. The Revenue Account shall indicate the
appropriation of surplus by way of transfer to reserves and dividend
distributed. However, if investments are marked to market, depreciation may not
be provided. (iv) The Revenue Account shall indicate the
appropriation of surplus by way of transfer to reserves and dividend
distributed. (v) The following disclosures shall also be
made in the revenue accounts: (a) provision for aggregate value of
doubtful deposits, debts and outstanding and accrued income; (b) profit or loss in sale and redemption of
investment may be shown on a net basis; (c) custodian and registrar fees; (d) total income and expenditure expressed
as a percentage of average net assets, calculated on a weekly basis. 5. Auditor's Report (i) All mutual funds shall be required to
get their accounts audited in terms of a provision to that effect in their
trust deeds. The Auditor's Report shall form a part of the Annual Report. It
should accompany the Abridged Balance Sheet and Revenue Account. The auditor
shall report to the Board of Trustees and not to the unit holders. (ii) The auditor shall state whether: 1. he has obtained all information and
explanations which, to the best of his knowledge and belief, were necessary for
the purpose of his audit. 2. the Balance Sheet and the Revenue Account
are in agreement with the books of account of the fund. (iii) The auditor shall give his opinion as
to whether: 1. The Balance Sheet gives a true and fair
view of the schemewise state of affairs of the fund as at the balance sheet
date, and 2. the Revenue Account gives a true and fair
view of the schemewise surplus / deficit of the fund for the year / period
ended at the balance sheet date. 6. Perspective Historical per Unit
Statistics 1. This statement shall disclose the
following schemewise per unit statistics for the past 3 years: (a) net assets value, per unit; (b) gross income per-unit broken up into the
following components: (i) income other than profit on sale of
investment, per unit; (ii) income from profit on inter scheme
sales / transfer of investment, per unit; (iii) income from profit on sale of
investment to third party, per unit; (iv) transfer to revenue account from past
year's reserve per unit. (c) aggregate of expenses, write
off,amortisation and charges, per-unit; (d) net income, per unit; (e) unrealised appreciation / depreciation
in value of investments, per unit; (f) if the units are traded or repurchased /
resold, the highest and the lowest prices per unit during the year and the
price-earning ratio. (g) Per unit, ratio of expenses to average
net assets by percentage; (h) Per unit, ratio of gross income to
average net assets by percentage (excluding transfer to revenue account from
past year's reserve but including unrealised appreciation on investments) i) per unit NAV Foot notes 128. Substituted
for "1993" by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette of 129. "at a
price" inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette of 130.
Substituted for "credited" by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of 131
"inter alia" inserted by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of 132 Substituted for
the following sub-clause (iii) by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of "The Balance Sheet shall disclose
under each type of investment the aggregate carrying value and market value of
non-performing investments. An investment shall be regarded as non-performing
if it has provided no returns in the form of dividend or interest for more than
2 years as at the end of the accounting year of the mutual fund. However,
disclosure of such non-performing investments shall not be necessary of all
investments are valued at marked to market" 133 Clause (c) omitted
by the SEBI (Mutual Funds) (Amendment) Regulations, 2000 published in the
Official Gazette dated 14.03.2000. Clause (c) read as follows in SEBI
(Mutual Funds) Regulations, 1996 published in the Official Gazette dated
09.12.1996 "Where an individual investment
constitutes more than 2% of the total investments in the major classification,
individual disclosure shall be made of such investment." The above clause (c) was substituted for
the following by the SEBI (Mutual Funds) (Amendment) Regulations, 2000
published in the Official Gazette dated 12.01.1998 "(c) full schemewise portfolio of investments
of a mutual fund. Provided that a mutual fund may publish
particulars of its full portfolio in the advertisements of abridged annual
report or full annual reports in newspapers." 134"Clause (j)"
inserted by the SEBI (Mutual Fund) (Amendment) Regulations, 1998, published in
the Official Gazette of Inida dated 12.01.1998. 135
Clause
(j) renumbered as (k) by the SEBI (Mutual Fund) (Amendment) Regulations, 1998,
published in the Official Gazette of Inida dated 12.01.1998. 136*{TWELFTH SCHEDULE [HALF
YEARLY FINANCIAL RESULTS FOR THE PERIOD ENDED______] SL.NO PARTICULARS SCHEME NAMES 1.1 2 Reserves & Surplus [Rs. In Crores] 4.1 4.2 4.3 Dividend paid per unit during the half-year
[Rs.] 5.1 5.3 5.4 5.5 5.6 Interest [Rs. in Crores] Profit/(Loss) on sale/redemption of
investments (other than inter scheme transfer/sale) [Rs. in Crores] Profit/(Loss) on inter-scheme transfer/sale
of investments [Rs. in Crores] Other Income (indicating nature) [Rs. in
Crores] Total Income (5.1 to 5.5) [Rs. in Crores] 6.1 6.3 6.4 6.5 Trustee Fees [Rs. in Crores] Total Recurring Expenses (including 6.1 and
6.2) [Rs. in Crores] Percentage of Management Fees to
daily/weekly average net assets [%] Total Recurring expenses as a percentage of
daily/weekly average net assets [%] 7.1 Last 1 year [%] Last 3 years [%] Last 5 years [%] Since launch of the scheme (date of launch
to be given) [%] 8 Provision for Doubtful Income/Debts [Rs.
