Change in NAV calculation
Investors will get the purchase NAV of the day when the investor’s money reach the AMC, irrespective of the size of the investments. It has been decided that in respect of the purchase of units of mutual fund schemes closing NAV of the day shall be applicable on which the funds are available for utilization irrespective of the size and time of receipt of such application.
Under current rules, the NAV of the same day is considered for purchases of less than ₹2 lakh, even if the money does not reach the asset management company (AMC), but the order is placed within the cut-off time.
New RiskometerTool
SEBI introduced a fresh category of ‘very high risk on its riskometer tool for investors to make better decisions with high-risk mutual funds. It replaces the old model based simply on a scheme’s category without adequately considering its actual portfolio. Risk-o-meter shall be evaluated on a monthly basis and AMCs shall disclose the Risk-o-meter along with portfolio disclosure for all their schemes on their website and on the AMFI website within 10 days from the close of each month. Mutual Funds also have to publish a history of riskometer changes every year. Further, any change in risk-o-meter shall be communicated to unitholders of that particular scheme.
Inter-scheme Transfer
From January 1, 2021, inter-scheme transfer in close-ended funds can only be done within 3 business days of the allotment of the scheme’s units to investors and not thereafter. SEBI came out with a circular in October. Inter scheme transfers involve the shifting of debt papers from one mutual fund scheme to another.
Under existing rules, SEBI only requires that such ISTs be done at market prices and that the transfer should be in conformity with the investment objective of the receiving scheme.
SEBI also laid down that no ISTs shall be allowed if there is any negative market news or rumours about security in the mainstream media or an alert is generated about security by the fund’s internal risk assessment in the previous 4 months.
RECENT AMENDMENT
| Pre-Amendment | Post-Amendment[Amendment by SEBI (Mutual Funds) (Amendment) Regulations, 2020] |
1 | Provided that in case of a gold exchange traded fund scheme, the assets of the scheme being gold or gold related instruments may be kept in custody of a bank which is registered as a custodian with the Board. | in regulation 26,- first proviso to sub-regulation (1)shall be substituted by the following clause, namely,- “Provided that in case of a gold exchange traded fund schemidelinee, the assets of the scheme being gold or gold related instruments may be kept in the custody of a custodian registered with the Board”.
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2
| The sponsor or asset management company shall invest not less than one percent of the amount which would be raised in the new fund offer or fifty lakh rupees, whichever is less, in the growth option of the scheme and such investment shall not be redeemed unless the scheme is wound up: Provided that this | in regulation 28, –sub-regulation (4) shall be substituted by the following clause, namely,-“28(4). The sponsor or asset management company shall invest not less than one percent of the amount which would be raised in the new fund offer or fifty lakh rupees, whichever is less, and such investment shall not be redeemed unless the scheme is wound up.Provided that the investment by the sponsor or asset management company shall be made in such option of the scheme, as may be specified by the Board |
Guideline on the compensation of key mutual fund employees
A part of the compensation of the key employees of the AMCs shall be paid in the form of units of the scheme, the circular stated. Market regulator Securities and Exchange Board of India (SEBI) in a circular said that minimum of 20% of the salary of the key employees of asset management companies (AMCs) to be in units.
In order to align the interest of the Key Employees of the AMCs with the unitholders of the mutual fund schemes, it has been decided that a part of the compensation of the Key Employees of the AMCs shall be paid in the form of units of the scheme, the circular stated. Key employees include the CEO, CIO, COO, fund managers and others. Exchange-Traded Funds (ETFs), Index Funds, Overnight Funds and existing close-ended schemes have been excluded from the order. The regulator also added that the compensation paid as mutual fund units will be locked in for a minimum period of three years or tenure of the scheme, whichever is less. This circular shall be applicable with effect from July 01, 2021.
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