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TMI BlogSecurities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2024.X X X X Extracts X X X X X X X X Extracts X X X X ..... nd V of regulation 3 of these amendment regulations shall come into force with effect from April 1, 2025. 3. In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 , I. in Chapter II, in regulation 11 , after the words and symbol in regulation 7 , the words and symbol or regulation 81 shall be inserted. II. in Chapter IV , in regulation 23 , after the words and symbol in regulation 21 , the words and symbol and regulation 86 shall be inserted. III. In regulation 29A ,- (i) in sub-regulation (1), the words in the manner specified in Fourth Schedule shall be substituted with the words in the manner as may be specified from time to time . (ii) the existing sub-regulation (2) shall be renumbered as sub-regulation (3). (iii) after sub-regulation (1), the following sub-regulation shall be inserted, namely: (2) The unitholder shall have an option to nominate, in the manner as may be specified, a person who shall be authorized to conduct transactions on behalf of the unitholder in the event of the incapacitation of the unitholder. (iv) after sub-regulation (3), the following sub-regulation shall be inserted, namely: (4) An asset management company or its registrar t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accredited investor. (2) The Fund Manager of Specialized Investment Funds shall have the relevant NISM certification as may be specified by the Board from time to time. (3) All provisions applicable to the schemes of a mutual fund under these regulations shall also apply to the Investment Strategies launched under the Specialized Investment Fund, unless otherwise specified. Procedure for launching of investment strategies: 49Y. (1) The investment strategies under the Specialized Investment Fund shall be launched in accordance with the procedure applicable to the schemes of the mutual funds, as laid down in regulation 28: Provided that a Specialized Investment Fund may launch such investment strategies in the manner as may be specified by the Board from time to time. (2) An investment strategy under the Specialized Investment Fund shall be launched as an open-ended investment strategy or close-ended investment strategy or interval investment strategy with subscription and redemption frequency appropriately disclosed in the offer document. (3) The fees and expenses for the investment strategies launched under the Specialized Investment Fund shall be in accordance with regulation 52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at company s paid up capital carrying voting rights. (3) No investment strategy of a Specialized Investment Fund shall invest more than 10 per cent of its NAV in the equity shares and equity-related instruments of any company. (4) A Specialized Investment Fund may invest in the units of REITs and InvITs subject to the following: (a) No Specialized Investment Fund under all its investment strategies shall own more than 20 per cent of units issued by a single issuer of REIT and InvIT: Provided that the limit mentioned in clause (a) of sub-regulation 4 above shall be inclusive of 10 per cent limit for mutual fund scheme as specified under clause 13 (a) of Seventh Schedule. (b) An investment strategy under Specialized Investment Fund shall not invest - (i) more than 20 per cent of its NAV in the units of REITs and InvITs; and (ii) more than 10 per cent of its NAV in the units of REIT and InvIT issued by a single issuer: Provided that the limits mentioned in sub-clauses (i) and (ii) above shall not be applicable for investments in case of index fund or sector or industry specific scheme pertaining to REIT and InvIT. (5) All other investment restrictions applicable for schemes of mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mutual fund Lite. (b) Mutual Fund Lite or MF Lite means a mutual fund that has obtained registration under this Chapter and is having only such index funds, exchange traded funds, fund of funds or other mutual fund schemes as may be specified by the Board from time to time. (c) Mutual Fund Lite asset management company or MF Lite asset management company or MF Lite AMC means an asset management company of a Mutual Fund Lite that has been granted approval under this Chapter. (d) Mutual Fund Lite scheme or MF Lite Scheme means any scheme launched by a mutual fund lite or any other eligible passive scheme as may be specified by the Board from time to time. Applicability 80 . (1) The provisions of this Chapter shall be applicable to Mutual Funds Lite and Mutual Fund Lite Schemes. (2) All other provisions of these regulations except the following provisions and the guidelines and circulars issues thereunder, unless the context otherwise requires, or is repugnant to the provisions of this Chapter, shall apply to a Mutual Fund Lite, Mutual Fund Lite schemes, and trustees and asset management companies in relation to such mutual funds and schemes: i. regulation 7; ii. regulation 14; iii. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef Investment Officer shall be at least twenty years; and (iv) ensure that in case of acquisition of existing MF Lite asset management company, the sponsor shall have minimum positive liquid net worth equal to incremental capitalization required to ensure minimum capitalization of the MF Lite asset management company and the positive liquid net worth of the sponsor or the funds tied up by the sponsor are to the extent of aggregate par value or market value of the shares proposed to be acquired, whichever is higher; (v) ensure that in case of acquisition of stake in an existing MF Lite asset management company, the shareholding equivalent to at least rupees seventy five crore shall be locked in for three years. (vi) ensure that other conditions in this regard as may be specified by the Board from time to time are adhered to: Provided further that a private equity fund or a pooled investment vehicle or a