Minimum Number of Investors in Scheme(s)/Plan(s) of Mutual Funds
Summary
This circular clarifies the methodology for calculating the 25% investor holding limit in mutual fund schemes. It mandates that breaches be determined at the portfolio level using daily average net assets and quarterly averages of individual holdings. If a breach occurs, the fund must allow a one-month rebalancing period followed by a 15-day notice for redemption.
Text
The aforesaid Circular would be applicable at the Portfolio level.
The average net assets of the scheme would be calculated daily and any breach of the 25 % holding limit by an investor would be determined. At the end of the quarter, the average of daily holding by each such investor is computed to determine whether that investor has breached the 25 % limit over the quarter.
If there is a breach of limit by any investor over the quarter, a rebalancing period of one month would be allowed and thereafter the investor who is in breach of the rule shall be given 15 days notice to redeem his exposure over the 25 % limit. Failure on the part of the said investor to redeem his exposure over the 25 % limit within the aforesaid 15 days would lead to automatic redemption by the Mutual Fund on the applicable Net Asset Value on the 15th day of the notice period.
Source: SecMarx — Minimum Number of Investors in Scheme(s)/Plan(s) of Mutual Funds. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.