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TMI BlogMaster Circular for Mutual FundsX X X X Extracts X X X X X X X X Extracts X X X X ..... cludes circulars issued upto March 31, 2013. 2. In case of any inconsistency between the master circular and the applicable circulars, the contents of the relevant circular shall prevail. 3. Master Circular is a compilation of all the existing/applicable circulars issued by Investment Management Department of SEBI issued to Mutual Funds. Efforts have been made to incorporate certain applicable provisions of existing circulars (as on March 31, 2013) issued by other Departments/Divisions of SEBI relevant to Mutual Funds. INDEX ABBREVIATIONS ............................................................................. 5 CHAPTER 1 .................................................................................... 7 OFFER DOCUMENT FOR SCHEMES ................................................ 7 CHAPTER 2 .................................................................................. 19 CONVERSION AND CONSOLIDATION OF SCHEMES AND LAUNCH OF ADDITIONAL PLAN ........................................................................ 19 CHAPTER 3 .................................................................................. 26 NEW PRODUCTS ............ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ...............................164 CHAPTER 17 ........................................................................... 16472 MISCELLANEOUS .........................................................................172 FORMATS ------------------------------------------- Refer the attachment ANNEXURES --------------------------------------- Refer the attachment ABBREVIATIONS American Depository Receipt ADR Asset Management Company AMC Asset under Management AUM Association of Mutual Funds in India AMFI Authorized Dealer AD Bombay Stock Exchange BSE Central Board of Direct Taxes CBDT Compliance Test Reports CTR(s) Common Account Statement CAS Contingent Deferred Sales Charge CDSC Compound Annual Growth Rate CAGR Depository Participant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UCC Unit Confirmation Receipt UCR CHAPTER 1 OFFER DOCUMENT FOR SCHEMES 1.1 Filing of Offer Document with the Board SEBI Circular No. SEBI/IMD/CIR No.5/ 126096/08 dated May 23,2008 and SEBI Circular No SEBI/IMD/CIR No.10/178129/09 dated September 29,2009 1.1.1 The Offer Document shall have two parts i.e. Scheme Information Document (SID) and Statement of Additional Information (SAI). SID shall incorporate all information pertaining to a particular scheme. SAI shall incorporate all statutory information on Mutual Fund. 1.1.2 The Mutual Funds shall prepare SID and SAI in the prescribed formats For format of SID SAI, please refer to the section on Formats . Contents of SID and SAI shall follow the same sequence as prescribed in the format. The Board of the AMC and the Trustee(s) shall exercise necessary due diligence, ensuring that the SID/SAI and the fees paid The filing fees was revised via gazette notification No. LAD-NRO/GN/2009-10/11/167759 on SEBI (Payment of Fees) (Amendment) Regulations, 2009 dated 29 June, 2009, The revised filing fee was applicable to those scheme(s) whose sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall also submit an undertaking to the Board while filing the soft copy that information contained in the soft copy of SID to be uploaded on SEBI website is current and relevant and matches exactly with the contents of the hard copy and that the AMC is fully responsible for the contents of the soft copy of SID. The soft copy of SID should also be uploaded on AMFI website two working days prior to launch of the scheme SEBI Circular No SEBI/IMD/CIR No.10/178129/09 dated September 29,2009 . Failure to submit the printed SID to the Board before it is issued for circulation shall invite penalties under the Mutual Funds Regulations SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997.. b. In case of any difference, in nature of material alteration of the suggestions made by the Board Regulation 29(2) of the SEBI (Mutual Funds) Regulations, 1996 between the printed SID and the SID filed with the Board, immediate withdrawal of the SID from circulation will be ordered and such withdrawal shall be publicized by the Board The existing schemes shall adopt the SID and KIM format as soon as possible but not later than 12 months from the date of issuance of the circular- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the contents of the soft copy of the SID SEBI Circular No SEBI/IMD/CIR No.10/178129/09 dated September 29,2009 . 1.2.2 Updation of SAI 1.2.2.1 A printed copy of SAI shall be made available to the investor(s) on request. SAI shall be updated within 3 months from end of financial year and filed with SEBI. 1.2.2.2 Any material changes in the SAI shall be made on an ongoing basis by way of updation on the Mutual Fund and AMFI website. SEBI shall be intimated of the changes made in the SAI within 7 days. The effective date for such changes shall be mentioned in the updated SAI. 1.2.2.3 A soft copy of updated SAI shall be filed with SEBI in PDF format along with printed copy of the same. AMC shall also submit an undertaking to SEBI while filing the soft copy that information contained in the soft copy of SAI to be uploaded on SEBI website is current and relevant and matches exactly with the contents of the hard copy and that the AMC shall be fully responsible for the contents of soft copy of SAI SEBI Circular No SEBI/IMD/CIR No.10/178129/09 dated September 29,2009 . 1.3 Validity of SEBI Observations on SID 1.3.1 The AMCs shall file their replies to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and shall be filed with SEBI. 1.6.3.2 In case of changes in the SID other than changes in fundamental attribute in terms of Reg 18 (15A), the addendum circulated to all the distributors/brokers/investor Service Centre (ISC) shall be attached to KIM till the KIM is updated. 1.6.3.3 In case any information in SID is amended more than once, the latest applicable addendum shall be a part of KIM (For example, in case of changes in load structure the addendum carrying the latest applicable load structure shall be attached to all KIM and SID already in stock till it is updated). 1.7 Product Labeling in Mutual Funds SEBI Circular No. CIR/IMD/DF/5/2013 dated March 18, 2013 1.7.1 All the mutual funds shall Label their schemes on the parameters as mentioned under: a. Nature of scheme such as to create wealth or provide regular income in an indicative time horizon (short/ medium/ long term). b. A brief about the investment objective (in a single line sentence) followed by kind of product in which investor is investing (Equity/Debt).c. Level of risk, depicted by colour code boxes as under: Blue principal at low risk. Yellow principal at medium risk. Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall always be compared against The Bombay Stock Exchange Ltd. (BSE) Sensex or The National Stock Exchange Ltd. (NSE) Nifty or BSE 100 or CRISIL 500 or similar standard indices. 1.9.5.2 Income funds maintaining 65% or more of investments in debt instruments shall be compared with a suitable index that is a representative of the fund s portfolio. 1.9.5.3 Balanced funds with equity investments of 40%-60% shall be compared with a tailored index having 50% of its weight selected from any equity index as above and the other 50% from an appropriate bond return index. 1.9.5.4 Money Market funds or liquid plans can be compared against a suitable Money Market Instrument or a combination of such instruments. 1.10 New Fund Offer (NFO) Period SEBI circular no MFD/Cir.No 9/120/2000 dated November 24, 2000. SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010. The provisions mentioned shall be applicable for all NFOs launched on or after July 01, 2010. 1.10.1 In case of open ended and close ended schemes (except ELSS schemes), the NFO should be open for upto 15 days (from 30 days in case of open ended schemes and 45 days of close ended scheme). 1.10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose Ended Scheme(s) to Open Ended Scheme(s) SEBI Circular No. MFD/CIR No.22/2311/03 dated January 30, 2003. 2.1.1 Although the procedure for conversion of close ended scheme(s) to open ended scheme(s) has been clearly enumerated in the Mutual Funds Regulations Regulation 33(3) of the SEBI (Mutual Funds), Regulations, 1996., following requirements are clarified again: 2.1.1.1 Since the scheme(s) would reopen for fresh subscriptions, disclosures contained in the SID shall be revised and updated. A copy of the draft SID shall be filed with the Board as required under Regulation 28(1) of the Mutual Funds Regulations along with filing fees prescribed under Regulation 28(2) of the Mutual Funds Regulations. Instructions issued by the Board SEBI Circular No. SEBI/IMD/Cir No 5/126096/08 dated May 23, 2008 for filing of the SID shall also be followed. 2.1.1.2 A draft of the communication to be sent to unit holders shall be submitted to the Board which shall include the following: a. Latest portfolio of the scheme(s) in the prescribed format Refer to format of half yearly portfolio disclosure under section on formats. b. Details of the financial performance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o take well informed decisions. This information will include, inter alia: 1. Latest portfolio of the concerned schemes Refer format of half yearly portfolio disclosure under section on Formats . 2. Details of the financial performance of the concerned schemes since inception in the format prescribed in SID Please refer to SID Format under section on Formats along with comparisons with appropriate benchmarks. 3. Information on the investment objective, asset allocation and the main features of the new consolidated scheme. 4. Basis of allocation of new units by way of a numerical illustration. 5. Percentage of total NPAs and percentage of total illiquid assets to net assets of each individual scheme(s) as well the consolidated scheme. 6. Tax impact of the consolidation on the unit holders. 7. Any other disclosure as specified by the Trustees. 8. Any other disclosure as directed by the Board. 2.2.2.3 Updation of SID shall be as per the requirements for change in fundamental attribute of the scheme Please refer to SID chapter for further details . 2.2.2.4 Maintenance of Records : a. AMC(s) shall maintain records of dispatch of the letters to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with SEBI 21 days in advance of opening of plan(s). 2.3.2.2 AMC(s) shall publish an advertisement or issue a press release at the time of launch of such additional plan(s). 2.4 Single Plan SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 2.4.1 Mutual funds/AMCs shall launch schemes under a single plan and ensure that all new investors are subject to single expense structure. 