pooled investment fund may also be permitted to sponsor mutual funds lite subject to such other conditions as may be specified by the Board from time to time. (b) applicant is a fit and proper person by taking into account the criteria specified in Schedule II of the Securities and E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lder holding 10% or more shareholding or voting rights in an existing asset management company of the mutual fund may be allowed to hold 10% or more shareholding or voting rights in a mutual fund lite asset management company belonging to a group entity of the same sponsor. (4) An existing mutual fund that intends to only launch mutual fund lite schemes may surrender its existing registration and migrate as a mutual fund lite under this Chapter subject to the conditions and the manner specified by the Board. Trust deed to be registered under the Registration Act 83. A mutual fund lite shall be constituted in the form of a trust and the instrument of trust shall be in the form of a deed, as specified by the Board, duly registered under the provisions of the Registration Act, 1908 (16 of 1908), executed by the mutual fund lite asset management company in favor of the trustees named in such an instrument: Provided that in case of disassociation of the sponsor, the signatory to the trust deed shall be as specified by the Board. Appointment of trustee. 84 . (1) Notwithstanding anything contained under regulation 7B of these regulations, a debenture trustee may be appointed as a trustee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unfair advantage to any associates or dealt with any of the associates of the mutual fund lite asset management company in any manner detrimental to interest of the unitholders. (11) Each trustee shall file the details of his transactions of dealing in securities with the Mutual Fund Lite within the time and manner as may be specified by the Board from time to time. (12) The trustees shall take steps to ensure that the transactions of the mutual fund lite are in accordance with the provisions of the trust deed. (13) The trustees shall obtain the consent of the unitholders (a) whenever required to do so by the Board in the interest of the unitholders; or (b) whenever required to do so on the requisition made by three-fourths of the unitholders of any mutual fund lite scheme; or (c) when the majority of the trustees decide to wind up a scheme in terms of clause (a) of sub regulation (2) of regulation 39 or prematurely redeem the units of a close ended scheme. (14) The trustees shall call for the details of transactions in securities by the key personnel of the mutual fund lite asset management company in his own name or on behalf of the mutual fund lite asset management company and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e excluded while computing the networth of the mutual fund lite asset management company. (3) The networth of the mutual fund lite asset management company as required under sub-regulation (1) or (2) of this regulation shall be maintained on a continuous basis and it shall be the responsibility of the sponsor to ensure the same. (4) Notwithstanding anything contained in sub-regulations (1) to (3), if the total assets under management of the mutual fund lite asset management company exceeds the specified thresholds, the mutual fund lite asset management company shall abide by the net worth requirements under Chapter IV of these Regulations. Mutual fund lite asset management company and its obligations 87 . (1) The directors of a mutual fund lite asset management company shall be appointed by the sponsor and the sponsor shall exercise diligence while making such appointments. (2) The mutual fund lite asset management company shall take all reasonable steps and exercise due diligence to ensure that the investment of funds pertaining to any mutual fund lite scheme is not contrary to the provisions of these regulations and the trust deed. (3) The mutual fund lite asset management compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceptions, if any. (10) The board of directors of the mutual fund lite asset management company shall ensure that all the activities of the mutual fund lite asset management company are in accordance with the provisions of these regulations. (11) A mutual fund lite asset management company shall not: (a) through any broker associated with the sponsor, purchase or sell securities, which is average of 10 per cent or more of the aggregate purchases and sale of securities made by the mutual fund lite in all its schemes: Provided that for the purpose of this clause, the aggregate purchase and sale of securities shall exclude sale and distribution of units issued by the mutual fund lite and such other transactions as may be specified by the Board: Provided further that the aforesaid limit of 10 per cent shall apply for a block of any three months. (b) purchase or sell securities through any broker other than a broker referred to in clause (a) of sub-regulation (11) which is average of 25 per cent or more of the aggregate purchases and sale of securities made by the mutual fund lite in all its schemes, unless the mutual fund lite asset management company has recorded in writing the just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for rates higher than the competitive market rates, prior approval of the trustees shall be obtained and reasons for charging higher rates shall be disclosed in the annual accounts. (18) The mutual fund lite asset management company shall abide by the Code of Conduct as specified in PART-A of the Fifth Schedule of these regulations. (19) The mutual fund lite asset management company shall not carry out its operations including trading desk, unit holder servicing and investment operations outside the territory of India. (20) The mutual fund lite asset management company shall compute and carry out valuation of investments made by its scheme(s) in accordance with the investment valuation norms specified in Eighth Schedule of these