Regulation 21 - Eligibility criteria for appointment of asset management company - Securities and Exchange Board of India (Mutual Funds) Regulations, 1996

Eligibility criteria for appointment of asset management company 21. (1) For grant of approval of the asset management company the applicant has to fulfill the following :- (a) in case the asset management company is an existing asset management company it has a sound track record, general reputation and fairness in transactions. Explanation: For the purpose of this clause sound track record shall mean the networth and the profitability of the asset management company; 1 [(aa) the asset management company is a fit and proper person;] (b) the directors of the asset management company are persons having adequate professional experience in finance and financial services related field and not found guilty of moral turpitude or convicted of any economic offence or violation of any securities laws; (c) the key personnel of the asset management company 2 [have not been found guilty of moral turpitude or convicted of economic offence or violation of securities laws] 3 [or worked] for any asset management company or mutual fund or any intermediary 4 [during the period when its] registration has been suspended or cancelled at any time by the Board; (d) the board of directors of such asset management company has at least fifty per cent directors, who are not associate of, or associated in any manner with, the sponsor or any of its subsidiaries or the trustees; (e) the Chairman of the asset management company is not a trustee of any mutual fund; 17 [ (f) the asset management company has a networth of not less than rupees fifty crore deployed in assets as may be specified by the Board: Provided that where the sponsor does not fulfil the requirements provided in part (i) to (v) of the Explanation to clause (a) of regulation 7 at the time of making application, the asset management company shall be required to have a networth of not less than rupees one hundred crore deployed in assets as may be specified by the Board and the asset management company shall maintain such networth till it has profits for five consecutive years: Provided further that an asset management company of a mutual fund eligible to launch only infrastructure debt fund schemes, shall have a networth of not less than rupees ten crore. Explanation: Loans and advances given by asset management company to either sponsor, associates or group company of sponsor and associates or group company of asset management company shall be excluded while computing the networth of the asset management company. ] 18 [ (g) the networth of the asset management company as required under clause (f) of this regulation shall be maintained on a continuous basis and it shall be the responsibility of the sponsor to ensure the same. ] (2) The Board may, after considering an application with reference to the matters specified in sub-regulation (1), grant approval to the asset management company. ************** NOTES:- 1 Inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 1998, w.e.f. 12-1-1998. 2 Inserted ibid.. 3 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 1998, w.e.f. 12-1-1998, for the words, has not been working . 4 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 1998, w.e.f. 12-1-1998, for the words, whose . 5 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 2014, w.e.f. 06-05-2014, for the words, ten crores . 6 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 2014, w.e.f. 06-05-2014, for the figure, 1993 . 7 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 2014, w.e.f. 06-05-2014, for the figure, twelve months . 8 Substituted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2014, w.e.f. 30-12-2014, for the words, these regulations . 9 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 2014, w.e.f. 06-05-2014, for the words, ten crores . 10 Omitted by the SEBI (Mutual Funds) (Amendment) Regulations, 2014, w.e.f. 06-05-2014. Prior to omission, as inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 1998, w.e.f. 12-1-1998, it read as under: Provided further that the period specified in the first proviso may be extended in appropriate cases by the Board up to three years for reasons to be recorded in writing: 11 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 2014, w.e.f. 06-05-2014, for the words, ten crores . 12 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 1999, w.e.f. 8-12-1999. Prior to its substitution, explanation read as under; Explanation: For the purpose of this clause, networth means the paid up capital and free reserves of the company. 13 Inserted by the SEBI (Mutual Funds) (Amendment) Regulations, 2014, w.e.f. 06-05-2014. 14 Inserted by the SEBI (Mutual Funds) (Second Amendment) Regulations, 2014, w.e.f. 30-12-2014 15 Substituted by the SEBI (Mutual Funds) (Amendment) Regulations, 1999, w.e.f 08-12-1999 16. Substituted vide Notification No. SEBI/LAD-NRO/GN/2021/08 dated 04-02-2021 w.e.f. 30th day from the date of their publication in the Official Gazette, that is 04-02-2021 before it was read as (f) the asset management company has a networth of not less than rupees 5 [fifty crore]: Provided that an asset management company already granted approval under the provisions of Securities and Exchange Board of India (Mutual Funds) Regulations, 6 [1996] shall within a period of 7 [three years] from the date of notification of 8 [Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2014] increase its networth to rupees 9 [fifty crore]: 10 [***] Provided further that no new schemes shall be allowed to be launched or managed by such asset management company till the networth has been raised to rupees 11 [fifty crore].] 12 [Explanation : For the purposes of this clause, networth means the aggregate of the paid up capital and free reserves of the asset management company after deducting therefrom miscellaneous expenditure to the extent not written off or adjusted or deferred revenue expenditure, intangible assets and accumulated losses.] 13 [Provided further that an asset management company of a mutual fund eligible to launch only infrastructure debt fund schemes, shall have a networth of not less than rupees ten crore.] 14 [Provided further that in cases where the Board is satisfied that an asset management company is taking steps to meet the networth requirement within the specified time, the asset management company may be allowed to launch upto two new schemes per year.] 15 [Explanation: For the purposes of this clause, networth means the aggregate of the paid up capital and free reserves of the asset management company after deducting therefrom miscellaneous expenditure to the extent not written off or adjusted or deferred revenue expenditure, intangible assets and accumulated losses. ] 17. Substituted vide Notification No. SEBI/LAD-NRO/GN/2023/134 dated 26-06-2023 w.e.f. 01-01-2024 before it was read as, 16 [ (f) the asset management company has a networth of not less than rupees fifty crore: Provided that where the sponsor does not fulfil the requirements provided in part (iv) of the Explanation to clause (a) of regulation 7 at the time of making application, the asset management company shall be required to have a networth of not less than rupees one hundred crore and the asset management company shall maintain such networth till it has profits for five consecutive years: Provided further that an asset management company of a mutual fund eligible to launch only infrastructure debt fund schemes, shall have a networth of not less than rupees ten crore. Explanation: Loans and advances given by asset management company to either sponsor, associates or group company of sponsor and associates or group company of asset management company shall be excluded while computing the networth of the asset management company. ] 18. Substituted vide Notification No. SEBI/LAD-NRO/GN/2023/134 dated 26-06-2023 w.e.f. 01-08-2023 before it was read as, 17 [ (g) The networth of the asset management company as required under clause (f) of this regulation shall be maintained on a continuous basis. ]