Mutual Funds Alert: SEBI Makes 2 Announcements in Board Meeting
The Board Meeting of SEBI on Wednesday granted amendments to SEBI Mutual Funds Regulations, 1996. These changes focus on reducing the investment amount by minimizing the frequency of disclosures and aligning employee interests with mutual fund investors. Here’s an analysis of the changes based on the board’s decisions.
Ensuring the Interests of the AMC’s designated Employees match the Interests of the Unitholders
SEBI has approved changes to relax rules for aligning the interests of AMC employees with mutual fund investors. These changes focus on making it easier to manage mutual funds while requiring all mutual fund schemes to reveal stress test results.
Major Key Changes
- The minimum investment amount of the AMC employee in the scheme has been reduced.
- The frequency of the mandatory exposure has been reduced to ease compliance.
- Those employees who are resigning from asset management companies will now have a shorter lock-in period for their investments.
- The nomination and remuneration committee will now access conformity by appointing employees and enhancing governance.
- Those employees who are managing liquid funds will benefit from relaxed requirements.
- Redemption rules have been clarified for employees who are providing greater flexibility.
Updated Timelines for Fund Deployment in NFOs
SEBI has introduced a timeline for utilizing funds raised during New Fund Offers (NFOs) to ensure better utilisation and avoid investor inconvenience.
Major Key Changes
- AMCs must utilize funds raised in NFOs within 30 days under the scheme’s asset allocation strategy.
- If the funds are not utilized within the specified time, investors can exit the scheme without incurring exit loads.
- By reducing misselling, distributors will earn a lower of the two commissions in the case of switch transactions between two schemes.
