Securities and Exchange Board of India (Collective Investment Schemes) (Amendment) Regulations, 2022 - SEBI/LAD-NRO/GN/2022/84 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 10th May, 2022 SECURITIES AND EXCHANGE BOARD OF INDIA (COLLECTIVE INVESTMENT SCHEMES) (AMENDMENT) REGULATIONS, 2022 No. SEBI/LAD-NRO/GN/2022/84 .- In exercise of the powers conferred by section 30 read with section 11 and section 19 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 (Collective Investment Schemes) Regulations, 1999 , namely 1. These regulations may be called the Securities and Exchange Board of India (Collective Investment Schemes) (Amendment) Regulations, 2022. 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 (Collective Investment Schemes) Regulations, 1999 ,- I In regulation 2 , sub-regulation (1), i. clause (e) shall be substituted with the following clause, namely,- (e) auditor means a firm, including a limited liability partnership, constituted under the Limited Liability Partnership Act, 2008, who is eligible and qualified to audit the accounts of a company under section 141 of the Companies Act, 2013 (18 of 2013). ii. after clause (e), the following clause (ea) shall be inserted, namely,- (ea) designated employees of the Collective Investment Management Company includes: (i) chief executive officer, chief investment officer, chief risk officer, chief information security officer, chief operation officer, fund manager, compliance officer, sales head, investor relation officer, heads of other departments and dealer of the Collective Investment Management Company; (ii) persons directly reporting to the chief executive officer (excluding personal assistant/ secretary); (iii) fund management team and research team; (iv) other employees as identified by Collective Investment Management Companies or trustees. iii. in clause (h), after the words, number and symbol the Companies Act, 1956 (1 of 1956) and before the words and registered , the words, number and symbol or the Companies Act, 2013 (18 of 2013) shall be inserted. iv. in clause (k), (a) Sub-clauses (i) and (ii) shall be substituted with the following, namely,- (i) in the case of a company, by any person individually or together with persons acting in concert, who directly or indirectly own, control or hold shares carrying not less than ten percent of the voting rights of such company; or (ii) as between two companies, if the same person either individually or together with persons acting in concert, directly or indirectly, own, control or hold shares carrying not less than ten percent of the voting rights of each of the two companies; or (b) in sub-clause (iii), before the word majority , the word by shall be inserted. v. clause (n) shall be omitted. vi. clause (p) shall be substituted with the following clause, namely,- (p) fraud means a fraud as defined in sub-clause (c) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003; vii. clause (v) shall be substituted with the following clause, namely,- (v) relative means a person as defined in section 2(77) of the Companies Act, 2013 (18 of 2013). viii. clause (aa) shall be substituted with the following clause, namely,- (aa) securities laws means the Act, the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Depositories Act, 1996 (22 of 1996), the provisions of any other law to the extent it is administered by the Board and the relevant rules and regulations made thereunder; II In regulation 2, sub-regulation (3) shall be substituted with the following, namely,- (3) The words and expressions used and not defined in these regulations but defined in the Act, the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Companies Act, 2013 (18 of 2013), the Depositories Act, 1996 (22 of 1996), or any rules or regulations made thereunder shall have the same meanings respectively assigned to them in those acts, rules or regulations made thereunder or any statutory modification or reenactment thereto, as the case may be. III In regulation 9 , clause (c) shall be substituted with the following clause, namely,- (c) the applicant or its promoters should have a sound track record and general reputation of fairness and integrity in all their business transactions. Explanation.- For the purposes of this clause sound track record shall mean that, (i) the applicant or its promoter should be carrying on business in financial services or in the relevant field, in which collective investment schemes are proposed to be launched, for a period of not less than five years; (ii) the networth of applicant or its promoter is positive in all the immediately preceding five years; (iii) the applicant or its promoter has profits after providing for depreciation, interest and tax in three out of the immediately preceding five years, including the fifth year; and (iv) the applicant has a net worth of not less than rupees fifty crores on a continuous basis: Provided that the applicant shall have a networth not less than rupees hundred crore till it has profits for five consecutive years in case the requirements under sub-clause (iii) of clause (c) of this regulation is not fulfilled; IV After regulation 9A , the following shall be inserted, namely,- 9B (1) No Collective Investment Management Company or a promoter of a Collective Investment Management Company, their associates or group companies, through the schemes of the Collective Investment Management Company or otherwise, individually or collectively, directly or indirectly, have (a) ten percent or more of the shareholding or voting rights in the Collective Investment Management Company or the trustee company of any other Collective Investment Management Company; or (b) representation on the board of the Collective Investment Management Company or the trustee company of any other Collective Investment Management Company. (2) Any shareholder holding ten percent or more of the shareholding or voting rights in the Collective Investment Management Company or the trustee company of a Collective Investment Management Company, shall not have, directly or indirectly,- (a) ten percent or more of the shareholding or voting rights in the Collective Investment Management Company or the trustee company of any other Collective Investment Management Company; or (b) representation on the board of the Collective Investment Management Company or the trustee company of any other Collective Investment Management Company: Provided that in the event of a merger, acquisition, scheme of arrangement or any other arrangement involving the promoters of the Collective Investment Management Company, shareholders of the Collective Investment Management Company or trustee companies, their associates