2.4.2 Existing schemes with multiple plans based on the amount of investment (i.e. retail, institutional, super-institutional, etc) shall accept fresh subscriptions only under one plan. 2.4.3 Other plans will continue till the existing investors remain invested in the plan. 2.5 Direct Plan SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 2.5.1 Mutual funds/AMCs shall provide a separate plan for direct investments, i.e., investments not routed through a distributor, in existing as well as new schemes. 2.5.2 Such separate plan shall have a lower expense ratio excluding distribution expenses, commission, etc., and no commission shall be paid from such plans. The plan shall also have a separate NAV. CHAPTER 3 NEW PRODUCTS 3.1 Fund of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, 2006. 3.2.1.3 Gold Deposit Scheme (GDS) SEBI Circular No.CIR/IMD/DF/04/2013 dated February 15, 2013 of banks have been designated as one such gold related instrument. Investment in GDS of banks by Gold ETFs of mutual funds will be subject to following conditions: a. The total Investment in GDS will not exceed 20% of total asset under management of such schemes. b. Before investing in GDS of banks, mutual funds shall put in place a written policy with regard to investment in GDS with due approval from the Board of the Asset Management Company and the Trustees. The policy should have provision to make it necessary for the mutual funds to obtain prior approval of their trustees for each investment proposal in GDS of any Bank. The policy shall be reviewed by mutual funds, at least once a year. c. Gold certificates issued by Banks in respect of investments made by Gold ETFs in GDS shall be held by the mutual funds only in dematerialized form. 3.2.2 Valuation : 3.2.2.1 Gold shall be valued based on the methodology provided in Clause 3A of, Schedule Eight of the Mutual Funds Regulations SEBI Circular No. SEBI/IMD/CIR No.14/84243/07 dated January 15, 2007 rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated by a Credit Rating Agency from the view point of assessing the degree of certainty for achieving the objective of capital protection and the rating shall be reviewed on a quarterly basis. 3.3.3 The Trustees shall continuously monitor the portfolio structure of the scheme and report the same in the Half Yearly Trustee Reports For format of Half Yearly Trustee Report please refer section on Formats to the Board. The AMC(s) shall also report on the same in its bimonthly (CTR(s) For format of bimonthly CTR please refer section on Formats to the Board. 3.3.4 It shall also be ensured that the debt component of the portfolio structure has the highest investment grade rating. 3.4 Real Estate Mutual Funds SEBI Circular No - SEBI/IMD/CIR No.4/124477/08 May 2,2008: 3.4.1 A real estate mutual fund scheme Regulation 49 A(a)(i) of SEBI (Mutual Fund) Regulations, 1996 can invest in real estate assets in the cities mentioned in: 3.4.1.1 List of Million Plus Urban Agglomerations/Cities; or 3.4.1.2 List of Million Plus Cities 3.4.2 Such list appears in Census Statistics of India (2001) at www.censusindia.gov.in. A printout of cities which appear in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of transaction. d. For transactions undertaken by investors through their RGESS designated demat account, Depositories may seek necessary transactional details from stock exchanges viz. Actual Trade value, Trading date, Settlement number, etc, for the purpose of enforcing lock-in and for generating reports mandated vide MoF notification on RGESS. On receipt of such request from depositories, stock exchanges shall provide the details to depositories on an immediate basis. It shall also be ensured that a uniform file structure is used by stock exchanges and depositories for such intimation of transaction details. e. With regard to the securities held in the RGESS designated account, treatment of the corporate actions shall be given in the prescribed format76. 3.5.5 Mutual Funds / AMCs shall communicate list of RGESS eligible MF schemes / ETFs to the stock exchanges. 3.5.6 Mutual Funds / AMCs are directed to create wide publicity of the scheme among the investors, including displaying details on their website. CHAPTER 4 RISK MANAGEMENT SYSTEM SEBI Circular No. MFD/CIR/15/19133/2002 dated September 30, 2002. 4.1 An Operating Manual The Manual has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the progress made by the Mutual Funds with regard to Risk Management practices and the same shall be reported to the Board at the time of sending CTR(s) and Half Yearly Trustee Reports. 4.3.4 Review by Internal Auditors : 4.3.4.1 The review of Risk Management Systems shall be a part of internal audit and the auditors shall check their adequacy on a continuing basis. Their reports shall be placed before the Board of the AMC and Trustee(s) who shall comment on the adequacy of systems in the CTRs and Half Yearly Reports filed with the Board. CHAPTER 5 DISCLOSURES REPORTING NORMS PART I DISCLOSURES 5.1 Monthly Portfolio Disclosures SEBI Cirular No. CIR/IMD/DF/21/2012 dated September 13, 2012 5.1.1 Mutual funds/AMCs shall disclose portfolio (along with ISIN) as on the last day of the month for all their schemes on their respective website on or before the tenth day of the succeeding month in a user-friendly and downloadable format (preferably in a spreadsheet). 5.1.2 The format for monthly portfolio disclosure Please refer to section on Formats for requisite Formats shall be same as that of half yearly portfolio disclosures. 5.1.3 Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in a user-friendly and downloadable format (preferably in a spreadsheet). 5.4 Mailing of Schemewise Annual Report or Abridged Summary SEBI Circular No. IMD/CIR No.8/132968/2008 dated July 24, 2008 and Circular No.Cir/IMD/DF/16/2011 dated September 8, 2011 5.4.1 Mailing of Schemewise Annual Reports For format of abridged schemewise report, please refer the section on formats or abridged summary thereof shall be subject to the following: 5.4.1.1 In case of unitholders whose email addresses are available with the Mutual Fund, the AMCs shall communicate to them stating that henceforth, the scheme annual reports or abridged summary would only be sent by email. 5.4.1.2 In case of unitholders whose email addresses are not available with the Mutual Fund, the AMCs shall communicate to the unitholders to obtain their email addresses for registration of the same in their database. 5.4.1.3 The communication in both the above cases shall clearly mention that the scheme annual accounts or abridged summary would henceforth be sent to these email addresses and not as physical copies and the communication shall also have an option for the investors stating that those w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or more of the following conditions with respect to noninstitutional (retail and HNI) investors:- 5.7.1.1 Multiple point of presence (More than 20 locations) 5.7.1.2 AUM raised over `100 crore across industry in the non institutional category but including high networth individuals (HNIs). 5.7.1.3 Commission received of over `1 crore p.a. across industry 5.7.1.4 Commission received of over `50 lakh from a single Mutual Fund/AMC. 5.7.2 Mutual Fund / AMCs shall, in addition to the total commission and expenses paid to distributors, make additional disclosures SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. regarding distributor-wise gross inflows (indicating whether the distributor is an associate or group company of the sponsor(s) of the mutual fund), net inflows, average assets under management and ratio of AUM to gross inflows on their respective website on an yearly basis. In case the data mentioned above suggests that a distributor has an excessive portfolio turnover ratio, i.e. more than two times the industry average, AMCs shall conduct additional due-diligence of such distributors. 5.7.3 Mutual Funds / AMCs shall also submit the data m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative Report (MCR) SEBI circular MFD/CIR/07/206/2001 dated July 19, 2001, SEBI circular No IMD/Cir No.15/87045/2007 dated February 22, 2007, SEBI circular SEBI/IMD/CIR No 3/124444/08 dated April 30, 2008. 5.12.1 Date and Mode of Submission: 5.12.1.1 MCR For format of MCR please refer to section on Formats. shall be submitted to the Board by 3rd of each month by way of an email. Hard copy should also be sent by hand delivery/courier. 5.12.2 Other Guidelines: 5.12.2.1 Details of the new schemes launched shall be reported in the MCR for the month in which the allotment is done. For example, if an NFO closes in the month of July and the allotment is done in the month of August, then, the details of the new scheme shall be reported in the MCR for the month of August that will reach SEBI by 3rd of September. 5.12.2.2 Further, additional report on overseas investment SEBI Circular No. SEBI/IMD/CIR NO 15/87045/07 dated February 22,2007 by Mutual Funds in ADRs/GDRs, foreign securities and overseas exchange traded funds (ETFs) shall also be provided as per the prescribed format. For format please refer to the section on formats. 5.12.2.3 Compliance officers of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re no more to be submitted . 5.16 Daily Transaction Report SEBI Circular No.MFD/CIR/07/384/99 dated December 17, 1999 and MFD/CIR/08/23026/99 dated December 23, 1999 5.16.1 All Mutual Funds shall submit details of transactions in secondary market on daily basis in the prescribed format For format of daily transaction report, please refer the section on formats . Accordingly, Mutual Funds are advised to make necessary arrangements with their custodians for the submission of reports on a daily basis. The report is to be submitted to the Board in both hard as well as soft copy. 5.16.2 It must be ensured by the compliance officers of the custodians as well as that of Mutual Funds that the information submitted is correct and reaches the Board by 3.00 p.m. on the following working day (T+1). 5.17 Responsibilities of AMC(s) and Trustees SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000, SEBI Circular No. SEBI/MFD/CIR/10/039/2001 dated February 9, 2001. 5.17.1 All information and documents relating to the compliance process shall be authenticated and/or adopted by the Board of the AMC(s) to strengthen the compliance mechanism. 5.17.2 The Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) have to report specified financial transactions in electronic media to Income Tax Department giving PAN of the transacting parties in an Annual Information Return (AIR). 5.18.2 Some common errors in these returns have been pointed out by the Directorate of Income Tax (Systems) as: 5.18.2.1 Not mentioning PAN or mentioning invalid PAN. 5.18.2.2 Entering incomprehensible/ incomplete names of transacting parties, e.g. names of 2 or 3 letters. 