Alignment of interest of Asset Management Companies (AMCs) with the Unitholders of the Mutual Fund Schemes
Summary
This circular mandates Asset Management Companies to invest a minimum percentage of their Assets Under Management into their own mutual fund schemes based on the scheme's risk value. The required investment percentages range from 0.03% for low-risk schemes to 0.13% for very high-risk schemes as detailed in the annexure. Compliance is monitored by trustees, with quarterly reviews required to address any shortfalls within seven days.
Text
asset management companies (‘AMCs’) are required to invest such amount in such scheme(s) of the mutual fund, based on the risk associated with the scheme, as may be specified by the Board from time to time.
AMCs shall invest minimum amount as a percentage of assets under management (‘AUM’) in their scheme(s) as provided in the Annexure.
The risk value of the scheme as per the risk-o-meter of the immediate preceding month shall be considered.
The investment shall be maintained at all points of time till the completion of tenure of the scheme or till the scheme is wound up.
AMCs shall, except in case of close ended scheme(s), conduct a quarterly review... shortfall in value of the investment in scheme(s), if any, shall be made good within 7 days of such review.
AMCs may invest from their net worth or the sponsor may fund the AMC to fulfil the aforesaid obligations, if required.
AMCs shall be required to make good the shortfall in the minimum networth to comply with the requirement of the MF Regulations in case of sustenance of temporary Mark to Market loss for two consecutive quarters.
AMCs shall not be required to invest in ETFs, Index Funds, Overnight Funds, Funds of Funds scheme(s) and in case of close ended funds wherein the subscription period has closed...
The mandatory contribution already made by the AMCs in compliance with the applicable MF Regulations shall not be withdrawn. However, such contribution can be adjusted against the investment required by the AMC as per this circular.
The compliance of the provisions of this circular shall be ensured by the AMCs and monitored by the Trustees. Any non-compliance in this regard, shall be reported in the Quarterly CTR and half-yearly Trustee Report.
Details of investment by AMCs in each of their mutual fund scheme(s) shall be disclosed on the website of AMCs and AMFI.
The provisions of this circular shall come into force on the date of applicability of the MF Amendment Regulations as referred under para 1 of this circular. SEBI circular SEBI/HO/IMD/DF4/CIR/P/2020/100 dated June 12, 2020 shall stand rescinded from such date.
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Source: SecMarx — Alignment of interest of Asset Management Companies (AMCs) with the Unitholders of the Mutual Fund Schemes. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.