·
REGULATIONS OF MUTUAL
FUNDS IN INDIA
·
DR SHASHI AGAGRWAL
·
REGULATIONS OF MUTUAL
FUNDS
1.
REGULATED BY THE
SECURITIES AND EXCHANGE BOARD OF INDIA
2.
IN 1996,SEBI
FORMULATED THE MUTUAL FUNDS REGULATIONS
3.
ALONG WITH SEBI,MUTUAL
FUNDS ARE REGULATED BY RBI,COMPANIES ACT,STOCK EXCHANGE,INDIAN TRUST ACT AND
MINISTRY OF FINANCE.
4.
IN ORDER TO PROVIDE A
GUARANTEED RETURN SCHEME, MUTUAL FUNDS NEEDS TO TAKE APPROVAL FROM RBI
5.
THE MINISTRY OF FINANCE
ACTS AS SUPERVISOR OF RBI AND SEBI AND APPELLATE AUTHORITY UNDER SEBI
REGULATIONS
6.
MUTUAL FUNDS CAN APPEAL TO
THE MINISTRY OF FINANCE ON THE SEBI RULING
7.
THE ASSOCIATION OF MUTUAL
FUNDS IN INDIA ( AMFI) HAS BEEN MADE TO DEVELOP THIS MUTUAL FUND INDUSTRY OF
INDIA ON PROFESSIONAL AND ETHICAL LINES AND TO ENHANCE AND MAINTAIN STANDARD IN
ALL AREAS WITH A VIEW TO PROTECT AND PROMOTE THE MUTUAL FUNDS AND THEIR UNIT
HOLDERS.
8.
AMFI WAS INCORPORATED ON
22 ND AUGUST 1995 AS A NON PROFIT ORGANIZATION
9.
IT IS AN ASSOCIATION OF
SEBI REGISTERED MUTUAL FUNDS IN INDIA OF ALL THE REGISTERED ASSET MANAGEMENT
COMPANIES
·
STRUCTURE OF MUTUAL FUNDS
IN INDIA
1.
MUTUAL FUNDS HAVE A THREE
TIER SYSTEM IN INDIA
2.
IST TIER IS SPONSOR,2ND
TIER IS PUBLIC TRUST AND THIRD TIER IS
ASSET MANAGEMENT COMPANY
3.
A SPONSOR IS A PERSON WHO
ESTABLISHES A MUTUAL FUND AND IS ASSOCIATED WITH ANOTHER CORPORATION
4.
NECESSARY FOR A SPONSOR TO
SEEK APPROVAL FROM THE SEBI
5.
AFTER THE APPROVAL THE
SPONSOR HAS TO MAKE THE PUBLIC TRUST AS PER THE INDIAN TRUST ACT 1882
6.
TRUSTEE ARE APPOINTED AS
THE TRUST DOES NOT HAVE ANY LEGAL IDENTITY
7.
THE INSTRUMENT OF THE
TRUST MUST BE IN THE FORM OF DDED AGREEMENT BETWEEN THE SPONSOR AND THE
TRUSTEES OF THE MUTUAL FUNDS UNDER THE INDIAN REGISTRATION ACT,1908
8.
THE SPONSOR AND TRUST ARE
TWO SEPARATE ENTITIES
9.
THE TRUST ACTS AS INTERNAL
REGULATOR OF THE MUTUAL FUNDS AND TRUSTEE APPOINT AN ASSET MANAGEMENT COMPANY
TO MANAGE AND COLLECT THE MONEY THROUGH THE MUTUAL FUND
10. THE APPROVAL OF SEBI IS REQUIRED FOR AMCS
·
GENERAL GUIDELINES
·
GENERAL :
1.
MONEY MARKET MUTUAL FUNDS
WOULD BE REGULATED BY THE RBI
2.
OTHER MUTUAL FUNDS WILL BE
REGULATED BY THE SECURITIES EXCHANGE BOARD OF INDIA
3.
MUTUAL FUND SHALL BE
ESTABLISHED IN THE FORM OF TRUSTS UNDER THE INDIAN TRUST ACT AND BE AUTHORISED
FOR THE BUSINESS BY SEBI
4.
MUTUAL FUNDS SHALL BE
ESTABLISHED BY SEPARATELY ESTABLISHED ASSET MANAGEMENT COMPANIES
5.