5.18.2.3 Entering incomprehensible/ incomplete addresses of transacting parties, e.g. Nil , N/A , _ , in all address fields, incomplete postal addresses, names of buildings split into separate fields, names of two cities in address fields, wrong PIN codes, etc. 5.18.2.4 Incorrect district and state codes. 5.18.2.5 Incorrect transaction codes. 5.18.2.6 Wrongly showing transaction as of Govt. party. 5.18.3 In this regard, AIRs are required to be filed only by the Mutual Fund and no separate AIR has to be furnished for each scheme of the Mutual Fund. CHAPTER 6 GOVERNANCE NORMS PART I - FUND GOVERNANCE 6.1 Formation of Audit and Valuation Committees by the Trustees and/or AMC SEBI Circular No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the sponsor or any of its subsidiaries or the trustees Regulation 21(d) of the SEBI (Mutual Funds) Regulations, 1996.. 6.3.2 An associate shall be defined as: 6.3.2.1 Relatives As defined under Section 6 of the Companies Act 1956. of Sponsor(s) or directors of the Sponsor Company or relatives of Associate Directors of the AMC(s) and Trustee. 6.3.2.2 Persons providing any type of professional service to the Mutual Funds, the AMC and the Trustees and the Sponsor(s). Also, persons having a material pecuniary relationship with the above mentioned entities that may, in the judgment of the Trustees, affect their independence. 6.3.2.3 Nominees of the companies who are stakeholders in the Sponsor company or AMC(s) (even if they are not deemed sponsors by virtue of holding less than 40% of net worth of AMC(s)). 6.3.3 Cooling off Period 6.3.4 An Associate Regulation 2(c) of the SEBI (Mutual Funds) Regulations, 1996. cannot be appointed as Independent Director even after he ceases to be an Associate unless a cooling off period of three years has elapsed from the date of his disassociation. 6.3.5 Mutual Funds are required to have a minimum of 50 per cent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Guidelines from the date of joining the AMC(s) and/or Trustees. b. These Guidelines shall cover transactions for sale or purchase of securities made in the employees name, either individually or jointly, and in the name of the employees spouse and/or dependent children and transactions as a member of HUF. 6.4.3.2 The objectives and principles of these Guidelines are: a. To ensure that all securities transactions made by employees in their personal capacity are conducted in consonance with these Guidelines and in such manner as to avoid any actual or potential conflict of interest or any abuse of an individual s position of trust and responsibility. b. The employees of AMC(s) and Trustees especially Access Persons shall not take undue advantage of any price sensitive information that they may have about any company. Access Person for the purpose of these Guidelines shall mean the Head of the AMC (designated as CEO/Managing Director/President or by any other name), the Fund Managers, Dealers, Research Analysts, all employees in the Fund Operations Department, Compliance Officer and Heads of all divisions and/or departments or any other employee as decided by the AMC( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities by the employees. d. The approval of Compliance Officer for carrying out a transaction of sale or purchase of a security by the access person shall not be valid for more than seven calendar days from the date of approval SEBI Circular No. SEBI/IMD/CIR No.7/13391/03 dated July 11, 2003.. e. If a transaction approved by Compliance Officer has not been effected within seven SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009 calendar days from the date of its approval, the access person shall be required to obtain approval once again from Compliance Officer prior to effecting the transaction. f. All employees shall refrain from profiting from the purchase and sale or sale and purchase of any security within a period of 30 calendar days from the date of their personal transaction SEBI Circular No. SEBI/IMD/CIR No.7/13391/03 dated July 11, 2003.. However, in cases where it is done, the employee shall provide a suitable explanation to the Compliance Officer, which shall be reported to the Board of the AMC and the Trustees at the time of review. 6.4.5 Investments in Shares and/or Debentures and/or Bonds and/or Warrants and/or Deri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of the company whose securities the employee wishes to buy and/or sell, type of security, and the number of shares and/or debentures and/or bonds and/or warrants and/or derivatives that the access person wishes to buy/sell. b. The Compliance Officer shall clear these requests if the following conditions are met: 1. If the shares and/or debentures and/or bonds and/or warrants of the company or derivatives specified by the access person are not held by any scheme of the Mutual Fund of which the AMC is the investment manager; 2. If such shares and/or debentures and/or bonds and/or warrants of the company or derivatives specified by the employee are held by any scheme of the Mutual Fund of which the AMC is the investment manager, there should be a cooling off period of 15 calendar days. The Compliance Officer shall ensure that the last transaction in that particular security was done by the Mutual Fund at least 15 calendar days prior to the date of the written application by the access person. In other words, an application for a purchase /sale transaction on a personal basis would be cleared only if the Mutual Fund has not transacted in that particular security for at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Mutual Fund schemes. However, details of each such transaction, excluding transactions in Money Market Mutual Fund schemes shall be reported by them to the Compliance Officer within 7 calendar days from the date of transaction. 6.4.6.2 In case of investments in SIP of any Mutual Fund scheme, the employees may report only at the time of making the first installment of the SIP. 6.4.6.3 Notwithstanding anything mentioned earlier, in the following cases employees of AMC Trustees shall not purchase or sell /or repurchase or redeem units of any scheme, including Money Market Mutual Fund scheme of their Mutual Fund: a. There is a likelihood of a change in the investment objectives of the concerned Mutual Fund Scheme(s) and this has not been communicated to the investors; b. There is a likelihood of a rights and/or bonus issue in the concerned Mutual Fund Scheme(s) and this has not been communicated to the investors; c. The concerned Mutual Fund Scheme is contemplating to issue dividend to the unit holders and this has not been communicated to the investors; d. There is a likelihood of a change in the accounting policy, or a significant change in the valuation of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xperience, industry practices and/or developments in applicable laws and regulations. They shall report compliance and any violations and remedial action taken by them in their reports submitted to the Board. 6.6 Responsibilities of AMC Trustees MFD/CIR/09/014/2000 dated January 5, 2000 6.6.1 For effective discharge of their responsibilities under the Mutual Funds Regulations, the AMC(s) shall provide infrastructure and administrative support to the Trustees. The Mutual Fund may decide to appoint independent auditors and/or may have separate full fledged administrative set up for the Trustees. However, the expenditure incurred in this regard shall be within the limits as specified in Regulation 52(6) of the Mutual Funds Regulations. AMC(s) shall place correspondence and reports submitted to SEBI before the Trustees. PART II -SCHEME GOVERNANCE 6.7 Minimum Number of investors SEBI Circular No. SEBI/IMD/CIR No.10/22701/03 dated December 12, 2003, SEBI Circular No. SEBI/IMD/CIR No.1/42529/05 dated June 14, 2005. 6.7.1 Applicability for an open-ended scheme 6.7.1.1 The Scheme/Plan shall have: a. a minimum of 20 investors and b. no single invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the allotment would be effective only to the extent of 25% of the corpus collected. Consequently, such exposure over 25% limits will lead to refund within 6 weeks of the date of closure of the New Fund Offer. 6.7.2.5 For interval scheme the aforesaid provision will be applicable at the end of NFO and each specified transaction period. 6.7.2.6 Requisite disclosure in this regard shall be made in the SID. 6.7.3 Determination of breach : 6.7.3.1 The average shall be calculated, at the end of each quarter, on the basis of number of investors at the end of the business hours of the scheme on a daily basis. 6.7.3.2 To determine breach of 25% holding limit by an investor, net assets under the scheme shall be calculated daily and the daily holding limit shall be determined accordingly. At the end of the quarter, average daily holding by each investor shall be calculated and any breach of the 25% holding limit will be accordingly determined. 6.7.4 Applicability 6.7.4.1 These Guidelines are applicable at the Portfolio level. 6.7.4.2 These Guidelines are not applicable to Exchange Traded Funds (ETFs). 6.7.5 Redemptions 6.7.5.1 Redemptions effected pursu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 / 198647 /2010 dated March 15, 2010 6.15 MFs should play an active role in ensuring better corporate governance of listed companies. 6.16 AMCs shall disclose their general policies and procedures for exercising the voting rights in respect of shares held by them on the website of the respective AMC as well as in the annual report distributed to the unit holders. 6.17 AMCs are required to disclose on the website of the respective AMC as well as in the annual report distributed to the unit holders, the actual exercise of their proxy votes in the AGMs/EGMs of the investee companies in respect of the following matters:- 6.17.1 Corporate governance matters, including changes in the state of incorporation, merger and other corporate restructuring, and anti takeover provisions 6.17.2 Changes to capital structure, including increases and decreases of capital and preferred stock issuances. 6.17.3 Stock option plans and other management compensation issues; 6.17.4 Social and corporate responsibility issues. 6.17.5 Appointment and Removal of Directors. 6.17.6 Any other issue that may affect the interest of the shareholders in general and interest of the unit-h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontracts SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005; SEBI Circular No. DNPD/Cir-30/2006 dated January 20, 2006, SEBI Circular No. SEBI/DNPD/Cir-31/2006 dated September 22, 2006. 7.4.1 For trading in Exchange Traded Derivatives Contracts, following should be observed:- 7.4.1.1 Mutual Fund schemes can participate in derivatives market as per the guidelines issued by SEBI in this regard from time to time. SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005. 