Facilitating ease of doing business relating to the framework on Alignment of interest of the Designated Employees of the Asset Management Company (AMC) with the interest of the unitholders
Summary
This circular amends the Master Circular for Mutual Funds to relax 'skin in the game' requirements for Designated Employees of Asset Management Companies. The amendments introduce new slabs based on gross annual CTC and employee roles, with mandatory investment percentages ranging from nil to 22.5%. These changes aim to facilitate ease of doing business while maintaining alignment of interest with unitholders.
Text
Amendments to MF Regulations were carried out to relax regulatory framework relating to ‘Alignment of interest of the Designated Employees of the AMCs with the interest of the unitholders’. The said amendments shall be applicable from April 01, 2025.
A minimum slab wise percentage of the salary/perks/bonus/non-cash compensation (gross annual CTC) net of income tax and any statutory contributions of the Designated Employees of the AMCs shall be mandatorily invested in units of Mutual Fund schemes in which they have a role/oversight.
Category A employees (CEO, CIO, Fund Managers, etc.) are subject to slabs based on CTC as per Clause 6.10.1.1.a. Category B employees (Direct reportees to CEO, CISO, COO, Sales Head, etc.) are subject to Slab 0 or Slab 1, irrespective of CTC, as decided by AMC.
For dedicated Designated Employees associated with liquid fund schemes, Slab 1 shall be considered even if the Designated Employee falls in either Slab 2 or Slab 3 based on the CTC.
For Designated Employees managing liquid fund schemes, up to 75 percent of the minimum investment amount required to be invested in liquid fund schemes may be invested in schemes managed by the AMC with higher risk.
In case of retirement on attaining superannuation age, units shall be released from lock-in except for close-ended schemes. On resignation or early retirement, lock-in period is reduced to 1 year from end of employment or completion of 3-year lock-in, whichever is earlier.
After expiry of mandatory lock-in, Designated Employee can redeem units in open ended schemes subject to compliance with SEBI (Prohibition of Insider Trading) Regulations, 2015.
In event of violation of Code of Conduct, fraud, or gross negligence by Designated Employees, the Nomination and Remuneration Committee shall undertake preliminary examination and provide recommendations to SEBI after approval of Trustees.
Every scheme shall disclose the ‘compensation, in aggregate, mandatorily invested in units for the Designated Employees’ on the website of Stock Exchanges.
Source: SecMarx — Facilitating ease of doing business relating to the framework on Alignment of interest of the Designated Employees of the Asset Management Company (AMC) with the interest of the unitholders. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.