AT LEAST 50% OF THE BOARD
OF THE AMC MUST BE INDEPENDENT DIRECTORS WHO HAVE NO CONNECTION WITH THE
SPONSORING ORGANIZATION. THE DIRECTORS MUST HAVE PROFESSIONAL EXPERIENCE OF
AT LEAST 10 YEARS IN THE RELEVANT FIELDS SUCH AS PORTFOLIO MANAGEMENT,FINANCIAL
ADMINISTRATION ETC
6.
THE AMCS SHOULD HAVE A
MINIMUM NET WORTH OF RS 5 CRORES AT ALL TIMES
7.
THE SEBI IS GIVEN THE
POWER TO WITHDRAW THE AUTHORISATION GIVEN TO ANY AMC IF IT FOUND TO BE NOT
SERVING THE BEST INTEREST OF THE INVESTORS AS WELL AS CAPITAL MARKET
8.
NOT APPLICABLE TO BANKS
SPONSORED AMCS
·
BUSINESS ACTIVITIES
1.
BOTH AMC AND TRUSTEE SHOULD
BE TREATED AS TWO SEPARATE LEGAL ENTITIES
2.
AMC SHOULD NOT BE
PERMITTED TO UNDER TAKE ANY OTHER BUSINESS ACTIVITY EXCEPT MUTUAL FUNDS
3.
ONE AMC CAN NOT ACT AS THE
ASSET MANAGEMENT COMPANY FOR OTHER MUTUAL FUNDS
·
SCHEMES
1.
EACH SCHEME OF MUTUAL
FUNDS MUST BE COMPULSORILY REGISTERED WITH SEBI BEFORE IT IS FLOATED IN THE
MARKET
2.
THE MINIMUM SIZE OF THE
FUNDS SHOULD BE RS 20 CRORES IN THE CASE OF EACH CLOSE ENDED SCHEME AND IT IS
RS 50 CRORES FOR EACH OPEN ENDED SCHEME
3.
CLOSE ENDED SCHEMES SHOULD
NOT BE KEPT OPEN FOR SUBSCRIPTION FOR MORE THAN 45 DAYS. FOR OPEN ENDED SCHEMES
THE FIRST 45 DAYS SHOULD BE CONSIDERED FOR DETERMINING THE TARGET FIGURE OR THE
MINIMUM SIZE
4.
IF THE MINIMUM AMOUNT OR
THE 60% OF THE TARGETED AMOUNT WHICH EVER IS HIGHER IS NOT RAISED THEN THE
ENTIRE SUBSCRIPTION HAS TO BE REFUNDED TO THE INVESTORS
5.
TO PROVIDE CONTINUOUS
CLOSE ENDED SCHEMES SHOULD BE LISTED ON STOCK EXCHANGE. IN THE CASE OF
OPEN-ENDED SCHEMES MUTUAL FUNDS SHALL SELL AND REPURCHASE UNITS AT PREDETERMINED
PRICES BASED ON NET ASSET VALUE AND SUCH PRICES SHOULD BE PUBLISHED AT LEAST
ONCE A WEEK
6.
FOR EACH SCHEME THERE
SHOULD BE A SEPARATE AND RESPONSIBLE FUND MANAGER
·
RULES REGARDING
ADVERTISEMENT
1.
AN ADVERTISEMENT SHOULD
DISCLOSE THE OBJECTIVE OF THE SCHEME
2.
IT SHOULD BE TRUTHFUL,FAIR
.CLEAR AND SHALL NOT CONTAIN A STATEMENT OF PROMISE OR FORECAST WHICH IS UNTRUE
OR MISLEADING
3.
SHOULD NOT BE FRAMED TO
EXPLOIT THE LACK OF EXPERIENCE OR KNOWLEDGE OF THE INVESTORS
4.
ALL THE ADVERTISEMENT
ISSUED BY A MUTUAL FUND OR ITS SPONSOR OR ASSET MANAGEMENT COMPANY SHALL STATE
ALL INVESTMENTS IN MUTUAL FUNDS AND SECURITIES ARE SUBJECT TO MARKET RISKS AND
NAV OF THE SCHEMES MAY GO UP OR DOWN DEPENDING UPON THE FACTORS AND THE FORCES
AFFECTING THE SECURITIES MARKET
5.
SHOULD NOT COMPARE ONE
FUND WITH ANOTHER
6.
