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SEBI implements steps to re-energise MF industry

AMCs shall annually set apart at least 2 bps on daily net assets within the maximum limit of TER for investor education and awareness initiatives

January 01, 1970 5:30 IST | India Infoline News Service
To increase penetration of mutual fund products and to energise the distribution network while protecting the interest of investors, SEBI held a series of meetings with various stakeholders in the mutual fund industry.

Mutual Fund Advisory Committee (MFAC) also offered its recommendations on issues confronted by the industry. Pursuant to SEBI Board’s approval to various recommendations, it has been decided to implement the following:

Additional TER (total expense ratio) can be charged up to 30 basis points (bps) on daily net assets of the scheme, if the new inflows from beyond top 15 cities are at least 30% of gross new inflows in the scheme or 15% of the average assets under management (year to date) of the scheme, whichever is higher.

AMCs (asset management companies) shall make complete disclosures in the half yearly report of trustees to SEBI regarding the efforts undertaken by them to increase geographical penetration of mutual funds and the details of opening of new branches, especially at locations beyond top 15 cities.

AMCs may charge service tax on investment and advisory fees to the scheme in addition to the maximum limit of TER. Service tax on other than investment and advisory fees, if any, shall be borne by the scheme within the maximum limit of TER.

Service tax on exit load, if any, shall be paid out of the exit load proceeds. Service tax on brokerage and transaction cost paid for asset purchases, if any, shall be within the limit prescribed under regulation 52 of the Regulations.

AMCs shall launch schemes under a single plan and ensure that all new investors are subject to single expense structure. Existing schemes with multiple plans based on the amount of investment (i.e. retail, institutional, etc) shall accept fresh subscriptions only under one plan. Other plans will continue till the existing investors remain invested in the plan.

AMCs shall provide a separate plan for direct investments, i.e., investments not routed through a distributor, in existing as well as new schemes. Such separate plan shall have a lower expense ratio excluding distribution expenses, commission, etc., and no commission shall be paid from such plans. The plan shall also have a separate NAV.

Distributors of mutual fund units are required to obtain certification from the National Institute of Securities Markets (NISM) and registration from AMFI. A new cadre of distributors, such as postal agents, retired government and semi-government officials, with a service of at least 10 years shall be allowed to sell units of simple and performing mutual fund schemes.

Simple and performing mutual fund schemes shall comprise diversified equity schemes, fixed maturity plans (FMPs) and index schemes and should have returns equal to or better than their scheme benchmark returns during each of the last three years.
These new cadre of distributors would require a simplified form of NISM certification and AMFI Registration. AMFI shall create a unique identity number of the sales person of the distributor interacting with the investor for the sale of mutual fund products, in addition to the AMFI Registration Number (ARN) of the distributor.

The application form for mutual fund schemes shall have provision for disclosing the unique identity number of such sales personnel along with the ARN of the distributor.
AMCs shall annually set apart at least 2 bps on daily net assets within the maximum limit of TER for investor education and awareness initiatives. Mutual Funds shall make complete disclosures in the half yearly trustee report to SEBI regarding the investor education and awareness initiatives undertaken.

AMCs shall disclose portfolio (along with ISIN) as on the last day of the month for all their schemes on their websites on or before the 10th day of the succeeding month in a user-friendly and downloadable format.

AMCs shall ensure that total exposure of debt schemes of mutual funds in a particular sector (excluding investments in Bank CDs, CBLO, G-Secs, T-Bills and AAA rated securities issued by Public Financial Institutions) shall not exceed 30% of the net assets of the scheme.

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