Review of Dividend option(s) / Plan(s) in case of Mutual Fund Schemes
Summary
This SEBI circular mandates the renaming of mutual fund dividend options to explicitly indicate that distributions may include capital withdrawal from the Equalization Reserve. It requires Asset Management Companies to disclose this nature of distribution in offer documents and consolidated account statements. The regulatory changes are effective from April 1, 2021, and are not considered a fundamental attribute change.
Text
All existing and proposed Schemes shall rename Dividend Payout to 'Payout of Income Distribution cum capital withdrawal option', Dividend Re-investment to 'Reinvestment of Income Distribution cum capital withdrawal option', and Dividend Transfer Plan to 'Transfer of Income Distribution cum capital withdrawal plan'.
Offer documents shall clearly disclose that amounts can be distributed out of investors capital (Equalization Reserve), which is part of sale price representing realized gains, at the time of subscription.
AMCs shall ensure clear segregation between income distribution and capital distribution is disclosed in the Consolidated Account Statement provided to investors as required under Regulation 36(4) of SEBI (Mutual Funds) Regulations, 1996.
The aforesaid changes shall not be treated as Fundamental Attribute Change in terms of Regulation 18 (15A) of SEBI (Mutual Funds) Regulations, 1996.
The provisions mentioned under paragraph 4 shall be effective from April 01, 2021.
Source: SecMarx — Review of Dividend option(s) / Plan(s) in case of Mutual Fund Schemes. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.