-
ALSO READ
Sebi tweaks norms for assigning NAV while purchasing units of MF schemes
Risk-averse investors re-deploy funds in arbitrage MF schemes in April
After Franklin fiasco, unlisted debt securities come under Sebi scrutiny
Reliance Broadcast defaults to debt schemes of Franklin Templeton MF
Equity schemes post net outflows of Rs 4,000 cr in Aug, highest in 10 yrs
-
Markets regulator Sebi on Monday directed renaming of dividend options of mutual fund schemes and also said investors need to be nearly communicated that certain portion of their capital can be distributed as dividends.
As per regulatory requirements, when units are sold and sale price (net asset value) is higher than the unit's face value, a portion of the sale price, representing realised gains, has to be credited to an equalisation reserve account. This can be used to pay dividend.
According to recommendations of the Mutual Funds Advisory Committee (MFAC), Sebi said all the existing and proposed mutual funds schemes shall name or rename the dividend options in the prescribed manner.
Dividend payout option has to be renamed as "Payout of Income Distribution cum capital withdrawal option," the regulator said in a circular.
Dividend re-investment will be renamed as "Reinvestment of Income Distribution cum capital withdrawal option", while the name prescribed for dividend transfer plan is "Transfer of Income Distribution cum capital withdrawal plan".
The changes are not to be treated as fundamental attribute change, it added.
"Offer documents shall clearly disclose that the amounts can be distributed out of investors capital (equalization reserve), which is part of sale price that represents realized gains," Sebi said.
It also asked asset management companies (AMC) to ensure that the disclosure is made to investors at the time of subscription of such options/plans.
In addition, AMCs are required to ensure that consolidated account statement given to the investors discloses a clear segregation between income distribution (appreciation on NAV) and capital distribution (equalisation reserve), whenever distributable surplus is distributed.
The changes shall be effective from April 1, 2021, the regulator said.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU