CIRCULAR,
CIR/IMD/DF/05/2014, dated March 24, 2014
All Mutual
Funds/Asset Management Companies (AMCs)/
Trustee Companies/Boards
of Trustees of Mutual Funds/
Association of
Mutual Funds in India (AMFI)
Enhancing
disclosures, investor education & awareness campaign, developing
alternative distribution channels for Mutual Fund products, etc.
I. SEBI has framed a Long Term Policy for
Mutual Funds in India which inter alia includes enhancing the reach of
Mutual Fund products, promoting financial inclusion, tax treatment , obligation
of various stakeholders, increasing transparency, etc. In this regard the
following has been decided:
A. Disclosure of
Assets Under Management (AUM)
1. In order to
enhance transparency and increase the quality of the disclosures for the
investors, Mutual Funds shall disclose the following on monthly basis on their website
and also share the same with Association of Mutual Funds in India (AMFI):
a. AUM from different categories of
schemes such as equity schemes, debt schemes, etc.
b. Contribution to AUM from B-15 cities
(i.e. other than top 15 cities as identified by AMFI) and T-15 cities (Top 15
cities).
c. Contribution to AUM from sponsor and
its associates.
d. Contribution to AUM from entities
other than sponsor and its associates.
e. Contribution to AUM from investors
type (retail, corporate, etc.) in different scheme type (equity, debt, ETF,
etc.).
f. AUM garnered through sponsor group/
non-sponsor group distributors.
g. State-wise/Union Territory-wise
contribution to AUM.
2. In order to
have a holistic picture, Mutual Fund wise and consolidated data on the above
parameters shall also be disclosed on AMFI website. The above shall be disclosed
as per the format placed at annexure A1 and A2.
3. AMCs shall
disclose the above on their website (in spreadsheet format) and forward to AMFI
within 7 working days from the end of the month. AMFI in turn shall disclose
the consolidated data in this regard on its website (in spreadsheet format).
B. Disclosures
of Votes Cast by Mutual Funds
1. In order to
improve transparency as well as encourage Mutual Funds/AMCs to diligently
exercise their voting rights in best interest of the unitholders, in partial modification
to Point 4 of SEBI Circular SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15,
2010, it has been decided that:
a. AMCs shall be required to record and
disclose specific rationale supporting their voting decision (for, against or
abstain) with respect to each vote proposal stated in point 4 (iii) of
aforementioned SEBI circular.
b. AMCs shall additionally be required
to publish summary of the votes cast across all its investee company and its
break-up in terms of total number of votes cast in favor, against or abstained
from.
c. AMCs shall be required to make
disclosure of votes cast on their website (in spreadsheet format) on a
quarterly basis, within 10 working days from the end of the quarter. Further,
AMCs shall continue disclosing voting details in their annual report. The
revised format for disclosure of vote cast by Mutual Funds in respect of
resolutions passed in general meetings of the investee companies and the format
for presenting summary of votes cast by Mutual Funds is placed as annexure B.
d. Further, on an annual basis, AMCs
shall be required to obtain Auditor's certification on the voting reports being
disclosed by them. Such auditor's certification shall be submitted to trustees
and also disclosed in the relevant portion of the Mutual Funds' annual report
& website.
e. Board of AMCs and Trustees of Mutual
Funds shall be required to review and ensure that AMCs have voted on important
decisions that may affect the interest of investors and the rationale recorded
for vote decision is prudent and adequate. The confirmation to the same, along
with any adverse comments made by auditors, shall have to be reported to SEBI
in the half yearly trustee reports.
C. Financial
Inclusion
1. In context of
Mutual Funds, financial inclusion implies that the concept of Mutual Fund
products is understood by all and are accessible to anyone who wishes to make
an investment in them. Also, investors should be capable of figuring out which
Mutual Fund scheme is appropriate for their financial objectives. Towards this,
it has been decided that:
a. Mutual Funds shall mandatorily also
make available printed literature on mutual funds in regional languages for
investor awareness and education.
b. Mutual Funds to introduce Investor
awareness campaign in regional languages both in print and electronic media.
D. Developing
alternative distribution channels
1. In order to
increase penetration of Mutual Fund products and to energise the distribution network
while protecting the interest of investors, SEBI had permitted additional
expense ratio of 30 bps for garnering funds from B-15 cities. This development
would lead to setting up of distribution infrastructure by AMCs. However, in
order to achieve participation from all parts of the country in Mutual Funds
there is greater need for developing additional distribution channels.
Therefore, it
has been decided that:
a. Distribution through PSU banks: PSU banks which
have wide bank branches network and have distribution reach in the nook and
corner of the country, could play a key role in Mutual Funds distribution. In
order to leverage the PSU banks infrastructure, Mutual Funds/ AMCs need to develop
a system for active support to PSU banks to distribute Mutual Fund products
through them. Such active support would also encourage PSU banks to distribute
products of all Mutual Funds.
b. Online distribution: Online
distribution not only increases customer convenience, but also significantly
improves distributor economics. The online phenomenon is increasing rapidly and
it is observed that more and more people especially younger generation prefers
online transactions.
Therefore, it has been decided that all
Mutual Funds should enhance the online investment facility and tap the internet
savvy users to invest in Mutual Funds by providing an online investment
facility on their websites. Mutual Funds also need to tap the burgeoning
mobile-only internet users for direct distribution of Mutual Fund products.
II. Prudential
limits and disclosures on portfolio concentration risk in debtoriented mutual
funds scheme:
1. The
guidelines issued on prudential limits for sectoral exposure in debt oriented mutual
funds schemes vide SEBI circulars viz. CIR/IMD/DF/21/2012 dated September 13,
2012 and CIR/IMD/DF/24/2012 dated November 19, 2012 excludes investment in Bank
CDs, CBLO, G-Secs, T-Bills and AAA rated securities issued by Public Financial
Institutions and Public Sector Banks while calculating total exposure of debt
schemes of mutual funds in a particular sector.
2. Since the
investments in short term deposits of scheduled commercial banks is allowed
pending deployment of funds of a scheme the same shall also be excluded while
calculating sector exposure.
III. This circular shall be applicable with
effect from April 1, 2014.
IV. This circular is issued in exercise of
the powers conferred under Section 11 (1) of the Securities and Exchange Board
of India Act 1992, read with the provision of Regulation 77 of SEBI (Mutual Funds)
Regulation, 1996 to protect the interests of investors in securities and to
promote the development of, and to regulate the securities market.
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