in Crores] Considering movement of NAV during the
half-year and after adjustment of dividend, bonus, etc. ** For the calculation of compounded
annualised yield, the procedure specified in Standard Offer Document shall be
followed. All performance calculations shall be based only on NAV and the
payouts to the unitholders. The calculation of returns shall assume that all
payouts during the period have been reinvested in the units of the scheme at
the then prevailing NAV. The type of plan/option of the scheme for which yield
is given shall also be mentioned. Notes: 1. Effect of changes in the accounting
policies on the above items shall be disclosed by way of notes. 2. Details of transactions with associates
in terms of Regulation 25 (8), if applicable, shall be given by way of note. 3. Details of investments made in companies
which have invested more than 5% of the NAV of a scheme in terms of Regulation
25(11), if applicable, shall be given as a note. 4. Details of large holdings (over 25% of
the NAV of the scheme), if applicable, including information about the no. of
such investors and total holdings by them in percentage terms, shall be given
as a note. 5. Any bonus declared during the half-year
in respect of any of the schemes to be disclosed by way of a note. 6. Details of Deferred Revenue Expenditure,
if any, shall be disclosed by giving a note. 7. Borrowings if any, above 10% of the net
assets of any scheme of a mutual fund shall be disclosed. 8. Exposure if any, of more than 10% of the
net assets of any scheme of a mutual fund investing in derivative products
shall be disclosed.} Foot notes 136. Substituted for the following by the SEBI (Mutual
Funds) (Second amendment) Regulations, 2001 published in the Official Gazette
of "TWELFTH
SCHEDULE SECURITIES
AND EXCHANGE BOARD OF HALF
YEARLY FINANCIAL RESULTS A) CONTENTS OF SUMMARY ADVERTISEMENT OF
ABRIDGED REVENUE ACCOUNT MUTUAL FUND REVENUE ACCOUNT FOR THE YEAR/PERIOD ENDED
__________________ (Rupees in lakhs) 1.
INCOME
CURRENT PREVIOUS CURRENT PREVIOUS CURRENT PREVIOUS 1.1 Dividend 1.2 Interest 1.3 Profit on sale/redemption of 1.4 Profit on inter-scheme transfer/ 1.5 Other income (indicating nature) 2. EXPENSES & LOSSES 2.1 Management, trusteeship, Administrative & other 2.2 Provision for Doubtful Income 2.3 Provision for Doubtful Deposits/ 2.4 Loss on sale/redemption of 2.5 Loss on inter-scheme transfer/sale TOTAL
_______________________________________________________________ B) CONTENTS OF SUMMARY
ADVERTISEMENT OF ABRIDGED BALANCE SHEET ________________ MUTUAL FUND BALANCE SHEET OF __________________ AT
_____________________ NAMES OF THE VARIOUS SCHEMES (RUPEES IN LAKHS) LIABILITIES
Current Previous Current Previous Current Previous 1. Unit Capital 2. Reserves & Surplus 2.1 Unit Premium Reserves 2.2 Other Reserves 3. Loans & Borrowings 3.1 From Banks 3.2 From Others 4. Current Liabilities & Provisions 4.1 Provision for doubtful Income/ 4.2 Proposed Income Distribution 4.3. Other Current Liabilities & RUPEES IN LAKHS ASSETS Current
Previous Current Previous Current
Previous 1. Investments* 1.1 Equity & Preference Shares 1.2 Privately Placed Debentures/ 1.3 Debentures & Bonds Listed/Awaiting 1.4 Term Loans 1.5 Government Securities 1.6 Others 2. Deposits 2.1 With Scheduled Banks 2.2 With Others 3. Other Current Assets 3.1 Cash & Bank Balance 3.2 Others 4. Fixed Assets (At Depreciated Value) 5. Deferred Revenue Expenditure Note *: 1. Accounting Policy of valuation
of investments should be disclosed. C) OTHER CONTENTS OF ADVERTISEMENT ------------------------------- 1. Auditors Report 2. Perspective Historical Per Unit
Statistics disclosing the following schemewise per unit information for
past 136a*[three]
years: (a) net assets value, per unit ; (b) gross income per-unit broken up into
the following components: (i) income other than profit on sale of
investment, per unit; (ii) income from profit on inter scheme
sales / transfer of investment, per unit; (iii) income from profit on sale of
investment to third party, per unit;
(iv) transfer to revenue account from
past years' reserve, per unit; (c) aggregate of expenses, write off,
amortisation and charges, per-unit; indicating separately provision for
depreciation in value of investments, per unit; (d) net income, per unit; (e) if the units are traded or
repurchased / resold, the highest and the lowest prices per-unit during the
year and the price-earning ratio; 3. A note to the effect that, on request,
a unit-holder can obtain from the mutual fund a copy of the Annual Report of
the scheme in which he has invested." 136a.
Substituted for "eight" by the SEBI (Mutual Fund) (Amendment)
Regulations, 1998, published in the Official Gazette of |