Guidelines for votes cast by Mutual Funds
Summary
This circular prescribes additional guidelines for votes cast by Mutual Funds to enhance transparency and protect unitholder interests. It mandates compulsory voting on specific corporate governance matters, related party transactions, and all remaining resolutions from April 1, 2022. The document outlines exemptions for lack of economic interest, voting levels, and quarterly declarations by Fund Managers.
Text
Mutual Funds including their passive investment schemes like Index Funds, Exchange Traded Funds etc. shall be required to cast votes compulsorily in respect of the following resolutions: i. Matters mentioned at Para no.4(iii) of SEBI Circular SEBI/IMD/CIR No 18/ 198647 /2010 dated March 15, 2010 i.e. a) Corporate governance matters... b) Changes to capital structure... c) Stock option plans... d) Social and corporate responsibility issues. e) Appointment and Removal of Directors. f) Any other issue that may affect the interest of the shareholders in general and interest of the unit-holders in particular. ii. Related party transactions of the investee companies (excluding own group companies).
Further, for all remaining resolutions which are not covered at Para 1 of this circular, Mutual Funds shall also compulsorily be required to cast their votes with effect from April 01, 2022.
In case of the Mutual Funds having no economic interest on the day of voting, it may be exempted from compulsorily casting of votes.
The vote shall be cast at Mutual Fund Level. However, in case Fund Manager/(s) of any specific scheme has strong view against the views of Fund Manager/(s) of the other schemes, the voting at scheme level shall be allowed subject to recording of detailed rationale for the same.
Fund Managers/Decision makers shall submit a declaration on quarterly basis to the Trustees that the votes cast by them have not been influenced by any factor other than the best interest of the unit holders. Further, Trustees in their Half Yearly Trustee Report to SEBI, shall confirm the same.
This circular shall be applicable with effect from April 01, 2021 except Para 2 which will be applicable from the mentioned date.
This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Guidelines for votes cast by Mutual Funds. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.