Short Selling and Securities Lending and Borrowing & Net Settlement of Government Securities Transactions – Amendments to SEBI (Mutual Funds) Regulations, 1996 - SEBI - SEBI/IMD/CIR No.6/127947/08

DEPUTY GENERAL MANAGER INVESTMENT MANAGEMENT DEPARTMENT SEBI/IMD/CIR No.6/127947/08 June 6, 2008 All Mutual Funds Registered with SEBI Association of Mutual Funds in India (AMFI) Sir / Madam, Sub: Short Selling and Securities Lending and Borrowing Net Settlement of Government Securities Transactions Amendments to SEBI (Mutual Funds) Regulations, 1996 We are enclosing a copy of the gazette notifications No. LADNRO/ GN/2008/01/122441 dated April 8, 2008 pertaining to short selling and securities lending and borrowing and No. LAD-NRO/GN/2008/09/126202 dated May 22, 2008 pertaining to net settlement of government securities transactions for your information and implementation. Existing mutual fund schemes may engage in short selling of securities as well as lending and borrowing of securities after making additional disclosures including risk factors in the Scheme Information Document in accordance with clause 5(ii)(b) of SEBI circular SEBI/IMD/CIR No.5/126096/08 dated May 23, 2008. This circular, is available on SEBI website at www.sebi.gov.in under the category Mutual Funds - Circulars . This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996. Yours faithfully, Ruchi Chojer Encl : a/a THE GAZETTE OF INDIA EXTRAORDINARY PART-III-SECTION 4 PUBLISHED BY AUTHORITY NEW DELHI, April 8, 2008 SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 8th April, 2008 Notification under sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2007 and regulation 2 of the Securities and Exchange Board of India (Foreign Institutional Investors) (Second Amendment) Regulations, 2007 No. LAD-NRO/GN/2008/01/122441. - In exercise of the powers conferred by sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2007 and regulation 2 of the Securities and Exchange Board of India (Foreign Institutional Investors) (Second Amendment) Regulations, 2007, the Board hereby specifies 21st day of April, 2008 as the notified date for the purposes of (a) sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2007; and (b) regulation 2 of the Securities and Exchange Board of India (Foreign Institutional Investors) (Second Amendment) Regulations, 2007. C. B. BHAVE CHAIRMAN SECURITIES AND EXCHANGE BOARD OF INDIA [ADVT.III/IV/69ZB/2008/Exty.] THE GAZETTE OF INDIA EXTRAORDINARY PART III SECTION 4 PUBLISHED BY AUTHORITY NEW DELHI, MAY 22, 2008 SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 22nd May, 2008 SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) (SECOND AMENDMENT) REGULATIONS, 2008 No. LAD-NRO/GN/2008/09/126202. - In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to further amend the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, namely :- 1. These regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2008. 2. They shall come into force on the date of their publication in the Official Gazette. 3. In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 (i) in the Seventh Schedule, in clause 6, after the second proviso, the following proviso shall be inserted, namely:- Provided further that sale of government security already contracted for purchase shall be permitted in accordance with the guidelines issued by the Reserve Bank of India in this regard. C. B. BHAVE CHAIRMAN SECURITIES AND EXCHANGE BOARD OF INDIA [ADVT III/IV/69-ZB/2008/Exty.] Footnotes: (1) The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the Principal Regulations were published in the Gazette of India on December 9, 1996 vide S.O. No. 856(E). (2) The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 were subsequently amended (a) on April 15, 1997 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1997 vide S.O. No.327(E). (b) on January 12, 1998 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1998 vide S.O. No.32(E). (c) on December 08, 1999 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1999 vide S.O. No.1223(E). (d) on March 14, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2000 vide S.O. No.235 (E). (e) on March 28, 2000 by the Securities and Exchange Board of India (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O. No.278(E). (f) on May 22, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2000 vide S.O. No.484 (E). (g) on January 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2001 vide S.O. No.69 (E). (h) on May 29, 2001 by the Securities and Exchange Board of India (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide S.O. No.476(E). (i) on July 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2001 vide S.O. No.698(E). (j) on February 20, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2002 vide S.O. No.219 (E). (k) on June 11, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2002 vide S.O. No.625 (E). (l) on July 30, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2002 vide S.O. No.809(E). (m)on September 9, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2002 vide S.O. No.956(E). (n) on September 27, 2002 by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide S.O. No.1045(E). (o) on May 29, 2003 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2003 vide S.O.No. 632(E). (p) on January 12, 2004 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2004 vide F.No. SEBI/LAD/DOP/4/2004. (q) on March 10, 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398(E). (r) on January 12, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2006 vide S.O.No. 38(E). (s) on May 22, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2006 vide S.O.No. 783(E). (t) on August 3, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2006 vide S.O.No. 1254(E). (u) on December 27, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2006 vide F. No. SEBI/LAD/DOP/82534/2006. (v) on December 27, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Fifth Amendment) Regulations, 2006 vide F. No. SEBI/LAD/DOP/83065/2006. (w)on May 28, 2007 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2007 vide F. No. 11/LC/GN/2007/2518. (x) on October 31, 2007 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2007 vide F. No. 11/LC/GN/2007/4646. (y) on March 31, 2008 by the Securities and Exchange Board of India (Payment of Fees) (Amendment) Regulations, 2008 vide F. No. 11/LC/GN/2008/21669. (z) on April 16, 2008 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2008 vide F. No. LADNRO/ GN/2008/03/123042.