regulations, and shall publish the same. (21) The mutual fund lite asset management company and the sponsor of the mutual fund lite shall be liable to compensate the affected investors and/or the scheme for any unfair treatment to any investor as a result of inappropriate valuation. (22) The board of directors of the mutual fund lite asset management company shall exercise due diligence as follows: (a) The board of directors of the mutual fund lite ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compromised with those of any other scheme or of other activities of the mutual fund lite asset management company. (vi) the networth of the mutual fund lite asset management company are reviewed on a quarterly basis to ensure compliance with the threshold provided in regulation 86 on a continuous basis; (vii) all service contracts including custody arrangements of the assets and transfer agency of the securities are executed in the interest of the unit holders and test checks of service contracts are arranged. (viii) there is no conflict of interest between the manner of deployment of the networth of the mutual fund lite asset management company and the interest of the unit holders; (ix) the investor complaints received are periodically reviewed and redressed; (x) all service providers are holding appropriate registrations from the Board or with the concerned regulatory authority; (xi) any special developments in the mutual fund lite are immediately reported to the Board; (xii) there has been exercise of due diligence on the reports submitted by the mutual fund lite asset management company to the trustees; (xiii) there has been exercise of due diligence on such matters as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The mutual fund lite asset management company shall ensure that no change in the fundamental attributes of any scheme or the trust, fees and expenses payable or any other change which would modify the scheme and affect the interest of unit holders, shall be carried out unless, (i) a written communication about the proposed change is sent to each unit holder and an advertisement is issued in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of region where the Head Office of the mutual fund is situated; and (ii) the unit holders are given an option to exit at the prevailing Net Asset Value without any exit load. (30) The MF Lite asset management company shall put in place an institutional mechanism, as may be specified by the Board, for the identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities. (31) The Chief Executive Officer or Managing Director or such other person of equivalent or analogous rank and Chief Compliance Officer of the mutual fund lite asset management company shall be responsible and accountable for implementation of such an institutional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here are unavoidable conflict of interest situations, it shall satisfy itself that disclosures are made of source of conflict, potential material risk or damage to investor interests and detailed parameters for the same; (iv) it ensures independence to key personnel handling the relevant conflict of interest is provided through removal of direct link between remuneration to relevant asset management company personnel and revenues generated by that activity: Procedure for launching of mutual fund lite schemes 89 . (1) No mutual fund lite scheme shall be launched by the mutual fund lite asset management company unless such mutual fund lite scheme is approved by the board of directors of the mutual fund lite asset management company and a copy of the offer document has been filed with the Board. VII. In the Fourth Schedule the FORM FOR NOMINATION/CANCELLATION OF NOMINATION shall be omitted. PRAMOD RAO, Executive Director [ADVT.-III/4/Exty./764/2024-25] Footnote: 1. The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 , the Principal Regulations, were published in the Gazette of India on December 9, 1996 vide S.O. No. 856 (E). 2. The Securities and Exchange Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 10, 2004 by the Securities and Exchange Board of India (Criteria for Fit and Proper Person) Regulations, 2004 vide S.O. No. 398 (E). (18) On January 12, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2006 vide S.O. No. 38 (E). (19) On May 22, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2006 vide S.O. No. 783 (E). (20) On August 3, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2006 vide S.O. No. 1254 (E). (21) On December 27, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2006 vide F. No. SEBI/LAD/DOP/82534/2006. (22) On December 27, 2006 by the Securities and Exchange Board of India (Mutual Funds) (Fifth Amendment) Regulations, 2006 vide F. No. SEBI/LAD/ DOP/83065/2006. (23) On May 28, 2007 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2007 vide F. No. 11/LC/GN/2007/2518. (24) On October 31, 2007 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2007 vide F. No. 11/LC/GN/2007/4646. (25) On March 31, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulations, 2014 vide No. LAD-NRO/GN/2014-15/19/1973. (41) On May 15, 2015 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2015 No. NROOIAE/GN/2015-16/005. (42) On February 12, 2016 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2016 vide No. SEBI/LAD-NRO/GN/2015-16/034. (43) On February 15, 2017 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2017 vide No. SEBI/LAD/NRO/GN/2016-17/031. (44) On March 13, 2018 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/2018/02. (45) On May 30, 2018 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/2018/14. (46) On December 6, 2018 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/2018/50. (47) On December 13, 2018 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2018 vide No. SEBI/LADNRO/ GN/2018/51. (48) On January 1, 2019 by the Securities and Exchange Board of India (Custodian ..... X X X X Extracts X X X X X X X X Extracts X X X X
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