7.4.1.2 The Mutual Funds shall be treated at par with a registered FII in respect of position limits in index futures, index options, stock options and stock futures contracts. The Mutual Funds will be considered as trading members like registered FIIs and the schemes of Mutual Funds will be treated as clients like subaccounts of FIIs. 7.4.1.3 Appropriate disclosures shall be made in the offer document regarding the extent and manner of participation of the schemes of the Mutual Funds in derivatives and the risk factors, which should be explained by suitable numerical examples. 7.4.1.4 The participation of existing schemes of the Mutual Funds in the derivatives market shall be subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI Cir No. SEBI/IMD/Cir No.12/147132/08 dated December 11,2008 8.1.1 The NAV of schemes shall be published on a daily basis by the Mutual Funds at least in two daily newspapers Regulation 48(2) of SEBI (Mutual Funds) Regulations, 1996 . 8.1.2 NAV and sale/repurchase price of all Mutual Fund schemes except for Fund of Fund Schemes shall be updated on AMFI s website and the Mutual Funds websites by 9 p.m. of the same day SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006.. 8.1.3 Fund of Fund Schemes shall have an extended time up to 10 a.m. the following business day in this regard SEBI Circular No. SEBI/IMD/CIR No.5/96576/2007 dated June 25, 2007. and the NAVs shall be published in newspapers with an asterisk to indicate the one day time lag/or the actual time lag. 8.1.4 Delay beyond 10 a.m. of the following business day in case of Fund of Fund schemes and 9 p.m. on the same day for all other schemes shall be explained in writing to AMFI and the Board and shall also be reported in the CTR(s) For format of CTR, please refer to section on formats in terms of number of days of non adherence of time limit for uploading NAV on AMFI s webs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 . 8.3.3 Applicability 8.3.3.1 The Guidelines on Cut off Timings for applicability of Net Asset Value of Mutual Fund scheme(s) and/ or plan(s) shall be applicable to all schemes and plans of Mutual Funds except: a. International schemes and b. Transactions in Mutual Fund units undertaken on a recognized Stock Exchange. 8.3.4 Fixation of uniform Cut-off Timings 8.3.4.1 Mutual Funds shall reckon the Cut-off Timings for their schemes and plans in compliance with these Guidelines and the same shall be uniformly implemented for all investors. 8.3.4.2 Mutual Funds shall ensure that each payment instrument for subscription or purchase of units is deposited in a bank expeditiously by utilization of the appropriate banking facility, so as to comply with the requirement in Clause 8.3.4.1 above. 8.3.4.3 AMCs shall compensate any loss occasioned to any investor or to the scheme and/or plan on account of non compliance with Clause 8.3.4.2 above. 8.3.5 Cut-off Timings for liquid fund schemes and plans For determining the applicable NAV SEBI Circular No SEBI/IMD/DF/15/2010 dated November 26, 2010 : 8.3.5.1 The following cut-off timings shall be obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding the next business day; and b. Where the application is received after 3.00 pm the closing NAV of the next business day. 8.3.5.5 Mutual Funds shall calculate NAV for each calendar day for their liquid fund schemes and plans. a. Explanation : Business Day does not include a day on which the Money Markets are closed or otherwise not accessible. 8.3.6 Cut-off Timings for schemes and plans other than liquid fund schemes and plans 8.3.6.1 A Mutual Fund shall reckon only prospective NAV, in accordance with this clause, in respect of all their schemes and plans i.e. for other than liquid fund schemes and plans 8.3.6.2 The following Cut-off Timings shall be observed by Mutual Funds in respect of purchase of units in other schemes and plans and following NAVs shall be applied for such purchase: 8.3.6.2.1 Where the application is received up to 3.00 pm with a local cheque or demand draft payable at par at the place where it is received closing NAV of the day on which the application is received; 8.3.6.2.2 Where the application is received after 3.00 pm with a local cheque or demand draft payable at par at the place where it is received closing NAV of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the next business day. 8.3.7 Switch and Sweep Transactions 8.3.7.1 Paragraphs 8.3.5 and 8.3.6 shall apply to switch in transactions as if they were purchase transactions and to switch out transactions as if they were repurchase transactions. 8.3.7.2 Paragraphs 8.3.5 and 8.3.6 shall apply to sweep transactions as if they were purchase transactions and to reverse sweep transactions as if they were repurchase transactions. 8.3.7.3 In case of switch transactions from one scheme to another, the allocation shall be in line with redemption payouts. 8.3.8 Time Stamping 8.3.8.1 Application from investors shall be received by Mutual Funds only at official points of acceptance, addresses of which shall be disclosed in the SID and on Mutual Funds websites. 8.3.8.2 Cut off timings as prescribed under Paragraphs 8.3.5 and 8.3.6 shall apply with reference to the point of time at which the applications are received at such official points of acceptance. 8.3.8.3 Time stamping machines at all official points of acceptance shall be in compliance with the requirements mentioned in Section 8.4. 8.3.9 Compliance Reporting 8.3.9.1 Status of compliance with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akdown of the time stamping process shall be duly recorded and reported to the Trustees. 8.4.8 Every effort should be made to ensure uninterrupted functioning of the time stamping machine. In case of breakdown, the Mutual Funds shall take prompt action to rectify the situation. During the breakdown period, Mutual Funds shall adopt an alternative time stamping method that has already been approved by the Board of the AMC and the Trustee(s). An audit trail shall be available to check and ensure the accuracy of the time stamping process during the said period. 8.4.9 Any alternate mode of application that does not have any physical or electronic trail shall be converted into a physical piece of information and time stamped in accordance with these Guidelines. 8.4.10 Mutual Funds shall maintain and preserve all applications/ requests, duly time stamped as aforesaid, at least for a period of eight years Regulation 50(2) of SEBI (Mutual Funds) Regulations, 1996 to be able to produce them as and when required by the Board or auditors appointed by the Board. 8.5 Uniformity in calculation of sale and repurchase price SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with the daily quotations, the same can be used by the Mutual Funds. e. If the shares are not listed on the Stock Exchanges which provide such information, then Mutual Funds shall make their own analysis in line with the above criteria to check whether such securities are thinly traded or not and then value them accordingly. 9.1.3 Thinly traded Debt Securities SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.1.3.1 A debt security (other than Government Securities) shall be considered as a thinly traded security if, on the valuation date, there are no individual trades in that security in marketable lots (currently applicable) on the principal Stock Exchange or any other Stock Exchange. 9.2 Valuation of Securities 9.2.1 Traded Securities : SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 9.2.1.1 When a security (other than debt securities) is not traded on any Stock Exchange on a particular valuation day, the value at which it was traded on the selected Stock Exchange, as the case may be, on the earliest previous day may be used provided such date is not more than thirty days prior to valuation date. 9.2.1.2 When a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 per cent. of the total assets of the scheme, it shall be valued by the procedure above and the proportion which it bears to the total net assets of the scheme to which it belongs will be compared on the date of valuation SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001 . g. In case trading in an equity security is suspended up to thirty days, then the last traded price shall be considered for valuation of that security. If an equity security is suspended for more than thirty days, then the AMC(s) or Trustees shall decide the valuation norms to be followed and such norms shall be documented and recorded. 9.2.4 Non traded/thinly Traded Debt security 9.2.4.1 A thinly traded debt security as defined above shall be valued as per the norms for non traded debt security. a. Valuation SEBI Circular No. SEBI/IMD/CIR No.16/ 193388/2010 dated February 02, 2010 of money market and debt securities with residual maturity of upto 60 SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012 days: 1. All money market and debt securities, including floating rate securities, with residual maturity of upto 60 days shall be valued at the weighted average price at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated February 28, 2012 , 0.25- 0.5 yrs SEBI/IMD/CIR No.16/ 193388/2010 dated February 02, 2010 , 0.5-1 year, 1-2 years, 2-3 years, 4-5 years, 5-6 years and 6 years and the volume weighted yield would be computed for each bucket. These duration buckets may be changed to reflect the market value more closely by any agency suggested by AMFI giving benchmark yield/ matrix of spreads over benchmark yield. b. The benchmark as calculated above will be set at least weekly, and in the event of any significant movement in prices of Government Securities on account of any event impacting interest rated on any day such as a change in the Reserve Bank of India (RBI) policies, the benchmark will be reset to reflect any change in the market conditions. 9.3.2 Building a Matrix of Spreads for Marking-up the Benchmark Yield203 9.3.2.1 Mark up for credit risk over the risk free benchmark YTM as calculated in 9.3.1 above, will be determined using the trades of corporate debentures/bonds of different ratings. All trades on appropriate stock exchange during the fortnight prior to the benchmark date will be used in building the corporate YTM and spread matrices. Initially these matrices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yields calculated would be marked-up/marked-down to account for the illiquidity risk, promoter background, finance company risk and the issuer class risk. As the level of illiquidity risk would be higher for non rated securities the marking process for rated and non rated securities would be differentiated as follows: a. Adjustments for Securities rated by external rating agencies SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. Category Discretionary mark up/mark down + - Rated instruments withduration upto 2 years 100 bps 50 bps Rated instruments withduration over 2 years 75 bps 25 bps 1. The rationale for the above discount structure is to take cognizance of the differential interest rate risk of the securities. This structure will be reviewed periodically. b. Adjustments for Internally Rated Securities SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002. 