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SEBI amends Mutual Funds Regulations

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SEBI earlier this week amended Mutual Funds Regulations bringing major changes in structure and governance of mutual funds.


The amendments now allow sponsors of Asset Management Companies (AMCs) to disassociate themselves from AMCs and mutual funds. Further, the regulations provide that an AMC itself can act as sponsor of an existing mutual fund, if the sponsor disassociates itself. The regulation further provides shareholding conditions and the structure of board of AMCs in such cases, with the objective to ensure that the board of AMCs act independently and no individual shareholder hold excessive influence.


The amendments also provide that in case a company is appointed as trustee of a mutual fund, the chairperson of the board of directors of the trustee company shall be an independent director. The amendments further imposes responsibility on a trustee to ensure that no change in the fundamental attributes of any scheme, the fees and expenses payable or any other change which would modify the scheme and affect the interest of the unit holders is carried out by AMCs unless it complies with the conditions and obligations laid down for AMCs under the regulations.


Further, in order to make AMCs of the regulations more accountable, the amendments have now imposed the responsibility of due diligence prior to launch of a mutual fund and responsibility to ensure that the mutual funds are being run in interest of the unitholders on the AMCs. In fact, SEBI vide this amendment has transferred these responsibilities from trustees to the AMCs.


The amendments also introduced necessary provisions to allow mutual funds to invest in Corporate Debt Market Development Fund. SEBI had decided to form the fund earlier this year in the form of AIF, which would act as a backstop facility for purchase of investment grade corporate debt securities during times of stress. The move is aimed at instilling confidence amongst the participants in the corporate bond market and to generally enhance secondary market liquidity.


The amendments have also brought necessary provisions to allow private equity fund or a pooled investment vehicle or a pooled investment fund to act as sponsor of mutual funds.


Readers can access the amendments below.


Readers are also welcome to send their views to Regstreet Law Advisors at info@regstreetlaw.com.

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