or group companies which results in the incidental acquisition of shares, voting rights or representation on the board of the Collective Investment Management Company or trustee companies, this regulation shall be complied with within a period of one year of coming into force of such an arrangement. V In regulation 14 , i. in clause (m), the symbol . shall be substituted with the symbol ; ii. after clause (m), the following clause shall be inserted, namely,- (n) the Collective Investment Management Company and its designated employees shall invest such amounts in such schemes of the Collective Investment Management Company, as may be specified by the Board from time to time. VI After sub-regulation (5) of regulation 24 , the following shall be inserted, namely,- Closure of subscription list (6) Each collective investment scheme shall immediately after the closure of the subscription list comply with the following conditions, namely,- (a) minimum subscription amount of rupees twenty crore; (b) minimum twenty investors; and (c) no person shall hold more than twenty-five percent of the assets under management of scheme: Provided that where the collective investment scheme fails to comply with this sub-regulation, Collective Investment Management Company shall be liable to refund the application money to the applicants. VII Regulation 30 shall be substituted with the following, namely,- Offer period 30. No collective investment scheme shall be open for subscription for more than fifteen days: Provided that collective investment scheme may be kept open for subscription for a maximum of another fifteen days subject to issuance of public notice by the Collective Investment Management Company before the expiry of initial fifteen days. VIII In regulation 31 , i. Sub-regulation (3) shall be substituted with the following, namely,- (3) Any amount refundable under sub-regulation (2) or proviso to sub-regulation (6) of regulation 24, shall be refunded within a period of five working days from the date of closure of subscription list, by cheque or demand draft marked A/C Payee through Registered A.D. or speed post, courier etc., or payment channels such as RTGS, NEFT, IMPS, direct credit, etc. or any other mode allowed by the Reserve Bank of India from time to time, to the applicants. ii. In sub-regulation (4), the words six weeks shall be substituted with the words five working days . IX In regulation 32 , i. the words unit certificates as soon as possible but not later than six weeks shall be substituted with the words the units only in dematerialized form within a period of five working days . ii. the symbol : shall be substituted with the symbol . . iii. the proviso shall be omitted. X In regulation 35 , after clause (d), the following clause shall be inserted, namely,- (e) not invest more than twenty five percent of the amount raised by Collective Investment Management Company in projects owned directly or indirectly by Collective Investment Management Company. XI In Ninth Schedule , Part 1 shall be substituted with the following, namely,- PART I -CEILING ON EXPENSES The expenses incurred shall be subject to a ceiling as specified below: (1) Initial Issue Expenses (a) These may include: cost of offer documents and related costs; marketing and selling expenses including agents commission, if any; fees to Lead Managers, if any, Registrars and collecting banks; initial rating and appraisal fees. (b) These expenses may be borne by the collective investment scheme. (c) These expenses shall not exceed 2.00 percent of the funds raised under the collective investment scheme. (2) Annual recurring expenses (a) Annual recurring expenses consist of the following: i. Management and Advisory Fees; ii. Registrar fees for transfer of units sold or redeemed; iii. Fees and expenses of trustees; iv. Audit fees; v. Subsequent Rating and Appraisal fees; and vi. Listing fees. (b) The annual recurring expenses shall not exceed 2 percent of the funds raised under the collective investment scheme. (c) Incentive fees No incentive fee based on performance of the scheme shall be charged to the scheme in any form or manner. (3) Other Expenses Other direct costs, if any, which are incidental to the operation of the collective investment scheme may be charged to scheme, as may be approved by trustee: Provided that granular (item wise) list of direct costs covering at least eighty percent expenses shall be disclosed in offer document and a quarterly disclosure of actual expenses shall be made. (4) All other expenses shall be borne by the Collective Investment Management Company: Provided that collective investment scheme related expenses including commission paid to distributors, by whatever name it may be called and in whatever manner it may be paid, shall necessarily be paid from the scheme only within the regulatory limits and not from the books of the Collective Investment Management Company, its associate, promoter(s), trustee or any other entity or through any other route: Provided further that Collective Investment Management Companies shall adopt full trail model of commission in all schemes, without payment of any upfront commission or upfronting of any trail commission, directly or indirectly, in cash or kind, through sponsorships, or any other route. MADHABI PURI BUCH, Chairman [ADVT.-III/4/Exty./66/2022-23] Footnote: 1. Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999, the Principal Regulations, were published in the Gazette of India on 15th October 1999 vide No. S.O. 1035(E). 2. The Principal Regulations were subsequently amended on: - (i) 14th February 2000 by the Securities and Exchange Board of India (Collective Investment Schemes) (Amendment) Regulations, 2000 vide S. O. No. 122 (E); (ii) 28th March 2000 by the Securities and Exchange Board of India (Appeal to Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S. O. No 278 (E); (iii) 10th March 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398(E); (iv) 26th May 2008 by the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 vide Notification No. LAD-NRO/GN/2008/11/126538; (v) 9th January 2014 by the Securities and Exchange Board of India (Collective Investment Schemes) (Amendment) Regulations, 2014 vide Notification No. LAD- LAD-NRO/GN/2013- 14/39/51; (vi) 6th March 2017 by the Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2017 vide notification no. SEBI/LAD/NRO/GN/2016- 17/037 read with notification no. SEBI/LAD/NRO/GN/2016-17/38 dated March 29, 2017; (vii) 17th April 2020 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/2020/10; (viii) 3rd August 2021 by the (Regulatory Sandbox) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/2021/30.