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𝐏𝐅𝐑𝐃𝐀 𝐛𝐫𝐢𝐧𝐠𝐬 𝐦𝐚𝐣𝐨𝐫 𝐜𝐡𝐚𝐧𝐠𝐞𝐬 𝐭𝐨 𝐭𝐡𝐞 𝐏𝐞𝐧𝐬𝐢𝐨𝐧 𝐅𝐮𝐧𝐝 𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐢𝐨𝐧𝐬

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The Pension Fund Regulatory and Development Authority (PFRDA) has by an amendment overhauled the Regulations governing Pension Funds . An overview of the changes been brought in is as under:

1. 𝐎𝐛𝐣𝐞𝐜𝐭𝐢𝐯𝐞 – The objective of the Regulations has been streamlined to make them more in sync with the objective of the PFRDA Act, 2013.

2. 𝐄𝐥𝐢𝐠𝐢𝐛𝐢𝐥𝐢𝐭𝐲 𝐂𝐫𝐢𝐭𝐞𝐫𝐢𝐚 – The Eligibility Criteria for a sponsor to a Pension Fund has been amended keeping in view ease of doing business. The earlier regulations provided that any violation of securities laws by the sponsor / principal officer would make the applicant ineligible. The scope of this has been reduced to limit it to an order of restraint, prohibition or debarment leaving out ineligibility arising out of imposition of monetary penalty. Further, a timeline of three years from expiry of such restraint / prohibition has been included post which the applicant may potentially fall back within the eligibility criteria. 

3. 𝐓𝐞𝐫𝐦𝐬 𝐚𝐧𝐝 𝐂𝐨𝐧𝐝𝐢𝐭𝐢𝐨𝐧𝐬 𝐨𝐟 𝐑𝐞𝐠𝐢𝐬𝐭𝐫𝐚𝐭𝐢𝐨𝐧 – The timeline to intimate PFRDA regarding any change in shareholding of less than 5% has been reduced from 15 days to 7 days. Further, several of the conditions for eligibility regarding prohibition on a pension fund holding equity stake in another pension fund, shareholding caps in other regulated entities have also explicitly added to the Terms and Conditions of Registration.

4. 𝐍𝐞𝐭 𝐀𝐬𝐬𝐞𝐭 𝐕𝐚𝐥𝐮𝐞 (𝐍𝐀𝐕) 𝐟𝐨𝐫 𝐒𝐜𝐡𝐞𝐦𝐞𝐬 – The amended regulations have provided greater clarity on the computation of NAV which includes a new Schedule XII which provides an illustration for calculation of NAV.

5. 𝐀𝐧𝐧𝐮𝐚𝐥 𝐑𝐞𝐩𝐨𝐫𝐭 – Under the amended regulations, the annual report shall include a Directors responsibility statement and certificate by CEO / Head of Operations on (i) correctness of the state of affairs and NAV of the schemes, (ii) adequacy and effectiveness of internal financial processes and digital architecture controls and (iii) compliance / adherence to various applicable laws.

6. 𝐃𝐮𝐭𝐢𝐞𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐏𝐞𝐧𝐬𝐢𝐨𝐧 𝐅𝐮𝐧𝐝 – The amended regulations direct Pension Funds to take all measures necessary for prevention of fraud, develop and follow a fraud prevention and mitigation policy. Further, the Pension Fund shall indemnify the subscriber for any loss on account of fraud or negligence on the part of the pension fund. 

While the effect and impact of the amended regulations will be assessed by industry participants in due course, it is certainly a welcome step in relation to effective legislative drafting. 

A copy of the Gazette Notification which amended the regulations is enclosed herewith.

Readers are welcome to share their views with Regstreet Law Advisors on info@regstreetlaw.com

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