SEBI Circular: Alignment of interest of key Employees of Asset Management Companies (AMCs) with the unitholders of the Mutual Fund Schemes[i]

The Securities and Exchange Board of India through its circular dated June 25, 2021, has extended the implementation date for a circular pertaining to the alignment of interest of Key Employees of Asset Management Companies (AMC’s) with the unitholders of the Mutual Fund Schemes till October 1, 2021.

Key Employees Asset Management Companies consist of: CEO, CIO, CRO, CISO, COO, Fund managers, compliance officers, Sales head, Heads of other departments and dealers of asset management firm, etc. 

In the process to align the interest of the key Employees of the AMCs with the unitholders of the mutual fund schemes, it has been decided that part of the compensation of the Key Employees of the AMCs shall be paid in the form of units of the scheme are as follow:

A minimum of 20% of the salary or perks or bonus or non-cash compensation net of income tax and any statutory contributions i.e PF and NPS of the Key Employees of the AMCs shall be paid in the form of units of Mutual Fund Schemes in which they have a role.

SEBI said such mutual funds units would be locked in for a minimum period of three years of the scheme, whichever is less.  

The compensation paid in the form of units needs to be proportionate to the asset under management (AUM) of the schemes. 

Units allotted to the Key Employees shall be subject to claw-back in the event of a violation of code of conduct, fraud, gross negligence by them, as determined by the SEBI. The units shall be redeemed and the amount shall be credited to the scheme, upon the claw-back.

The compensation paid in the form of units needs to be proportionate to the assets under the management of the schemes. 

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[i] Securities and Exchange Board of India, Alignment of interest of key Employees of Asset Management Companies (AMCs) with the unit holders of the Mutual Fund Schemes