SECURITIES AND EXCHANGE BOARD OF INDIA

MUTUAL FUNDS DEPARTMENT

STANDARD OBSERVATIONS

 

1. If the AMC is undertaking other business activities as provided in Regulation 24(2) brief details of the same giving SEBI registration particulars, if applicable, and certification that there is no conflict of interest.

    

    

2. Investments :

    

 

1. The AMC shall not invest in any of the schemes unless full disclosure of its intention to invest has been made in the offer document and that the AMC shall not be entitled to charge any fees on such investments may be disclosed.

    

    

2. If any company has invested more than 5 percent of the NAV of a scheme and investment made by that scheme or by any other scheme of the same mutual fund in that company or its subsidiaries may be disclosed.

    

    

3. All the investment restrictions as contained in the Seventh Schedule to SEBI (Mutual Funds) Regulations, 1996 and applicable to the scheme should be incorporated.

    

    

4. Disclosure to the effect that the aggregate inter scheme investment made by all schemes under the same management or in schemes under the management of any other AMC shall not exceed 5% of the NAV of the mutual fund. No fees shall be charged for investing in other schemes of the fund or any other mutual fund.

    

    

5. Disclosure to the effect that no investment shall be made in any unlisted security of an associate or group company of the sponsor; any security issued by way of private placement by an associate or group company of the sponsor and that investment in listed securities of group company of the sponsor shall not exceed 25% of the net assets of the scheme.

    

    

6. If the scheme proposes to invest in securitised debt, the table on investment pattern should disclose the maximum limit upto which such investment in securitised debt would be made.

    

    

7. In case the mutual fund intends to engage in stock lending or trading in derivatives, these concepts and risks associated with such activities should be disclosed at relevant places in the offer document. The offer document shall contain disclosures as communicated vide our circulars no. MFD/CIR/01/047/99 dated February 10, 1999 and MFD/CIR/011/061/2000 dated February 1, 2000.

    

    

8. In case the mutual fund intends to invest in ADRs/GDRs and foreign securities, the risk factors associated with such investments should be disclosed

    

    

9. You are advised to clarify whether, apart from the investment restrictions prescribed under SEBI (MF) Regulations, does the fund follow any internal norms vis-à-vis limiting exposure to a particular scrip or sector, etc.

    

    

10. You are advised to clearly indicate the asset allocation pattern under normal circumstances and to what extent that would be allowed to rise or fall before a review and rebalancing would be called for. From the disclosures, prospective investors should be able to gather an idea on the investment strategy of a scheme at any point of time.

     

     

11. In case the scheme intends to invest substantially in debt and/or money market instruments, a brief note on the debt market in India including the instruments available, likely yields on these instruments, etc. may also be included alongside the asset allocation.

     

     

12. The details pertaining to the key personnel of the AMC shall inter-alia include the age of the person, educational qualification, total no. of years' experience, type and nature of past experience including assignments held during the last 10 years, etc. The number of persons involved in equity research and fund management and their past experience must be mentioned. If any of the key personnel is based elsewhere and not in the registered/corporate office of the AMC, must be disclosed.

     

     

13. The detailed procedures followed for investment decisions, whether an individual or committee takes decisions, role of chief executive of AMC in investment decisions, recording of the each investment decision, how these decisions and performance of schemes are monitored by the AMC Board and the trustees, should be explained by way of a separate paragraph in the Offer Document / Abridged Offer Document. It may also be disclosed whether the AMC and trustees would compare the performance of the scheme with any benchmark index/indices or performance of similar other schemes in the industry.

     

3. Expenses :

 

1. Disclosure that the total expenses of the scheme including the investment management and advisory fee (together with additional management fee wherever applicable) shall be within the limits stated in Regulation 52(6). In case of debt schemes, the expenses shall be lesser by 0.25% as provided in Regulation 52(6). Where the AMC proposes to bear initial issue expenses and charge an ‘additional management fee’, disclosure of the fact that such fees shall only be chargeable till the actual initial issue expenses borne by the AMC, limited to the maximum extent of 6% of the initial mobilization, are recovered.

    

    

2. All loads including CDSC for each scheme shall be maintained in a separate account and may be utilised towards meeting the selling and distribution expenses. Any surplus in this account may be credited to the scheme, whenever felt appropriate by the AMC.

    

    

3. Any imposition or enhancement of load in future shall be applicable on prospective investments only. At the time of changing the load structure, you may consider the following measures to avoid complaints from investors about investment in the schemes without knowing the loads :

    

 

1. The addendum detailing the changes may be attached to offer documents and abridged offer documents. The addendum may be circulated to all the distributors/brokers so that the same can be attached to all offer documents and abridged offer documents already in stock. The addendum may be sent alongwith the newsletter sent to the unitholders immediately after the changes.

    

    

2. Arrangements may be made to display the changes/modifications in the offer document in the form of a notice in all the investor service centres and distributors/brokers office.

    

    

3. The introduction of the exit load/ CDSC alongwith the details may be stamped in the acknowledgement slip issued to the investors on submission of the application form and may also be disclosed in the statement of accounts issued after the introduction of such load/CDSC.

    

    

4. Any other measures which you may feel necessary.

    

 

1. NAV Information/ Sale and Repurchase price :

    

 

1. Disclosure to the effect that NAV shall be published atleast in two daily newspapers at intervals of not exceeding one week (daily in the case of open ended schemes).

