Archive for the ‘Mutual Funds’ Category


CIRCULAR- CIR/ IMD/ FII&C/ 13/ 2012, dated June 07, 2012

All SEBI registered Intermediaries/ Recognized Stock Exchanges/ Depositories/Mutual Fund/ qualified Depository Participants (DP)

Vide SEBI circulars Cir/IMD/DF/14/2011 and Cir/IMD/FII&C/3/2012 dated August 09, 2011 and January 13, 2012, respectively, Qualified Foreign Investors (QFI) were allowed to invest in schemes of Indian mutual funds and Indian equity shares subject to terms and conditions mentioned therein. Subsequently, vide SEBI circular CIR/IMD/FII&C/4/2012 dated January 25, 2012, the eligibility criteria for a qualified DP was revised.

2. On a review and in consultation with the Government of India (GoI) and RBI, it has been decided to revise the definition of QFI as under:

QFI shall mean a person who fulfils the following criteria:

(i) Resident in a country that is a member of Financial Action Task Force (FATF) or a member of a group which is a member of FATF; and

(ii) Resident in a country that is a signatory to IOSCO’s MMOU (Appendix A Signatories) or a signatory of a bilateral MOU with SEBI:

Provided that the person is not resident in a country listed in the public statements issued by FATF from time to time on-(i) jurisdictions having a strategic Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) deficiencies to which counter measures apply, (ii) jurisdictions that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies:

Provided further such person is not resident in India:

Provided further that such person is not registered with SEBI as Foreign Institutional Investor or Sub-account or Foreign Venture Capital Investor.

Explanation.-For the purposes of this clause:

(1)The term “Person” shall carry the same meaning under Foreign Exchange Management Act (FEMA), 1999 and section 2(31) of the Income Tax Act, 1961;

(2) The phrase “resident in India” shall carry the same meaning as in the FEMA 1999, and Income Tax Act, 1961;

(3) “Resident” in a country, other than India, shall mean resident as per the direct tax laws of that country.

(4) “Bilateral MoU with SEBI” shall mean a bilateral MoU between SEBI and the overseas regulator that inter alia provides for information sharing arrangements.

(5) Member of FATF shall not mean an Associate member of FATF.

The definition of QFI, as provided in the circulars Cir/IMD/DF/14/2011 and Cir/IMD/FII&C/3/2012 dated August 09, 2011 and January 13, 2012, respectively, stands amended as above.

3. The word “Purchase” used in clause 6.1.4 of circular Cir/IMD/FII&C/3/2012 dated January 13, 2012 shall be substituted with the word “Subscription”.

4. Between clauses 8.6 and 8.7 of Circular dated January 13, 2012, clause 8.6.1 is inserted to read as under:

“8.6.1. In case a person invests in the same company through both QFI route and FDI route, the aggregate holding of the person in such company shall not exceed five percent of paid up equity capital of the company at any point of time. This investment limit shall be applicable to each class of equity shares having separate and distinct ISIN. This shall be subject to guidelines on FDI as prescribed by GoI and RBI from time to time.”

5. It has been decided to allow QFIs to make fresh purchases of eligible securities, out of the sale/ redemption/ dividend proceeds of any of the eligible securities. Further, it is clarified that all the eligible securities shall be held in a single demat account of the QFI. Eligible securities shall mean mutual fund units (under both direct and indirect route), equity shares, corporate debt and any other security which is permitted for investment by QFI from time to time by GoI, RBI and SEBI.

Clause 4.7.7 of circular Cir/IMD/DF/14/2011 dated August 09, 2011 and Clause 9.2.2 of circular Cir/IMD/FII&C/3/2012 dated January 13, 2012 stand amended, accordingly.

6. It has been further decided to extend the option of appointment of custodian of securities by the QFI. The QFI, if it so desires, may appoint a custodian of securities, who would be obligated to perform clearing and settlement of securities on behalf of the QFI client. However, no person shall be appointed as custodian by the QFI unless it is itself the qualified DP of the QFI and is also registered as custodian with SEBI under SEBI (Custodian of Securities) Regulations, 1996.

7. A QFI shall open a single non-interest bearing Rupee Account with an AD Category- I bank in India, for routing the receipt and payment for transactions relating to purchase and sale of eligible securities subject to the conditions as may be prescribed by RBI from time to time. Accordingly, it is clarified that henceforth there is no more requirement for opening and maintenance of a single rupee pool bank account by the qualified DP. QFIs, shall, henceforth invest in all eligible securities through this single non- interest bearing Rupee Account.

Circulars dated August 9, 2011, January 13, 2012, and January 25, 2012 respectively, stand amended as above.

This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

S MADHUSUDHANAN

Deputy General Manager

Tel No.: 022-26449614

Email: smadhu@sebi.gov.in

Click here to download the complete text of the above Circular in PDF Format- CIRCULAR- CIR/ IMD/ FII&C/ 13/ 2012, dated June 07, 2012.

Source: Securities and Exchange Board of India.