1. To value an un-rated security, the fund manager shall assign an internal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued at prices for government securities released by an agency suggested by AMFI to ensure uniformity in calculation of NAVs SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002.. 9.6 Illiquid Securities SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000. 1. Provided that in case any scheme has illiquid securities in excess of 15% of total assets as on September 30, 2000 then such a scheme shall within a period of two years bring down the ratio of illiquid securities within the prescribed limit of 15 per cent. in the following time frame: a. All the illiquid securities above 20 per cent. of total assets of the scheme shall be assigned zero value on September 30, 2001. b. All the illiquid securities above 15 per cent. of total assets of the scheme shall be assigned zero value on September 30, 2002. 2. In respect of closed ended funds, for the purposes of valuation of illiquid securities, the limits of 15 per cent. and 20 per cent. applicable to open ended funds should be increased to 20 per cent. and 25 per cent. respectively. 3. Where a scheme has illiquid securities as at September 30, 2001 not exceeding 15% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visioning prior to the closure of the scheme or the scheduled phasing which ever is earlier. 9.7.4.2 The value of the asset shall be provided in the following manner or earlier at the discretion of the Mutual Fund. Mutual Funds will not have discretion to extend the period of provisioning. The provisioning against the principal amount or installments shall be made at the following rates irrespective of whether the principal is due for repayment or not. a. 10 percent of the book value of the asset shall be provided for after 6 months past due date of interest i.e. 3 months form the date of classification of the asset as NPA. b. 20 percent of the book value of the asset should be provided for after 9 months past due date of interest i.e. 6 months from the date of classification of the asset as NPA. c. Another 20 percent of the book value of the assets shall be provided for after 12 months past due date of interest i.e. 9 months from the date of classification of the asset as NPA. d. Another 25 percent of the book value of the assets shall be provided for after 15 months past due date of interest i.e. 12 months from the date of classification of the asset as NPA. e. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be written back at the end of the 2nd quarter and 25% after every subsequent quarter where both installments and interest payment were in default earlier. 3. Explanation : The words 2nd quarter wherever appear, shall mean 2nd calendar quarter. SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001. e. An asset is reclassified as 'standard asset' only when both, the overdue interest and overdue installments are paid in full and there is satisfactory performance for a subsequent period of 6 months. 9.7.6 Receipt of past dues : 9.7.6.1 When the Mutual Fund has received income/ principal amount after their classifications as NPAs: a. For the next 2 quarters, income shall be recognized on cash basis and thereafter on accrual basis. The asset will be continued to be classified as NPA for these two quarters. b. During this period of two quarters although the asset is classified as NPA no provision needs to be made for the principal if the same is not due and outstanding. c. If part payment is received towards principal, the asset continues to be classified as NPA and provisions are continued as per the norms set at 9.7.4 above any excess provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investments and asterisk mark shall be given against such investments which are recognized as NPAs. Where the date of redemption of an investment has lapsed, the amount not redeemed shall be shown as Sundry Debtors and not investment, provided, that where an investment is redeemable by installments, that will be shown as an investment until all installments have become overdue. 9.8 Investment in Unlisted Equity Shares SEBI Circular No. MFD/CIR/03/526/2002 dated May 9, 2002. 9.8.1 To ensure uniformity in calculation of NAV the following guidelines are issued: 9.8.1.1 Methodology for Valuation - unlisted equity shares of a company shall be valued in good faith as below: a. Based on the latest available audited balance sheet, Net Worth shall be calculated as the lower of item (1) and (2) below: 1. Net Worth per share = [Share Capital + Free Reserves (excluding revaluation reserves) - Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] / Number of Paid up Shares. 2. After taking into account the outstanding warrants and options, Net Worth per share shall again be calculated and shall be = [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Investment in unlisted equity shares at a price higher than the price obtained by using the aforesaid methodology. However, this restriction is not applicable for investment made in the Initial Public Offers (IPOs) of the companies or firm allotment in public issues where all the regulatory requirements and formalities pertaining to public issues have been complied with by the companies and where the Mutual Funds are required to pay just before the date of public issue. 9.8.3.2 The Board of the AMC and Board of Trustees shall lay down the parameters for investing in unlisted equity shares. They shall pay specific attention as to whether due diligence was exercised while making such investments and shall review the performance of such investments in their periodical meetings SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000.. 9.8.4 Reporting of Compliance 9.8.4.1 Comments on compliance of these Guidelines shall be indicated by the AMCs and Trustees in their CTRs For CTR format please refer to the section on formats and Half Yearly Reports For Half Yearly Reports, please refer to the section on formats filed with the Board. 9.9 Valuation of securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, SEBI Circular No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998, SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 10.1.1 Mutual Funds may charge certain expenses to a scheme, as specified under Regulations. Regulation 52(4) of the Mutual Funds Regulations,1996 Apart from the these expenses, any other expense as may be approved by SEBI under clause (xiii) of Sub Regulation 52(4) can also be charged to the Mutual Fund schemes. Other expenses directly attributable to a scheme may be charged with the approval of trustees within the overall limits as provided in the Regulation 52(6). SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 10.1.2 Additional TER SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. can be charged up to 30 basis points on daily net assets of the scheme as per Regulation 52 Regulation 52 of the Mutual Funds Regulations,1996 , if the new inflows from beyond top 15 cities are at least (a) 30% of gross new inflows in the scheme or (b) 15% of the average assets under management (year to date) of the scheme, whichever is higher. In case inflows from beyond top 15 cities is less than the higher of (a) or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit holders. 10.1.7.3 Legal, marketing, publication and other general expenses not attributable to any scheme(s). 10.1.7.4 Fund Accounting Fees. 10.1.7.5 Expenses on investment management/general management. 10.1.7.6 Expenses on general administration, corporate advertising and infrastructure costs. 10.1.7.7 Depreciation on fixed assets and software development expenses. 10.1.7.8 Such other costs as may be prohibited by the Board. 10.1.8 The expenditure and/or fee payable by Mutual Funds to the Depositories may either be capitalized or included as part of recurring expenditure within the limits prescribed under Regulation 52(6) of the Mutual Funds Regulations SEBI Circular No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998.. 10.1.9 Further, each item of expenditure accounting for more than 10% of total expenditure shall be disclosed in the accounts or the notes thereto of the schemes SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000.. 10.1.10 Provision of charging of additional management fees by the Asset Management Companies in case of schemes launched on no load basis SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver of load for direct applications - Vide SEBI Circular No. SEBI/IMD/CIR No.10/112153/07 dated December 31, 2007,SEBI mandated w.e.f January 4,2009 no entry load shall be charged for applications received directly by the AMC(s) through internet or submitted directly to the AMC(s) or Collection Center/Investor Service Centre and not routed through any distributor or agent or broker. This waiver was applicable to both additional purchases under the same folio and switch in to a scheme from other schemes also done directly by the investor. AMCs shall follow the provisions pertaining to informing the unitholders upon a change in load structure as per clause 3(d) of standard observations. for all Mutual Fund schemes. 10.4.1.2 The scheme application forms shall carry a suitable disclosure to the effect that the upfront commission to distributors will be paid by the investor directly to the distributor, based on his assessment of various factors including the service rendered by the distributor. 10.4.1.3 The load balances are maintained as liabilities in the books of the scheme and are not included in the net asset value (NAV). The usage SEBI Circular No.CIR/IMD/DF/4/2011 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n charge shall be subject to the following: 10.5.1.1 For existing investors in a Mutual Fund, the distributor may be paid `100/- as transaction charge per subscription of `10,000/- and above. 10.5.1.2 As an incentive to attract new investors, the distributor may be paid `150/- as transaction charge for a first time investor in Mutual Funds. 10.5.1.3 The terms and conditions relating to transaction charge shall be part of the application form in bold print. 10.5.1.4 The transaction charge, if any, shall be deducted by the AMC from the subscription amount and paid to the distributor; and the balance shall be invested. 10.5.1.5 The statement of account shall clearly state that the net investment as gross subscription less transaction charge and give the number of units allotted against the net investment. 