Alignment of interest of Asset Management Companies (‘AMCs’) with the Unitholders of the Mutual Fund Schemes
Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2021 (‘MF Amendment Regulations’) was notified on August 05, 2021 and the provisions of the said Regulations will come into force on the 270th day from the date of notification.
As per the amended regulations AMCs are required to invest such amount in such scheme(s) of the mutual fund, based on the risk associated with the scheme, as may be specified by the Board from time to time.
Now, it has been decided that based on the risk value assigned to the scheme(s) , in terms of SEBI circular no. SEBI/HO/IMD/DF3/CIR/P/2020/197 dated October 5, 2020, AMCs shall invest minimum amount as a percentage of assets under management (‘AUM’) in their scheme(s).
In this regard,
(a) the risk value of the scheme as per the risk-o-meter of the immediate preceding month shall be considered.
(b) The investment shall be maintained at all points of time till the completion of tenure of the scheme or till the scheme is wound up.
(c) AMCs shall, except in case of close ended scheme(s) , conduct a quarterly review to ensure compliance with the requirement of investment of minimum amount in the scheme(s) which may change either due to change in value of the AUM or in the risk value assigned to the scheme. Further, based on review of quarterly average AUM, shortfall in value of the investment in scheme(s), if any, shall be made good within 7 days of such review. AMC shall have the option to withdraw any excess investment than what is required pursuant to such review.
(d) AMCs may invest from their net worth or the sponsor may fund the AMC to fulfil the aforesaid obligations, if required. However, the AMCs shall be required to make good the shortfall in the minimum networth to comply with the requirement of the MF Regulations in case of sustenance of temporary Mark to Market loss for two consecutive quarters. AMC shall ensure that such temporariness of the Mark to Market loss is certified by the statutory auditor.
(e) AMCs shall not be required to invest in ETFs, Index Funds, Overnight Funds, Funds of Funds scheme(s) and in case of close ended funds wherein the subscription period has closed as on date of coming into force of MF Amendment Regulations.
The mandatory contribution already made by the AMCs in compliance with the applicable MF Regulations shall not be withdrawn. However, such contribution can be adjusted against the investment required by the AMC as per this circular.
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