Clarifications with respect to Circular dated April 28, 2021 on ‘Alignment of interest of Key Employees (‘Designated Employees’) of Asset Management Companies (AMCs) with the Unitholders of the Mutual Fund Schemes’
Summary
This circular provides clarifications on the alignment of interest between Key Employees and Unitholders in Mutual Funds. It defines 'Key employees' as 'Designated Employees' and mandates that their compensation be invested in scheme units. The document outlines phased implementation for junior employees, specific redemption procedures, and disclosure requirements.
Text
The term ‘Key employees’ shall be read as ‘Designated Employees’.
The phrase ‘paid in the form of units’ shall be read as ‘mandatorily invested in units’.
For junior employees, the provision under para 2(i) of the Alignment Circular shall be implemented in a phased manner i.e. 10% in the 1st year and 15% in the 2nd year of implementation of the Alignment circular.
All junior employees shall be mandatorily required to invest 20% as specified under para 2(i) of the Alignment circular with effect from October 01, 2023 onwards. However... other designated employees shall be mandatorily required to invest 20%... with effect from October 01, 2021.
The phased implementation for junior employees shall cease to apply from the date such employee attains the age of 35 years.
Investment in units of the scheme, shall be made on the day of payment of salary.
The previous month’s closing AUM shall be taken for apportioning the investment across eligible schemes.
All non-cash benefits and perks shall be accounted for in CTC at the perquisite value as per the Form 16 under Income Tax Act, 1961. However, superannuation benefits and Gratuity paid at the time of death/retirement, shall not be included in the CTC.
Designated Employees may set off their existing investments as on date of the applicability of the Alignment circular, if any, against the fresh investments as required in the same schemes.
Designated Employees may set off their units, for which the required lock-in period of 3 years is expired, against the fresh investments required to be made in the same schemes... AMC shall ensure that such units are locked in for the further period of 3 years or tenure of the scheme, whichever is less.
Units of Designated Employee invested in terms of the Alignment circular would get automatically redeemed on expiry of the mandatory lock-in period.
After the expiry of the mandatory lock-in period, designated employee can redeem their units in open ended schemes twice in a financial year, with the prior approval of the Compliance Officer...
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Source: SecMarx — Clarifications with respect to Circular dated April 28, 2021 on ‘Alignment of interest of Key Employees (‘Designated Employees’) 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.