Sebi Bars Mfs From Investing In Group Firms

The Securities and Exchange Board of India (Sebi) has amended Sebi Regulations, 1996, to include restriction on investments by mutual funds in group companies as well as in any privately placed securities of group companies.

According to a release issued by Sebi, AMCs are also not permitted to undertake security transactions with associate brokers beyond 5 per cent of the quarterly business done by the mutual fund.

In case of transactions undertaken with other brokers who are not associates, if the 5 per cent limit is exceeded on a quarterly basis, asset management companies shall now have to record, in writing, the justification for exceeding this limit, and report this to the trustees on a quarterly basis.

 

The amendments have also done away with the necessity of obtaining unitholders approval for rollover of schemes, and for conversion of close ended schemes into open ended schemes, subject to the condition that unitholders, who do not express written consent to the above, shall be allowed to redeem their holdings in full at NAV-based price as per the terms of the offer.

To help trustees of mutual funds to play their role in a more effective manner, independent trustees shall now constitute 2/3 of the board. Abridged prospectus containing key information will now be circulated along with all application forms and will be available to all investors.

The full portfolio disclosure in the annual reports will now be mandatory. The fundamental attributes of a scheme have now been defined to include type of a scheme, investment objective and terms of issue, and any amendment in these would require approval from the unitholders.