Regulation 81 - Eligibility Criteria - Securities and Exchange Board of India (Mutual Funds) Regulations, 1996

1 [Eligibility Criteria 81. For the purpose of grant of certificate of registration as a Mutual Fund Lite, the applicant has to fulfill the following requirements, namely (a) the sponsor should have a sound track record and general reputation of fairness and integrity in all business transactions. Explanation: For the purposes of this clause sound track record shall mean the sponsor should, (i) ensure that the networth is positive in all the immediately preceding five years; and (ii) ensure that the positive liquid networth is more than the proposed capital contribution of the sponsor in the MF Lite asset management company and ensure that in case of change in control of the existing asset management company due to acquisition of shares, the positive liquid net worth of the sponsor or funds tied up by the sponsor is to the extent of aggregate par value or market value of the shares proposed to be acquired, whichever is higher; and (iii) have net profit after providing for depreciation, interest and tax in three out of immediately preceding five years including the fifth year; and (iv) have average net annual profit after depreciation, interest and tax during the immediately preceding five years of at least rupees five crore: Provided that if the requirements specified under Explanation to clause (a) are not fulfilled, the sponsor shall,- (i) adequately capitalize the MF Lite asset management company such that the net worth of the said asset management company is not less than rupees seventy five crore; and (ii) ensure that the initial shareholding of sponsor equivalent to capital contributed to the MF Lite asset management company to the extent of not less than rupees seventy five crore is locked-in for a period of three years; and (iii) appoint experienced personnel in the MF Lite asset management company such that the total combined experience of Chief Executive Officer, Chief Operating Officer, Chief Compliance Officer and Chief Investment Officer shall be at least twenty years; and (iv) ensure that in case of acquisition of existing MF Lite asset management company, the sponsor shall have minimum positive liquid net worth equal to incremental capitalization required to ensure minimum capitalization of the MF Lite asset management company and the positive liquid net worth of the sponsor or the funds tied up by the sponsor are to the extent of aggregate par value or market value of the shares proposed to be acquired, whichever is higher; (v) ensure that in case of acquisition of stake in an existing MF Lite asset management company, the shareholding equivalent to at least rupees seventy five crore shall be locked in for three years. (vi) ensure that other conditions in this regard as may be specified by the Board from time to time are adhered to: Provided further that a private equity fund or a pooled investment vehicle or a pooled investment fund may also be permitted to sponsor mutual funds lite subject to such other conditions as may be specified by the Board from time to time. (b) applicant is a fit and proper person by taking into account the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. (c) in the case of an existing mutual fund, such fund is in the form of a trust and the trust deed has been approved by the Board; (d) the sponsor has contributed or contributes at least 40% to the net worth of the MF Lite asset management company: Provided that any person who holds 40% or more of the net worth of a MF Lite asset management company shall be deemed to be a sponsor and will be required to fulfill the eligibility criteria specified in these regulations; (e) the sponsor or any of its directors or the principal officer to be employed by the MF Lite should not have been guilty of fraud or has not been convicted of an offence involving moral turpitude or has not been found guilty of any economic offence; (f) appointment of debenture trustees to act as trustees for the MF Lite in accordance with the provisions of the regulations; (g) appointment of MF Lite asset management company to manage the MF Lite and operate the scheme of such funds in accordance with the provisions of these regulations; (h) appointment of custodian in order to keep custody of the securities and such other assets held by the Mutual Fund Lite as may be specified by the Board, and provide such other custodial services as may be required for managing a Mutual Fund Lite. ] ************** NOTES:- 1. Inserted vide Notification No.SEBI/LAD-NRO/GN/2024/221 dated 16-12-2024 w.e.f. ninetieth day from the date of their publication in the Official Gazette