SEBI revises mutual fund circulars/guidelines

SEBI vide circular SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15, 2009 has amended the various existing SEBI circulars for mutual funds. This circular was issued as a part of SEBI’s continuing efforts in relation to investor protection, market development and effective regulation. The major changes effected by this circular are as follows: -

Payment of interest for delay in dispatch of dividend warrants

SEBI has stated that in the event of failure of dispatch of dividend warrant within the stipulated 30 day period, the AMCs should to pay interest @ 15 per cent per annum to the unit holders. Such incidents should also be reported to SEBI as a part of the compliance test reports.

Valuation of collateral securities for the participation by mutual funds in the securities lending scheme

Earlier in 1999 SEBI had issued detailed guidelines for the securities lending by mutual funds. Now SEBI has deleted clause 2 of these guidelines in relation to the ‘valuation of collateral securities’ and advised mutual funds to comply with guidelines issued in this regard by SEBI/ Stock Exchange from time to time.

Consolidation of schemes

In cases of merger or consolidation of schemes, mutual funds have to give the unit holders an option to exit the scheme at prevailing NAV without exit load. Now SEBI has mandated that a report in this regard containing information on total number of unit holders in the schemes and their net assets, number of unit holders who opted to exit and net assets held by them, and number of unit holders and net assets in the consolidated scheme, should be filed by the AMC with SEBI within 21 days from the date of closure of the exit option.

Launch of additional plan under existing schemes

SEBI has replaced its earlier circular on ‘launch of additional plan under existing schemes’ with a new circular. The highlights of the new circular are as follows:-

• Additional plans sought to be launched under existing open ended schemes which differ substantially from that scheme in terms of portfolio or other characteristics should be launched as separate schemes in accordance with the regulatory provisions.
  

• Additional plans which are consistent with the characteristics of the scheme may be launched as additional plans as part of existing schemes by issuing an addendum.

Guidelines for advertisement by mutual funds

The definition of ‘Tombstone advertisement’ has been changed and now this form of advertisement can only give basic information about a mutual fund registered with SEBI whose Statement of Additional Information has been filed with SEBI and has been uploaded on SEBI website.

A copy of the circular is available here.