THE OFFER DOCUMENT AND
ADVERTISEMENT SHALL NOT BE MISLEADING OR CONTAIN ANY STATEMENTS OR OPINION
WHICH IS INCORRECT OR FALSE
·
INVESTMENT NORMS
1.
MUTUAL FUNDS SHOULD INVEST
ONLY IN TRANSFERABLE SECURITIES EITHER IN THE CAPITAL MARKET OR MONEY MARKET OR
SECURITISED DEBT. CAN NOT EXCEED 10 % IN CASE OF GROWTH FUNDS AND 40 PERCENT
IN IN CASE OF INCOME FUNDS
2.
SHOULD NOT INVEST MORE
THAN 5 PERCENT OF ITS SCHEMED IN ANY ONE COMPANY’S SHARES
3.
THE LIST OF 5 PERCENT CAN
BE EXTENDED TO 10 PERCENT IF ALL THE
SCHEMES OF A MUTUAL FUNDS ARE TAKEN TOGETHER
4.
NO SCHEME SHOULD INVEST IN
ANY OTHER SCHEME UNDER THE SAME AMC
5.
NO MUTUAL FUNDS UNDER ALL
ITS SCHEME TAKEN TOGETHER CAN INVEST MORE THAN 15 PERCENT OF THE FUNDS IN THE
SHARES AND DEBENTURES OF SPECIFIC INDUSTRY EXCEPT IN THE CASE OF THOSE SCHEMES
WHICH ARE SPECIFICALLY FLOATED FOR THE INVESTMENT IN ONE OR MORE SPECIFIED
INDUSTRY
·
OTHER NORMS
·
EXPENSES : THE AMC MAY CHARGE THE MUTUAL FUNDS WITH INVESTMENT MANAGEMENT AND
ADVISORY FEES. SHOULD BE DISCLOSED IN THE PROSPECTUS
- THE INITIAL EXPENSES SHOULD NOT EXCEED 6% OF THE FUNDS RAISED UNDER
EACH SCHEME
- EXCEPTING THE INTI AL EXPENSES ALL OTHER EXPENSES TO BE CHARGED TO THE
FUND SHOULD NOT EXCEED 3 PERCENT OF THE WEEKLY AVERAGE ASSETS OUTSTANDING
DURING THE CURRENT YEAR. MUST BE DISCLOSED THROUGH ADVERTISEMENT,ACCOUNTS
ETC
- ALL MUTUAL FUNDS MUST DISTRIBUTE A MINIMUM OF 90% OF THEIR PROFITS IN
ANY GIVEN YEAR
- THE SEBI IS GIVEN WIDE POWERS TO CALL FOR ANY INFORMATION REGARDING
THE OPERATIONS OF MUTUAL FUNDS
- EVERY MUTUAL FUND IS REQUIRED TO SEND ITS COPIES OF DULY AUDITED
ANNUAL STATEMENTS OF ACCOUNTS SIX MONTHLY UNAUDITED ACCOUNTS.QUARTERLY
STATEMENTS OF MOVEMENTS IN NET ASSETS FOR EACH OF ITS SCHEMES TO THE SEBI
- THE SEBI LAYS DOWN THE ACCOUNTING POLICIES,FORMAT AND CONTENTS OF THE
FINANCIAL STATEMENTS AND OTHER REPORTS
- ALL MUTUAL FUNDS SHALL SEGREGATE THEIR EARNING AS CURRENT INCOME,SHORT
TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS
- ACCOUNTING FOR ALL THE SCHEMES MUST BE DONE FOR THE SAME YEAR ENDING
- EACH CLOSE ENDED SCHEME SHOULD BE WOUND UP OR EXTENDED WITH THE
PERMISSION OF SEBI AS SOON AS THE PREDETERMINED PERIOD IS OVER
- AN OPEN SCHEME SHALL BE WOUND UP IF THE TOTAL NUMBER OF UNITS
OUTSTANDING AFTER REPURCHASE AT A POINT OF TIME FALLS BELOW 50 PER CENT OF
THE ORIGINALLY ISSUED NUMBER OF UNITS
- SEBI CAN AFTER DUE INVESTIGATION IMPOSE PENALTIES ON MUTUAL FUNDS FOR
VIOLATING THE GUIDELINES AS MAY BE NECESSARY
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