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CIRCULAR- MIRSD/ Cir-5 /2012- dated April 13, 2012

SEBI Registered Intermediaries –

KYC Registration Agencies (KRAs),

Stock Brokers through Stock Exchanges,

Depository Participants (DPs) through Depositories,

Mutual Funds (MFs)

Portfolio Managers (PMs)

Venture Capital Funds (VCFs)

Collective Investment Schemes (CIS),

Association of Mutual Funds in India (AMFI)

Please refer to SEBI circular no. CIR/MIRSD/16/2011 dated August 22, 2011, MIRSD/SE/Cir-21/2011 dated October 5, 2011, MIRSD/Cir-23/2011 dated December 2, 2011 and MIRSD/Cir- 26 /2011 dated December 23, 2011 on KYC related issues.

1. SEBI simplified the account opening process for investors and made it uniform across intermediaries in the securities markets vide aforementioned circulars. Further, to avoid duplication of KYC process with every intermediary, KRA system was developed for centralization of the KYC records in the securities markets. The system was made applicable for new clients who opened accounts with the intermediaries from January 1, 2012.

2. Now, for convenience of the clients registered prior to January 1, 2012 (hereinafter referred to as ‘existing clients’) and to expand the centralized database of the KYC records of the entire securities market, it is decided to upload the KYC details of the existing clients of the intermediaries in the current KRA system, in a phased manner.

3. The following guidelines for uploading the KYC data of the existing clients are being issued in consultation with the major Stock Exchanges, Depositories, KRAs, AMFI Brokers’ Associations and market participants:

a. For existing clients who trade / invest / deal with the intermediary anytime during the time period specified in the table given below starting from April 16, 2012, the intermediaries shall forthwith upload their KYC details in the KRA system. They shall also send original KYC documents to the KRA on continuous basis and complete the process within the prescribed time limits.

Considering the representations made by the intermediaries, they may send print outs of scanned documents to the KRAs instead of original documents in accordance with the schedule, certifying that they have retained the originals.

However, they must complete the process of sending the original documents to the KRA by March 31, 2013.

The KRAs shall update their systems and send letters to the clients for the receipt of the initial / updated KYC documents from intermediary in accordance with the time schedule.

The intermediaries shall maintain electronic records of the KYCs of their clients and keeping physical records would not be necessary.

Schedule for implementation (For the year 2012-13):

Existing clients of intermediary who trade/ invest/ deal with it during the below mentioned time

period

Timeline for intermediary to upload existing client’s KYC data on KRA system & send KYC documents to KRA

Timeline for KRA to update the record in their system & send acknowledgement to the existing client

April 16, 2012 – June

15, 2012

August 31, 2012

September 30, 2012

June 16, 2012 – August

31, 2012

October 31, 2012

November 30, 2012

September 1, 2012 –

October 31, 2012

November 30, 2012

December 31, 2012

November 1, 2012 –

December 31, 2012

January 31, 2013

February 28, 2013

January 1, 2013 –

February 28, 2013

March 15, 2013

March 31, 2013

 

The KYC data of the existing clients, who trade / invest or deal after the above mentioned schedule, shall be uploaded on a continuous basis.

b. While uploading the existing clients’ KYC details in the KRA system, the intermediary shall indicate the date of account opening / activation / updation of information. Necessary provisions shall be made by the KRAs in their systems. In case the KRA system indicates that the client’s KYC data already exists, the other intermediary shall upload the modifications, if any, after the aforesaid date so that the latest information about the client is available on the KRA system.

c. The intermediary shall highlight the KYC details about the existing client which is missing / not available, as per the KYC requirements specified vide circular dated October 5, 2011, only if it was not mandated earlier, when the client’s account was opened. KRAs shall make necessary provisions in their systems to categorize the KYC of such clients under the category of existing clients and highlight the information which is missing / not available.

d. When the existing client approaches another intermediary, it shall be the responsibility of that intermediary which downloads the data of that client from the KRA system, to update the missing information, do IPV as per requirements (if not done already) and send the relevant supporting documents, if any, to the KRA. Thereafter, the KRA system shall indicate the records as updated.

4. It is clarified that timelines mentioned in the schedule are the minimum requirements and the KYC data of the remaining existing clients can also be uploaded on the KRA system.

5. The Stock Exchanges and Depositories are directed to:

a. bring the provisions of this circular to the notice of the Stock Brokers and DPs, as the case may be, and also disseminate the same on their websites;

b. make amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision in co-ordination with one another, as considered necessary;

c. monitor the compliance of this circular through half-yearly internal audits and inspections; and

d. communicate to SEBI, the status of the implementation of the provisions of this circular.

6. in case of mutual funds, compliance of this circular shall be monitored by the Boards of Asset Management Companies and the Trustees and in case of other intermediaries by their the Board of Directors.

7. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 and Regulation 17 of the SEBI (KYC (Know Your Client) Registration Agency) Regulations, 2011 to protect the interests of investors in securities and to promote the development of and to regulate the securities markets.

