Securities And Exchange Board of India (Mutual Fund) (Amendment) Regulations, 2021[i]

SEBI has tweaked mutual fund regulations. The new rules will replace parts of SEBI (Mutual Fund) Regulations, 1996 and other circulars issued since then. SEBI this year on February 2021 issued new norms with regard to mutual funds i.e Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2021.

New changes to the Mutual Funds Regulations:-

• Easier profitability criteria to become a Mutual Fund Sponsor:
• Under the new norms, sponsors that are not fulfilling profitability criteria at the time of making an application will also be considered to be eligible to sponsor a mutual fund (MF).
• This is subject to, where Asset Management Company (AMC) is required to have a net worth of Rs. 100 Cr. and the Asset Management Company shall maintain this net worth till it has profits for 5 consecutive years.
• Currently, a sponsor has to have a profit after providing for depreciation, interest and tax in three out of the immediately preceding five years, including fifth year. Under the new norms, this requirement is not mandatory for the sponsor of Mutual Fund.
• As per SEBI, any entity which holds 40% or more of the net worth of an Asset Management Company shall be deemed to be a sponsor.

• Asset Management Company can launch infrastructure debt fund schemes:
• The Asset Management Company (AMC) of a mutual fund is eligible to launch only infrastructure debt fund schemes, should have a net worth of not less than Rs. 10Cr.

• Maintaining minimum net worth:
• It is compulsory for all asset management company to maintain the minimum net-worth on a continuous basis.

• Dividend Payments:
• Mutual Fund to send the dividend payments to the unit holders within 15 days from the record date from the earlier requirement of 30 days.

• To issue units in dematerialized form:
• The asset management company must issue units in dematerialized form to unit holder in a scheme within two working days of the receipt of request from the unit holder.

• Price:
• Mutual Funds ensures that the repurchase price of an open ended scheme is not lower than 95% of the Net Asset Value (NAV), when determining the price of the units.

• Segregate and Ring fence assets and liabilities:
• In addition to the existing requirement of the trustees and asset management companies to segregate bank accounts and securities accounts, SEBI has asked to segregate and ring fence assets and liabilities of mutual fund schemes.[ii]

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.

[i] Securities And Exchange Board of India (Mutual Fund) (Amendment) Regulations, 2021, Also available: https://www.sebi.gov.in/legal/regulations/feb-2021/securities-and-exchange-board-of-india-mutual-funds-amendment-regulations-2021_49020.html

[ii] AC Team, SEBI Releases new norms of (Mutual Funds) (Amendment) Regulations, 2021