Market regulator the Securities and Exchanges Board of India (Sebi) today asked mutual funds and asset management companies not to delegate due diligence activities of distributors to any agency as it is their "sole responsibility" to carry out the process.
In a notification, the Sebi said, "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, it added, "mutual funds/AMCs may take assistance of an agency of repute while carrying out due diligence process of distributors".
It further said that in order to avoid conflict of interest, AMCs will have to appoint separate fund manager for each separate fund unless the investment objectives and assets allocations are the same and the portfolio is replicated across all the funds managed by the fund manager.
Noting that 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, Sebi said, "it has been decided that the replication of minimum 70% of portfolio value shall be considered as adequate for the purpose of said compliance..."
That is subject to ensuring "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".
Also, an AMC will have to disclose in its websites the returns for all the schemes on a monthly basis.
"This circular is issued to protect the interests of investors in securities and to promote the development of, and to regulate the securities market."
Further, in another circular, Sebi asked AMCs to disclose all details of debt and money market securities transacted in its schemes portfolio on their websites and forward the same to Association of Mutual Funds in India (AMFI) for consolidation and dissemination.
"These disclosures shall be made settlement date wise on daily basis with a time lag of 30 days," it said.
Mutual funds will have to advertise details of pay out of dividends and impact of distribution taxes and money market schemes or cash and liquid schemes, the Sebi said.