10.5.1.6 Distributors shall be able to choose to opt out of charging the transaction charge. However, the opt-out shall be at distributor level and not investor level i.e. a distributor shall not charge one investor and choose not to charge another investor. Further, Distributors shall have also the option to either opt in or opt out of levying transaction charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated July 8, 2009 10.8.1 Revised filing fee Gazettee Notification No. LAD-NRO/GN/2009-10/11/167759 on SEBI (Payment of Fees) (Amendment) Regulations, 2009 dated 29 June, 2009 as per the SEBI (Payment of Fees) Amendment Regulations 2009 would be applicable to those scheme(s) whose SID has been filed with SEBI on or after July 01, 2009. CHAPTER 11 DIVIDEND DISTRIBUTION PROCEDURE SEBI Circular No. SEBI/IMD/CIR No.1/64057/06 dated April 4, 2006., For details on advertisement on dividend please refer to Chapter on Advertisements 11.1 Regulations Regulation 53(a) of the SEBI (Mutual Funds) Regulations, 1996 permit Mutual Funds to distribute returns including dividend. To introduce uniform practices in dividend distribution, the following guidelines should be followed: 11.2 These guidelines are applicable to all Mutual Fund schemes/plans which intend to declare the dividend irrespective of their dates of launch. SEBI Circular No SEBI/IMD/CIR No. 3/65370/06 dated April 21,2006 11.2.1 Unlisted Scheme(s)/ Plan(s) 11.2.1.1 The Trustees shall decide the quantum of dividend and the record date in their meeting Clause 20 of Third Schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to realized gains, cannot be used to pay dividend. Therefore:- 11.3.2.1 When units of an open-ended scheme are sold, and sale price is higher than face value of the unit, part of sale proceeds that represents unrealised gains shall be credited to a separate account (Unit Premium Reserve) and shall be treated at par with unit capital and the same shall not be utilized for the determination of distributable surplus. 11.3.2.2 When units of an open-ended scheme are sold, and sale price is less than face value of the unit, the difference between the sale price and face value shall be debited to distributable reserves and the dividend can be declared only when distributable reserves become positive after adjusting the amount debited to reserves as per Regulations Paragraph 2(a) (ix) of Eleventh Schedule of SEBI (Mutual Funds) Regulations, 1996 . CHAPTER 12 INVESTMENT BY SCHEMES Investments in Money Market instruments (MMIs) In case of the existing schemes ( i.e. existing on date of issue of SEBI Circular No - SEBI / IMD / CIR No.3 / 166386 / 2009 dated June 15, 2009) where the investments in money market instruments of an issuer are not in compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viewed as violation of investment restrictions. 12.3 Investments by close ended debt schemes: 12.3.1Close ended debt schemes shall invest only in such securities which mature on or before the date of the maturity of the scheme SEBI Circular No IMD/CIR No 12/147132/08 dated December 11, 2008. 12.4 Prudential limits and disclosures on portfolio concentration risk in debt oriented mutual fund schemes SEBI Circular No.CIR/IMD/ DF/ 21/ 2012 dated September 13, 2012 and SEBI Circular No. CIR/IMD/DF/24/2012 dated November 19, 2012 12.4.1 Mutual Funds/AMCs shall ensure that total exposure of debt schemes of mutual funds in a particular sector (excluding investments in Bank CDs, CBLO, G-Secs, T-Bills and AAA rated securities issued by Public Financial Institutions and Public Sector Banks) shall not exceed 30% of the net assets of the scheme; Provided that an additional exposure to financial services sector (over and above the limit of 30%) not exceeding 10% of the net assets of the scheme shall be allowed by way of increase in exposure to Housing Finance Companies (HFCs) only; Provided further that the additional exposure to such securities issued by HFCs are rated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struments SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000. 12.6.1 Mutual Funds may, for the purpose of operational flexibility, constitute committees to approve investment proposals in unrated instruments. However, detailed parameters for investment in unrated debt instruments have to be approved by the Board of the AMC and Trustees. Details of such investments shall be communicated by the AMCs to the Trustees in their periodical reports, along with clear indication as to how the parameters set for investments have been complied with. Prior approval of the Board of the AMC and Trustees shall be required in case investment is sought to be made in an unrated security falling outside the prescribed parameters. 12.7 Investment limit in Units of Venture Capital Funds SEBI Circular No. MFD/CIR/9/230/2001 dated August 14, 2001 12.7.1 Mutual Fund schemes can invest in listed or unlisted securities or units of Venture Capital Funds within the prescribed investment limits as applicable Clauses 10 and 11, Seventh Schedule of SEBI (Mutual Funds) Regulations, 1996 12.8 Investment limits for Government guaranteed debt securities SEBI Circular No. SEB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as invested in that scheme. 12.10.1.6 In case of liquid and debt oriented schemes, AMC(s) shall not charge any investment management and advisory fees for parking of funds in short term deposits of scheduled commercial banks. 12.10.1.7 Half Yearly portfolio statements shall disclose all funds parked in short term deposit(s) under a separate heading. Details shall also include name of the bank, amount of funds parked, percentage of NAV. 12.10.1.8 Trustees shall, in the Half Yearly Trustee Reports certify that provisions of the Mutual Funds Regulations pertaining to parking of funds in short term deposits pending deployment are complied with at all points of time. The AMC(s) shall also certify the same in its CTR(s). 12.10.1.9 Investments made in short term deposits pending deployment of funds Clause 8, Schedule Seven, SEBI (Mutual Funds), Regulations, 1996. shall be recorded SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. and reported to the Trustees including the reasons for the investment especially comparisons with interest rates offered by other scheduled commercial banks. SEBI Circular No. SEBI/IMD/CIR No.9/20306/03 dated November 12, 2003. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions only in AA SEBI Circular No. CIR/IMD/DF/23/2012 dated November 15, 2012 and above rated corporate debt securities. 12.12.1.4 In terms of Regulation 44 (2) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, mutual funds shall borrow through repo transactions only if the tenor of the transaction does not exceed a period of six months. 12.12.1.5 The Trustees and the Asset Management Companies shall frame guidelines about, inter alia, , the following in context of these transactions keeping in mind the interest of investors in their schemes: a. Category of counterparty b. Credit rating of counterparty c. Tenor of collateral d. Applicable haircuts 12.12.1.6 Mutual funds shall ensure compliance with the Seventh Schedule of the Mutual Funds Regulations about restrictions on investments, wherever applicable, with respect to repo transactions in corporate debt securities. 12.12.1.7 The details of repo transactions of the schemes in corporate debt securities, including details of counterparties, amount involved and percentage of NAV shall be disclosed to investors in the half yearly portfolio statements and to SEBI in the half ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting in a. Aforesaid Securities b. Real Estate Investment Trusts listed on recognized Stock Exchanges overseas or c. Unlisted overseas securities, not exceeding 10% of their net assets 12.13.3 Other Conditions: Funds Regulations and guidelines issued from time to time, Mutual Funds shall adhere to the following specific guidelines while making overseas investments: 12.13.3.1 Appointment of a Dedicated Fund Manager : a. A dedicated fund manager shall be appointed for making the above overseas investments. 12.13.3.2 Due Diligence : a. The Board of the AMC and Trustees shall exercise due diligence in making investment decisions and record the same. SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000. They shall make a detailed analysis of risks and returns of overseas investment and how these investments would be in the interest of investors. Investment shall be made in liquid actively traded securities /instruments. b. The Board of the AMC and Trustees may prescribe detailed parameters for making such investments which may include identification of countries, country rating, country limits etc. They shall satisfy themselves that the AMC has exper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposed investment is sent to each unit holder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the Mutual Fund is situated. The communication to unit holders shall also disclose the risk factors associated with such investments. 12.13.3.5 Detailed periodic reporting to Trustees by AMC(s) shall include : a. Performance of overseas investments b. Amount invested in various schemes and any breach of the exposure limit laid down in the SID. 12.13.3.6 Review of Performance : a. The Board of the AMC and Trustees shall review the performance of schemes making overseas investments with appropriate benchmark(s) as disclosed in the SID. 12.13.3.7 Reporting to the Board : a. The Trustees shall offer their comments on the compliance of these guidelines in the Half Yearly Reports filed with the Board. 12.13.3.8 Prudential Investment Norms : a. Investment restrictions specified in Schedule Seven of the Mutual Funds Regulations are applicable to overseas investments stipulated under paragraph 12.12.2.1- 12.12.2.9 b. However, Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. Regulation 25(2) of the SEBI (Mutual Funds) Regulations, 1996. Further AMC(s) shall maintain records in support of each investment decision which will indicate data, facts and opinion leading to that decision. While broad parameters for investments can be prescribed by the Board of Directors of the AMC, the basis for taking individual scrip wise investment decision in equity and debt securities shall be recorded. A detailed research report analyzing various factors for each investment decision taken for the first time shall be maintained and the reasons for subsequent purchase and sales in the same scrip shall also be recorded. 