Circular regarding SEBI (Mutual Funds) (Second Amendment) Regulations 2007
Summary
The document amends the SEBI (Mutual Funds) Regulations, 1996 to define index fund schemes and permit short selling and securities lending. It imposes caps on investment and advisory fees for index funds at 0.75% of weekly average net assets. The regulations also allow mutual funds to engage in derivatives transactions subject to specified frameworks.
Text
The provisions of clauses (ii), (iii) and (v) of regulation 3 shall come into force on such date as may be specified by the Board by notification in the Official Gazette.
All other provisions of these regulations shall come into force on the date of their publication in the Official Gazette.
'index fund scheme' means a mutual fund scheme that invests in securities in the same proportion as an index of securities;
A mutual fund may lend and borrow securities in accordance with the framework relating to short selling and securities lending and borrowing specified by the Board.
The funds of a scheme shall not in any manner be used in carry forward transactions: Provided that a mutual fund may enter into derivatives transactions on a recognized stock exchange, subject to the framework specified by the Board. A mutual fund may enter into short selling transactions on a recognized stock exchange, subject to the framework relating to short selling and securities lending and borrowing specified by the Board.
Provided that in case of an index fund scheme, the investment and advisory fees shall not exceed three fourths of one percent (0.75%) of the weekly average net assets.
Provided further that in case of an index fund scheme, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half percent (1.5%) of the weekly average net assets.
Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relevant securities and in all cases of sale, deliver the securities: Provided that a mutual fund may engage in short selling of securities in accordance with the framework relating to short selling and securities lending and borrowing specified by the Board: Provided further that a mutual fund may enter into derivatives transactions in a recognized stock exchange, subject to the framework specified by the Board.
Source: SecMarx — Circular regarding SEBI (Mutual Funds) (Second Amendment) Regulations 2007. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.