Board’s right to inspect and investigation
The Board may appoint one or more persons as inspecting officer to undertake the inspection of the books of accounts, records, documents and infrastructure, systems and procedures or to investigate the affairs of a mutual fund, the trustees and asset management company for any of the following purposes, namely:
- To ensure that the books of accounts are being maintained by the mutual fund, the trustees and asset management company in the manner specified in these regulations;
- To ascertain whether the provisions of the Act and these regulations are being complied with by the mutual fund, the trustees and asset management company;
- To ascertain whether the systems, procedures and safeguards followed by the mutual fund are adequate;
- To ascertain whether the provisions of the Act or any rules or regulations made thereunder have been violated;
- To investigate into the complaints received from the investors or any other person on any matter having a bearing on the activities of the mutual funds, trustees and asset management company;
- To suo-motu ensure that the affairs of the mutual fund, trustees or asset management company are being conducted in a manner which are in the interest of the investors or the securities market.
Notice before inspection and investigation.
- Before ordering an inspection or investigation under regulation 61 the Board shall give not less than ten days notice to the mutual fund, asset management company or trustees as the case may be.
- Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of the investors no such notice should be given, it may, by an order in writing direct that such inspection or investigation be taken up without such notice.
- During the course of inspection or investigation, the mutual fund, trustees or asset management company against whom the inspection or investigation is being carried out shall be bound to discharge his obligations as provided in regulation 63.
Obligations on inspection and investigation
- It shall be the duty of the mutual fund, trustees or asset management company whose affairs are being inspected or investigated, and of every director, officer and employee thereof, to produce to the inspecting officer such books, accounts, records, and other documents in its custody or control and furnish him such statements and information relating to the activities as mutual funds, trustees or asset management company, as the inspecting officer may require, within such reasonable period as the inspecting officer may specify.
- The mutual fund, trustees or asset management company shall allow the inspecting officer to have a reasonable access to the premises occupied by it or by any other person on its behalf and also extend reasonable facility for examining any books, records, documents, and computer data in the possession of the mutual fund, trustees and asset management company or such other person and also provide copies of documents or other materials which in the opinion of the inspecting officer are relevant for the purpose of the inspection.
- The inspecting officer, in the course of inspection or investigation, shall be entitled to examine or record the statements of any director, officer, or employee of the mutual fund, trustees and asset management company.
- It shall be the duty of every director, officer, or employee of the mutual fund, asset management company or trustee to give to the inspecting officer all assistance in connection with the inspection or investigation, which the inspecting officer may reasonably require.
Submission of report to the Board
The inspecting officer shall, as soon as possible, on completion of the inspection or investigation submit a report to the Board: Provided that if directed to do so by the Board, he may submit interim reports.
Action on inspection or investigation report
The Board or the Chairman shall after consideration of inspection or investigation report take such action as the Board or chairman may deem fit and appropriate including action under the Securities and Exchange Board of India (Procedure for Holding Enquriy by Enquiry Officer and Imposing Penalty) Regulations, 2002.]
Appointment of Auditor
Without prejudice to the provisions of regulation 55, the Board shall have the power to appoint an auditor to inspect or investigate, as the case may be, into the books of accounts or the affairs of the mutual fund, trustee or asset management company:
Provided that the Auditor so appointed shall have the same powers of the inspecting officer as stated in Regulation 61 and the obligation of the mutual fund, asset management company, trustee, and their respective employees in regulation 63, shall be applicable to the investigation under this regulation.
Payment of inspection fees to the Board
The Board shall be entitled to recover such expenses including fees paid to the auditors as may be incurred by it for the purposes of inspecting the books of accounts, records and documents of the mutual fund, the trustees and the asset management company.
Fee structure for inspection of mutual funds, from the year 2008-09:
|Sl. No.||Category||AUM||Fees (in Rs.)|
|02||B||101-1000 Crores||70,000 for the first Rs. 100 Crores + Rs. 15,000 for every additional Rs. 100 Crores|
|03||C||1001-4000 Crores||2,05,000 for the first 1000 Crores + Rs. 15,000 for every additional Rs. 300 Crores|
|04||D||4001-15000 Crores||3,55,000 for the first 4000 Crores + Rs.20,000 for every additional Rs. 2000 Crores|
|05||E||15001-35000 Crores||Rs. 4,65,000 for the first 15000 Crores + Rs. 22,500 for every additional Rs. 3000 Crores|
|06||F||35001-65000 Crores||6,15,000 for the first 35000 Crores + Rs. 27,500 for every additional Rs. 4000 Crores with maximum of Rs.8,00,000|
|07||G||65001 and above Crores||850000|
- The fund size is to be determined on the basis of the average net assets value of all schemes as at the beginning and close of the inspection period.
- Fees mentioned above cover one year functioning of a Mutual Fund. If the inspection period covers more or less than one year, then the fee payable would be effective pro rata.
- The out of pocket expenses would be payable only for traveling, if any, out of the headquarters which should be reimbursed on a reasonable basis.