Sebi to soon notify non-tax proposals of mutual fund policy

Proposals include making it mandatory for funds to contribute their own money in form of 'seed capital' amounting to 1% of the amount raised

Regulator Sebi is giving final touches to proposals aimed at bringing greater seriousness among mutual fund houses, by raising their minimum networth requirements and making it mandatory for them to contribute their own seed capital along with investors' money.

These proposals are currently going through the process of legal vetting, pursuant to which the Securities and Exchange Board of India (Sebi) would soon issue a detailed policy framework with necessary circulars and notifications, a senior official said.

These are part of a long-term mutual fund policy being worked out by Sebi, approval for which was granted by the regulator's board last month.

The proposals include making it mandatory for funds to contribute their own money in form of 'seed capital' amounting to one% of the amount raised. This amount is subject to a maximum of Rs 50 lakh through the lifetime of the scheme.

For existing schemes, Sebi would notify a cut-off date for calculation of the seed capital. A 'reasonable' time period of one year may be given for compliance.

Also, capital markets regulator is examining the proposal of increasing the minimum net worth requirement for funds from Rs 10 crore to Rs 50 crore to weed out non-serious players. However, the funds specialising in only infrastructure debt funds (IDFs) would be exempted from such increase.

Around 19 MFs would need to increase their networth and they would get three years to comply with these new rules.

Nearly 45 fund houses in the country together manage assets worth over Rs 9 lakh crore, but fund mobilisation has been a tough task for them for past few years.

Among other proposals, Sebi will soon issue circulars that would require MFs to disclose certain additional details about their Assets Under Management (AUM).

This would include monthly disclosure of AUM from different categories of schemes, AUM from places beyond top-15 cities, contribution of sponsor and its associates in AUM, contribution from different types of investors (retail, corporate etc), state-wise contribution and AUM from sponsor group or non-sponsor group distributors.

Besides, MFs would have to make quarterly disclosure about their voting details along with rationale supporting the decision (for, against or abstain) with regard to exercise of their voting rights in investee companies.

They would need to obtain auditors' certificate on an annual basis for voting data, while directors and trustees of fund houses would also review the voting date.

Through its circulars, Sebi would also ask fund houses to make available printed literature in regional languages for investor education and financial inclusion. Such regional language investor awareness campaigns would also be introduced in print and electronic media.

Besides, circulars are being finalised for developing a system for active support to PSU banks for distribution of mutual funds. Besides, all MFs would need to provide online investment facility and tap the internet and mobile phone users for direct distribution of products.