Role of Chief Executive Officers & Fund Managers and Fund of Funds - SEBI - MFD/CIR.No 04/11488 /2003

Circulars CHIEF GENERAL MANAGER MUTUAL FUNDS DEPARTMENT MFD/CIR.No 04/11488 /2003 June 12, 2003 All Mutual Funds Registered with SEBI Association of Mutual Funds in India (AMFI) Dear Sirs, We are enclosing a copy of the gazette notification no. S.O 632(E) dated May 29, 2003 pertaining to SEBI (Mutual Funds)(Amendment) Regulations, 2003 for your information and implementation. 1. Role of Chief Executive Officers and Fund Managers The amended Regulations define the roles of Chief Executive Officers and Fund Managers of mutual funds with a view to strengthen their positions and specifying their accountability and to protect the interest of investors. However, it is clarified that AMCs and trustees shall continue to discharge their responsibilities as specified in the Regulations. 2. Fund of Funds The amendments to Regulations permit mutual funds to launch Fund of Funds schemes. It is clarified in accordance with the provisions of Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996 that in case of Fund of Funds scheme, the mutual funds shall disclose in the offer document as well as in the advertisements that the investors are bearing the recurring expenses of the scheme in addition to the expenses of other schemes in which Fund of Funds scheme makes investment. Yours faithfully, P.K. NAGPAL THE GAZETTE OF INDIA EXTRAORDINARY PART II SECTION 3 SUB SECTION (ii) PUBLISHED BY AUTHORITY SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 29th May, 2003 SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) (AMENDMENT) REGULATIONS, 2003 S.O. 632(E).---- 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 :- These Regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2003. They shall come into force on the date of their publication in the Official Gazette. In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996: (i) in regulation 2, the following clause (ma) shall be added after the existing clause (m): (ma) fund of funds scheme means a mutual fund scheme that invests primarily in other schemes of the same mutual fund or other mutual funds. (ii) In regulation 25, the following sub-regulations shall be inserted after sub-regulation (6), namely:- (6A). The Chief Executive Officer (whatever his designation may be) of the asset management company shall ensure that the mutual fund complies with all the provisions of these regulations and the guidelines or circulars issued in relation thereto from time to time and that the investments made by the fund managers are in the interest of the unitholders and shall also be responsible for the overall risk management function of the mutual fund. Explanation: For the purpose of this sub-regulation, the words these regulations shall mean and include the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended from time to time. (6B) The fund managers (whatever the designation may be) shall ensure that the funds of the schemes are invested to achieve the objectives of the scheme and in the interest of the unitholders . (iii) in regulation 52, in sub-regulation (6), the following proviso shall be inserted after the existing proviso, namely:- Provided further that in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall not exceed 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis. (iv) in the Seventh Schedule, (a) in clause 4, the following proviso shall be inserted, namely:- Provided that this clause shall not apply to any fund of funds scheme (b) after the existing clause 9, the following clause shall be inserted, namely: 9A. No scheme of a mutual fund shall make any investment in any fund of funds scheme. (c) after the existing clause 11, the following clause shall be inserted, namely:- 12 . A fund of funds scheme shall be subject to the following investment restrictions: (a) A fund of funds scheme shall not invest in any other fund of funds scheme; (b) A fund of funds scheme shall not invest its assets other than in schemes of mutual funds, except to the extent of funds required for meeting the liquidity requirements for the purpose of repurchases or redemptions, as disclosed in the offer document of fund of funds scheme. [F.No. SEBI/LE/16330 /2003] G.N. BAJPAI CHAIRMAN SECURITIES AND EXCHANGE BOARD OF INDIA