New 'Code of Conduct' for agents and distributors of Mutual Funds

SEBI vide Circular SEBI/IMD/CIR No. 8/174648/2009 dated August 27, 2009 has come out with a new Code of Conduct for Intermediaries of Mutual Funds. Earlier in June, 2002, SEBI vide MFD/CIR/ 06/210/2002 dated June 26, 2002 had issued a Code of Conduct for Intermediaries of Mutual Funds. Taking into account the new regulatory developments (like ban on entry load) AMFI has revised the existing code for intermediaries (agents and distributors) and has come out with the new Code. SEBI states that if any intermediary does not comply with the code of conduct, the mutual fund should report it to AMFI and SEBI. It also states that mutual funds should not deal with those intermediaries who do not follow code of conduct. 

The additional obligations on intermediaries as per the new Code are the following: -

• Intermediaries should be fully conversant with the key provisions of the Scheme Information Document (SID), Statement of Additional Information (SAI) and Key Information Memorandum (KIM) as well as the operational requirements of various schemes.
• Intermediaries should disclose to the investors all material information including all the commissions (in the form of trail or any other mode) received for the different competing schemes of various Mutual Funds from amongst which the scheme is being recommended to the investors.
  

A copy of the Circular is available here.
A copy of the old Code is available here.

Anchor investors facility extended to issue of IDRs, ADR/GDR to trigger open offer in specified cases

SEBI vide its Press Release PR No.300/2009 has announced the decisions taken by the SEBI Board on September 22, 2009.

• Facility of anchor investors extended to issue of Indian Depository Receipts (IDRs): - SEBI decided to extend the facility of anchor investors to issue of IDRs on similar terms as applicable to public issues made by domestic companies. It also decided that at least 30% of issue size of the IDRs be reserved for allocation to retail individual investors, who may otherwise be crowded out.
• ADR & GDR under the purview of Takeover Code: - In cases where ADR/ GDR holders are entitled to exercise voting rights on the shares underlying GDRs / ADRs by virtue of clauses in the depositary agreement or otherwise, open offer obligations shall be triggered upon crossing the threshold limits set out under Chapter III of the Regulations. Earlier Takeover Code was not applicable to the acquisition of GDR or ADR so long as they are not converted into shares carrying voting rights (Regulation 3 (2).
• Disclosure of sale/ purchase by acquirer under Regulation 7 (1A) of Takeover Code: - SEBI has decided that any acquirer holding shares / voting rights between 15-75% should disclose purchase or sale aggregating two percent or more of the share capital. Earlier the regulation required disclosures on (+ /-) 2% acquisition / divestment by the acquirers holding shares / voting rights between 15-55%.
• Amendment to Regulation 11(1) of Takeover Code to allow creeping acquisition beyond 55%: - Regulation 11(1) would be amended to clarify that under Regulation 11 (1), the creeping acquisition of 5% would be available subject to the condition that post-acquisition, the shareholding / voting rights of the acquirer together with persons acting in concert with him, shall not increase beyond 55%. However, such acquisition up to 55% under Regulation 11(1) shall not be a bar on further acquisition up to 5% as envisaged under the second proviso to Regulation 11 (2). This means that acquirer can acquire without making a public announcement additional shares or voting rights entitling him upto 5% voting rights in the target company subject to the conditions mentioned in Regulation 11 (2) (i) & (ii).
• Compliance with applicable Accounting Standards: - SEBI decided that a listed company undergoing corporate restructuring under a scheme of arrangement should submit an auditors’ certificate to the stock exchange to the effect that the accounting treatment followed in respect of financials contained in the scheme is in compliance with all the applicable accounting standards. This requirement will be prescribed through amendments to listing agreement. In case of an unlisted company undergoing similar corporate restructuring and proposing to make an IPO should make disclosures in the DRHP in terms of AS 14. This will be mandated through the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

A copy of the Press Release is available here.

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 replaces SEBI (DIP) Guidelines, 2000

SEBI vide Circular SEBI/CFD/DIL/ICDRR/1/2009/03/09 dated September 3, 2009 has informed about the notification of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. SEBI has rescinded the SEBI (DIP) Guidelines, 2000 and the new ICDR Regulations replaces it. ICDR Regulations have been made primarily by conversion of the DIP guidelines. While most of the provisions of rescinded DIP Guidelines have been incorporated into the new ICDR Regulations, certain changes have been made by removing the redundant provisions, modifying certain provisions on account of changes necessitated due to market design and bringing more clarity to the provisions of the rescinded Guidelines.

Consequential amendments have also been made to the Equity Listing Agreement and SEBI (ESOS and ESPS) Guidelines, 1999 through Circulars issued by SEBI. The old DIP Guidelines contained a provision relating to compliance of listing conditions by a listed issuer. The same has now been included in the equity listing agreement by inserting a sub-clause in Clause 19 - “(d) that in case of a further public offer to be made through the fixed price route, the company shall notify the stock exchange, at least 48 hours in advance, of the proposed meeting of its Board of Directors convened for determination of issue price.” Further, the ESOPS Guidelines contained certain provisions which were required to be complied with by an unlisted issuer at the time of making an initial public offer. These provisions have now been incorporated in the ICDR Regulations and removed from ESOPS guidelines.

SEBI also has informed that any offer document, filed under the old Guidelines and pending will be deemed to have been filed or made under the corresponding provisions of the new ICDR Regulations

A copy of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 is available here.

A comparative analysis between the old DIP guideline v/s new ICDR Regulations is available here.

SEBI issues additional Anti Money Laundering (AML) and Combating Financing of Terrorism (CFT) requirements for Intermediaries

SEBI vide its Circular ISD/AML/CIR-1/2009 dated September 01, 2009 has prescribed additional requirements/obligations to be fulfilled by all registered intermediaries with regard to AML/CFT.

This circular clarifies a few aspects covered under the master circular issue by SEBI in December 2008 (covered in this blog here). It also stipulates the name screening requirement before opening an account. The circular is applicable to all the intermediaries registered with SEBI under section 12 of the SEBI Act, 1992.

A copy of the Circular is available here.

A copy of the Master Circular on Anti Money Laundering (AML) and Combating Financing of Terrorism (CFT) is available here.