Circular for Mutual Funds
Summary
This circular clarifies that mutual funds and AMCs bear sole responsibility for distributor due diligence, which cannot be delegated but may utilize reputable agencies. It amends Regulation 24 of the SEBI (Mutual Funds) Regulations, 1996, to address conflict of interest by mandating separate fund managers unless specific replication criteria are met. The document establishes a 70% portfolio replication threshold and imposes transparency requirements regarding performance disclosures and reporting discrepancies.
Text
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.
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.
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.
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.
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.
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.
Source: SecMarx — Circular for Mutual Funds. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.