Click here to download the complete text of the above Circular in PDF Format- CIRCULAR- MIRSD/ Cir-5 /2012- dated April 13, 2012.

Source: Securities and Exchange Board of India.


Circular- Cir/IMD/DF/7/2012 dated February 28, 2012

 All Mutual Funds/ Asset Management Companies (AMCs)

 A. Distributor Due Diligence

1. Please refer to SEBI circular no. SEBI/IMD/DF/13/2011 dated August 22, 2011 regarding the captioned matter.

2. It is hereby clarified that the due diligence of distributors is solely the responsibility of mutual funds/AMCs. This responsibility shall not be delegated to any agency. However, mutual funds/AMCs may take assistance of an agency of repute while carrying out due diligence process of distributors.

B. Clarification to Regulation 24 of SEBI (Mutual Funds) Regulations, 1996

1. In order to address the issue of conflict of interest wherein a fund manager manages schemes of Mutual Fund and is engaged in other permissible activities of AMC, SEBI has amended Regulation 24 of the SEBI (Mutual Funds) Regulations, 1996.

2. The amended Regulation mandates that AMCs shall appoint separate fund manager for each separate fund managed by it unless the investment objectives and assets allocations are the same and the portfolio is replicated across all the funds managed by the fund manager.

3. It has been represented to SEBI that the perfect replication of portfolio between the mutual fund scheme and schemes/products under other permissible activities of AMC may not be achieved at all times.

4. On examination of the same, it has been decided that the replication of minimum 70% of portfolio value shall be considered as adequate for the purpose of said compliance, provided that AMC has in place a written policy for trade allocation and it ensures at all points of time that the fund manager shall not take directionally opposite positions in the schemes managed by him.

5. In order to bring transparency while addressing the issue of conflict of interest wherein a fund manager is common across mutual fund schemes and schemes/products under other permissible activities of AMC, then the AMC shall:

a)      disclose on their websites, the returns provided by the said manager for all the schemes (mutual fund, pension funds, offshore funds etc) on a monthly basis.

b)      in case of any performance advertisement is issued by the AMC for any scheme, then the details of returns of all the schemes (mutual fund, pension funds, offshore funds etc) managed by that fund manager shall be provided.

c)      in case the difference between the annual returns provided by the schemes managed by the same fund manager is more than 10% then the same shall be reported to the trustee and explanation for the same shall be disclosed on the website of the AMC.

C. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Click here to download the complete text of the above Circular- Circular for Mutual Funds- Feb 28, 2012.

Source: Securities and Exchange Board of India.


CIRCULAR- Cir/IMD/DF/6/2012 dated February 28, 2012

All Mutual Funds/Asset Management Companies (AMCs)

A. Amendments to SEBI (Mutual Funds) Regulations, 1996

1. Please find enclosed a copy of the Gazette Notification No. LAD-NRO/GN/2011-12/38/4290 dated February 21, 2012 pertaining to Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2012 for your information and implementation.

B. Valuation of Debt and Money Market Instruments 

1. The valuation of money market and debt securities shall be in terms of the Eighth schedule.

2. In clause 2 (I) and 2(II) of the SEBI circular SEBI/IMD/CIR No.16/ 193388/2010 dated February 2, 2010, reference to “91 days” shall be replaced with “60 days” with effect from 30.09.2012. Consequently, changes shall be carried out in clause 2(V) of the said circular.

3. In order to further enhance transparency, the AMCs shall disclose all details of debt and money market securities transacted (including inter scheme transfers) in its schemes portfolio on AMCs’ website and the same shall be forwarded to AMFI for consolidation and dissemination as per format. These disclosures shall be made settlement date wise on daily basis with a time lag of 30 days.

C. Advertisement 

1. Advertisement shall be in terms of Sixth Schedule.

2. SEBI circulars dated June 05, 2000, June 26, 2003, February 26, 2008, December 15, 2009, January 18, 2010 and February 04, 2010 relating to Advertisement stands withdrawn. However, mutual funds shall continue to comply with the following:

  • While advertising pay out of dividends, all advertisements shall disclose the dividends declared or paid in rupees per unit along with the face value of each unit of that scheme and the prevailing NAV at the time of declaration of the dividend.
  • Impact of Distribution Taxes: While advertising returns by assuming reinvestment of dividends, if distribution taxes are excluded while calculating the returns, this fact shall also be disclosed.
  • Pay out of Dividend/ Bonus: While advertising pay outs, all advertisements shall disclose, immediately below the pay out figure (in percentage or in absolute terms) that the NAV of the scheme, pursuant to pay out would fall to the extent of payout and statutory levy (if applicable).
  • In case of Money Market schemes or cash and liquid schemes, wherein investors have very short investment horizon, the performance can be advertised by simple annualisation of yields if a performance figure is available for at least 7 days, 15 days and 30 days provided it does not reflect an unrealistic or misleading picture of the performance or future performance of the scheme.

D. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Click here to download the complete text of the above Circular- Circular on Mutual Funds- 28.02.2012.

Source: Securities and Exchange Board of India.