12.16.2 The Board of the AMC shall develop a mechanism to verify that due diligence is being exercised while making investment decisions especially in cases of investment in unlisted and privately placed securities, unrated debt securities, NPAs, transactions where associates are involved and instances where the performance of the scheme(s) is poor. 12.16.3 AMC(s) shall report compliance with these requirements in their periodical reports to the Trustees and the Trustees shall report the same to the Board in the Half Yearly Trustee Report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Positions 12.17.1.8 Each position taken in derivatives shall have an associated exposure as defined under. Exposure is the maximum possible loss that may occur on a position. However, certain derivative positions may theoretically have unlimited possible loss. Exposure in derivative positions shall be computed as follows: Position Exposure Long Future Futures Price * Lot Size * Number of Contracts Short Future Futures Price * Lot Size * Number of Contracts Option bought Option Premium Paid * Lot Size * Number of Contracts. 12.18 Interval Schemes/Plans SEBI Circular No. CIR/IMD/DF /19/2010 dated November 26, 2010 12.18.1 Certain SIDs provide that the subscription to the scheme can be made during a specific period (known as specified transaction period). These schemes are generally referred to as interval schemes . 12.18.2 For all interval schemes/plans Applicability: The AMC shall ensure compliance with the requirements mentioned in Clause 12.16.2 from the date of next specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efault swap in corporate bonds along with equity, debt and derivative positions shall not exceed 100% of the net assets of the scheme. e. The total exposure related to premium paid for all derivative positions, including CDS, shall not exceed 20% of the net assets of the scheme. f. Before undertaking CDS transactions, mutual funds shall put in place a written policy on participation in CDS approved by the Board of the Asset Management Company and the Trustees as per the guidelines specified by RBI and Securities and Exchange Board of India (SEBI). The policy shall be reviewed by mutual funds, at least once a year. g. To enable the investors in the mutual funds schemes to take an informed decision, the concerned Scheme Information Document (SID) shall disclose the intention to participate in CDS transaction in corporate debt securities in accordance with directions issued by RBI and SEBI from time to time, and related information as appropriate in this regard. h. Mutual funds shall also disclose the details of CDS transactions of the scheme in corporate debt securities in the monthly portfolio statements as well as in the half yearly trustee report, as per the format P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the last day of the calendar quarter preceding the date of advertisement, along with benchmark index performance for the same periods. 13.3.2 Where scheme has been in existence for more than one year but less than three years, performance advertisement of scheme(s) shall be provided for as many as twelve month periods as possible, such periods being counted from the last day of the calendar quarter preceding the date of advertisement, alongwith benchmark index performance for the same periods. 13.3.3 Where the scheme has been in existence for less than one year, past performance shall not be provided. 13.3.4 In case of Money Market schemes or cash and liquid schemes SEBI Circular No.Cir/IMD/DF/6/2012 dated February 28, 2012 , wherein investors have very short investment horizon, the performance can be advertised by simple annualisation of yields if a performance figure is available for at least 7 days, 15 days and 30 days provided it does not reflect an unrealistic or misleading picture of the performance or future performance of the scheme. 13.3.5 For the sake of standardization, a similar return in INR and by way of CAGR must be shown for the following apart f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e type of instruments which the schemes propose to invest viz. CPs, CDs, Treasury bills etc 13.4.2.4 MFs shall disclose the floors and ceilings within a range of 5% of the intended allocation (in %) against each sub asset class/credit rating. For example, it may be disclosed that x-y % would be in AAA rated bank CD as per the sample matrix below: 13.4.2.5 After the closure of NFO, the AMCs will report in the next meeting of AMCs and Trustees the publicized percentage allocation and the final portfolio. Variations between indicative portfolio allocation and final portfolio will not be permissible. CHAPTER 14 INVESTOR RIGHTS OBLIGATIONS PART I INVESTOR RIGHTS 14.1 Payment of interest for delay in dispatch of redemption and/or repurchase proceeds and/or dividend SEBI Circular No. SEBI/MFD/CIR/2/266/2000 dated May 19, 2000. 14.1.1 In the event of failure to dispatch: a. Redemption or repurchase proceeds within 10 working days from the date of receipt of such requests and/ or b. Dividend within the stipulated 30 day period SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009 , 14.1.2 The AMC(s) shall be lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but not later than five working days from the date of closure of the initial subscription list and/or from the date of receipt of the request from the unitholders. 14.3.2 Consolidated Account Statement SEBI Circular No.Cir/IMD/DF/16/2011 dated September 08, 2011 14.3.2.1 As per regulation Regulation 36(4) of SEBI (Mutual Funds) Regulations, 1996 , AMCs shall issue consolidated account statement for each calendar month to the investors in whose folios transaction(s) has/have taken place during that month. 14.3.3 Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) or Systematic Withdrawal Plan (SWP) SEBI Circular No. IMD/CIR/12/80083/2006 dated November 20, 2006 a. Mutual Funds may dispatch the Statement of Accounts to the unit holders under SIP or STP or SWP, once every quarter ending March, June, September and December within 10 working days of the end of the respective quarter. The first Statement of Accounts shall however be issued within 10 working days of the initial transaction. b. Mutual funds shall also provide Statement of Accounts to unit holders within 5 working days, without any charges, if specific requests are received f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor. SEBI Circular No -SEBI/IMD/CIR No./ 13/187052 /2009 December 11, 2009 14.7 Additional mode of payment through Applications Supported by Blocked Amount (hereinafter referred to as ASBA ) in Mutual Funds SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010 14.7.1 ASBA facility which investors have been enjoying for subscription to public issue of equity capital of companies has been extended to the investors subscribing to New Fund Offers (NFOs) of mutual fund schemes. It shall co-exist with the current process, wherein cheques/ demand drafts are used as a mode of payment. 14.7.2 The banks which are in SEBI s list shall extend the same facility in case of NFOs of mutual fund schemes to all eligible investors in Mutual Fund units. 14.7.3 Mutual Funds shall ensure that adequate arrangements are made by Registrar and Transfer Agents for the implementation of ASBA. Mutual Funds/AMCs shall make all relevant disclosures in this regard in the SAI. 14.7.4 SEBI circulars SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008, SEBI/CFD/DIL/2008/25/09 dated September 25, 2008, SEBI/CFD/DIL/MB/IS/5/2009/05/08 dated August 5, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r distributors and agents (including brokers, banks, post offices) and the investors. 14.11.3 AMCs may publish the same as small booklets. In such a case, while the booklets must bear SEBI name and logo, AMC may give their name as publisher. This may also be displayed prominently on their web sites. 14.11.4 AMFI may consider including the brochure as a part of study material for their training programmes for investors and for their certification programme conducted for agents and distributors. 14.11.5 Board may be kept informed about the steps taken by the AMCs in this regard from time to time. CHAPTER 15 CERTIFICATION AND REGISTRATION OF INTERMEDIARIES SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001, SEBI Circular No. MFD/CIR/20/23230/2002 dated November 28, 2002, SEBI Circular No. SEBI/MFD/CIR No.01/6693/03 dated April 3, 2003, SEBI Circular No. SEBI/IMD/CIR No.2/254/04 dated February 4, 2004, SEBI Circular No. MFD/CIR/06/210/2002 dated June 26, 2002., Exemption for Senior Citizens: Senior citizens with experience in distributing Mutual Funds units are exempt from the mandatory certification examination if they have completed 50 years of age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , experience and proficiency in the business. b. Record of regulatory / statutory levies, fines and penalties, legal suits, customer compensations made; causes for these and resultant corrective actions taken. c. Review of associates and subsidiaries on above factors. d. Organizational controls to ensure that the following processes are delinked from sales and relationship management processes and personnel: 1. Customer risk / investment objective evaluation. 2. MF scheme evaluation and defining its appropriateness to various customer risk categories. 15.4.1.4 In this respect, customer relationship and transactions shall be categorized as: a. Advisory - where a distributor represents to offer advice while distributing the product, it will be subject to the principle of appropriateness of products to that customer category. Appropriateness is defined as selling only that product categorization that is identified as best suited for investors within a defined upper ceiling of risk appetite. No exception shall be made. b. Execution Only - in case of transactions that are not booked as advisory , it shall still require: i. The distributor has information to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re and/or Code of Conduct shall be reported in the periodic meetings of the Board of the AMC and the Trustee(s) and shall also be reported to the Board by the AMC(s) in their CTR(s) and by the Trustees in their Half Yearly Reports. 15.5.2 AMFI has prescribed a Code of Conduct for Mutual Fund intermediaries enclosed herewith as Annexure 1 Refer Annexure for details on Code of Conduct . All intermediaries shall follow the Code of Conduct strictly and not indulge in any practice contravening it directly or indirectly. 15.5.3 Non compliance with the Code of Conduct shall be reported by the Mutual Funds to the Board and AMFI. Further, no Mutual Fund shall deal with intermediaries contravening the prescribed Code of Conduct. 15.6 Empanellment of Intermediaries by Mutual Funds 15.6.1 Empanelment of intermediaries by Mutual Funds, payment of commissions, brokerage and/or sub-brokerage etc. shall be in accordance with parameters and guidelines specified by the Board and AMFI from time to time. Mutual Funds shall monitor the compliance of these guidelines and Code of Conduct by their intermediaries in terms of business done across all Mutual Funds. In case of non-compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, prior to the expiry of the validity of the certification. 