    

    

2. In case of an open ended scheme the sale and repurchase price of units shall be published in a daily newspaper on a daily basis.

    

    

3. Disclosure to the effect that the repurchase price shall not be lower than 93% of the NAV and the sale price shall not be higher than 107% of the NAV and the difference between the repurchase price and sale price shall not exceed 7% on the sale price. In the case of close ended scheme the repurchase price shall not be lower than 95% of the NAV.

    

5. Investor Rights :

Disclosure to the effect that :

 

1. an abridged schemewise annual report shall be mailed to all unitholders not later than six months form the date of closure of the relevant accounting year and the full annual report shall be available for inspection at the head office of the fund and a copy shall be made available to the unitholders on request on payment of nominal fees if any.

    

    

2. before expiry of one month from the close of each half year that is on 31/3 and 30/9, the fund will publish its unaudited financial results in prescribed format as per SEBI Circular MFD/CIR/1/200/2001 dated April 20, 2001 in one national English daily newspaper and in a newspaper in the language of the region where the HO of the fund is situated.

    

    

3. before expiry of one month from the close of each half year that is on 31/3 and 30/9, the fund will publish its scheme portfolio in the prescribed format as per SEBI circular MFD/CIR/9/120/2000 dated November 24, 2000 in one national English daily newspaper and in a newspaper in the language of the region where the HO of the fund is situated or send a copy to all the unitholders.

    

    

4. 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 the 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 situtated; and (ii) the unitholders are given an option to exit at the prevailing Net Asset Value without any exit load.

    

    

5. the appointment of the AMC can be terminated by majority of the trustees or by seventy five percent of the unitholders of the scheme.

    

    

6. the despatch of dividend warrants shall be made within 30 days of the declaration of the dividend and despatch of redemption or repurchase proceeds shall be made within 10 working days from the date of redemption or repurchase

    

 

1. If the work relating to transfer of units is processed in-house, disclosure that the charges are at competitive rates and if the rates are higher, reasons for charging higher rates should be disclosed.

    

    

2. Disclosure that no amendments to the trust deed shall be carried out without the prior approval of SEBI and unitholders approval would be obtained where it affects the interests of unitholder.

    

    

3. Disclosure as to the procedure for seeking approval of the unitholders in specified circumstances.

    

    

4. A brief note on the supervisory role performed by the Trustees, the no.of meetings held during the last year, systems set up by the trustees for monitoring the activities of the AMC.

    

    

5. Disclosure to the effect that it shall be mandatory for the investors of mutual fund schemes to mention their bank account numbers in their applications/requests for redemptions.

    

    

6. Confirmation that disclosure in respect of tax benefits to the mutual fund and `the unit holders is in accordance with prevailing tax laws.

    

    

7. If the offer document is signed by the AMC, date of approval of the scheme by the Trustees shall be disclosed.

    

    

8. The Offer document shall have no clause which in effect limits the jurisdiction for settlement of claims of the investors to a specific place/region.

    

    

9. The para on pending litigations, penalties, criminal offences etc. as prescribed in Standard Offer Document shall be reproduced in the offer document. In case there are no such instances, each sub-para may be followed by a distinct negative statement that no such cases are there. Wherever, instances described in the specific para do exist, the details of all such cases may be disclosed.

    

    

10. The offer document especially the paras on accounting policy, valuation of assets, investment restrictions etc. should contain such information only as is relevant to the type of instruments in which the scheme is entitled to invest as per the investment objectives of the scheme. For example, offer documents of schemes investing exclusively in gilt or money market instruments should not mention the provisions which are applicable to equity etc.

     

     

11. The table on Condensed Financial Information should contain the date of allotment of units. The figure of annualised returns given in the table must be given in accordance with the formula prescribed in the Standard Offer Document. Further it is clarified that returns for periods less than one year should be given in absolute terms only and should not be annualised and a footnote to this effect should be given below the table. The same standard of performance reporting should also be followed in all advertisements.

     

     

12. All Risk Factors including general and scheme specific risk factors should appear at a single place in the offer document instead of giving at different places.

     

     

13. You are advised to inform us on the number of investor grievances referred by SEBI which are yet to be redressed. Have you reported the redressal of complaints to SEBI? You may also confirm whether the complaint status has been reconciled with our records. All pending complaints should be redressed and reported to SEBI immediately.

     

     

14. The AMC should categorically state that all the points mentioned above have been included in the Offer Document. In case of any deviation, the same should be specifically brought to the notice of SEBI.

     

     

15. You have already given a due diligence certificate stating that the draft offer document is in accordance with the SEBI (Mutual Funds) Regulations. You are again advised to specifically confirm whether there are any deviations from the regulations or whether subjective interpretations have been applied to the provisions of the regulations or where the AMC feels that any matter is required to be brought to the notice of SEBI. Please confirm that the contents of the offer document including figures, data, yields, etc. have been checked and are factually correct.

     

     

16. A statement should be incorporated on the last page of the offer document as follows " Notwithstanding anything contained in the offer document the provisions of the SEBI (Mutual Funds) Regulations, 1996 and the Guidelines thereunder shall be applicable."

     

All information in the offer document shall be updated 30 days before the launch of the scheme.

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Revised : July 9, 2001