15.7.5 The requirement of obtaining registration from AMFI after obtaining certification, as per the Circular dated November 28, 2002, would continue. 15.8 New cadre of distributors SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012. 15.8.1 A new cadre of distributors, such as postal agents, retired government and semi-government officials (class III and above or equivalent) with a service of at least 10 years, retired teachers with a service of at least 10 years, retired bank officers with a service of at least 10 years, and other similar persons (such as Bank correspondents) as may be notified by AMFI/AMC from time to time, shall be allowed to sell units of simple and performing mutual fund schemes. 15.8.2 Simple and performing mutual fund schemes shall comprise of diversified equity schemes, fixed maturity plans (FMPs) and index schemes and should have returns equal to or better than their scheme benchmark returns during each of the last three years. 15.8.3 These new cadre of distributors would require a simplified form of NISM certification and AMFI Registration. 15.9 Unique Ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... great care and be satisfied of investor bonafides before authorizing any transaction, including redemption, on such accounts/ folios. 16.1.3 The Trustees were required forthwith to confirm to Board that the steps had been taken to address the above and also send a status to the Board as and when process was completed to their satisfaction. 16.1.4 All mutual funds/ AMCs are directed that SEBI Circular No Cir /IMD/DF/9 / 2010 dated August 12, 2010 : 16.1.4.1 All new folios/ accounts shall be opened only after ensuring that all investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature are available with AMCs/RTAs and not just with the distributor. 16.1.4.2 For existing folios, AMCs shall be responsible for updation of the investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature by November 15, 2010. 16.1.4.3 The trustees shall submit a confirmation after they receive certification from an Independent auditor on completion of the said process latest by November 22, 2010. 16.2 Facilitating transactions in Mutual Fund schemes through the Stock Exchange i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units in dematerialised form, demat statement given by depository participant would be deemed to be adequate compliance with requirements for account statement prescribed by SEBI For details on dispatch of statement of accountts. refer to Chapter 14- Investor Rights and services. Investor grievance mechanism a. Stock exchanges shall provide for investor grievance handling mechanism to the extent they relate to disputes between brokers and their client. 16.2.4.5 Dematerialization of existing units held by investors a. In case investors desire to convert their existing physical units (represented by statement of account) into dematerialized form, mutual funds / AMCs shall take such steps in coordination with Registrar and Transfer Agents, Depositories and Depository participants (DPs) to facilitate the same. 16.2.4.6 Option to hold units in demat form SEBI circular no.CIR/IMD/DF/9/2011, dated May 19, 2011 a. Mutual Funds/AMCs are advised to invariably provide an option to the investors to mention demat account details in the subscription form, in case they desire to hold units in demat form while subscribing to any scheme (open ended/close ended/Interv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Payment of redemption proceeds to the broker/clearing members by MF/AMC shall discharge MF/AMC of its obligation of payment to individual investor. Similarly, in case of purchase of units, crediting units into broker/clearing member pool account shall discharge MF/AMC of its obligation to allot units to individual investor. 16.2.4.11 The following may be noted in this regard: a. Clearing members and Depository participants will be eligible to be considered as official points of acceptance SEBI Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006 and conditions stipulated SEBI Circular dated November 13, 2009 for stock brokers Viz. AMFI /NISM certification, code of conduct prescribed by SEBI for Intermediaries of Mutual Fund, shall be applicable for such Clearing members and Depository participants as well. b. Stock exchanges and Depositories shall provide investor grievance handling mechanism to the extent they relate to disputes between their respective regulated entity and their client and shall also monitor the compliance of code of conduct specified SEBI Circulars MFD/CIR/20/23230/02 dated November 28, 2002 and SEBI/IMD/08/174648/2009 dated August ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Multilateral Memorandum of Understanding, Provided that such person is not resident in India, Provided further that such person is not registered with SEBI as Foreign Institutional Investor or Sub-account. Explanation- For the purposes of this clause: (1) the term Person shall carry the same meaning under Section 2(31) of the Income Tax Act, 1961 (2) the phrase resident in India shall carry the same meaning as in the Income Tax Act, 1961 (3) resident in a country, other than India, shall mean resident as per the direct tax laws of that country. 17.1.2.2 MF shall ensure that only QFIs who comply with para 17.1.2.1 are allowed to invest under these routes. 17.1.2.3 MF shall ensure that QFIs meet the KYC requirements as per the FATF standards, Prevention of Money Laundering Act, 2002 (PMLA) rules and regulations made thereunder, and SEBI circulars issued in this regard before accepting subscriptions from QFIs. 17.1.2.4 The aggregate investments by QFIs under both the routes shall be subject to a total overall ceiling of US $10 billion for equity schemes. 17.1.2.5 In addition to the above, the aggregate investments by QFIs under both the routes for debt s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts / applicable guidelines for QFIs. 17.1.2.11 MF shall ensure that Systematic Investments/ transfer/ withdrawals and switches are not available to the QFIs. QFIs can only subscribe or redeem. 17.1.2.12 MF/ DP shall ensure that units/ UCRs held by QFIs are free from all encumbrances i.e. pledge or lien cannot be created for such units. 17.1.2.13 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 17.1.2.14 MF shall ensure that all the investor related documents/ records of the QFIs are available with them. 17.1.2.15 MF shall ensure compliance with laws (rules and regulations) of the jurisdictions where the QFIs are based and also ensure that the interest of existing unit holders of the MF schemes are not adversely affected due to the issuance of UCRs/ demat units to the QFIs. 17.1.2.16 In case of any penalty, pending litigations or proceedings, findings of Inspections or investigations for which action may have been taken or is in the process of being taken by an overseas regulator against MF/ AMC, it shall bring such information to the attention of SEBI and unitholders of the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with its DP and remit foreign inward remittances through normal banking channel in any permitted currency (freely convertible) directly to the single rupee pool bank account of the DP maintained with a designated AD category - I bank. b. DP in turn shall forward the purchase order to the concerned MF and remits the money to the MF s scheme account on the same day as the receipt of funds from QFIs. In case of receipt of money after business hours, DP shall remit the funds to MF scheme account by next business day. c. If for any reasons, the DP is not able to remit the money to the MF scheme account within the stipulated timeframe as mentioned in para-b, the DP shall immediately return the money to the designated overseas bank account of the QFIs. d. MF shall process the order and credit units into the demat account of the QFIs. e. If for any reasons the units are not allotted, MF / DP shall ensure that the money is remitted back to the QFI s designated overseas bank account within 3 working days from the date of receipt of subscription of money in the single rupee pool bank account of the DP maintained with a designated AD category I bank. Redemption a. QFIs can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.1.4.7 MF shall comply with all the requirements as per the PMLA, FATF standards and SEBI circulars issued in this regard on an ongoing basis. 17.1.4.8 Custodians appointed by the MF shall comply with the SEBI (Custodian of Securities) Regulations, 1996, circulars and guidelines issued by SEBI. 17.1.4.9 The rupee denominated units of the MF would be held as underlying by the custodian in India in demat mode against which the UCR issuer would issue UCR to be held by QFIs. 17.1.4.10 MF shall ensure that for every UCR issued by UCR issuer, Custodian in India shall hold corresponding number of units against it i.e., there shall be one unit of MF scheme for every unit of UCR. 17.1.4.11 MF shall receive money from UCR issuer either in foreign country by opening bank account overseas (in accordance with the relevant extant FEMA regulations) or in Indian rupees in the respective MF scheme account held in India. 17.1.4.12 MF shall mandate the UCR issuer regarding the requirements for KYC, Customer due diligence process and documents and information to be collected from the QFIs in terms of the requirements mentioned in para 17.1.2.13 above. 17.1.4.13 MF shall obtain ..... 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No.Cir/IMD/DF/7/2012 dated February 28, 2012 to Regulation 24 Of SEBI (Mutual Funds) Regulations, 1996 17.2.1 The amended Regulation 24 mandates that AMCs shall appoint separate fund manager for each separate fund managed by it unless the investment objectives and assets allocations are the same and the portfolio is replicated across all the funds managed by the fund manager. 17.2.2 The replication of minimum 70% of portfolio value shall be considered as adequate for the purpose of said compliance, provided that AMC has in place a written policy for trade allocation and it ensures at all points of time that the fund manager shall not take directionally opposite positions in the schemes managed by him. 17.2.3 Wherein a fund manager is common across mutual fund schemes and schemes/products under other permissible activities of AMC, then the AMC shall: 17.2.3.1 disclose on their websites, the returns provided by the said manager for all the schemes (mutual fund, pension funds, offshore funds etc) on a monthly basis. 17.2.3.2 in case of any performance advertisement is issued by the AMC for any scheme, then the details of returns of all the schemes (mutual fun ..... 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