Alignment of interest of Key Employees of Asset Management Companies (AMCs) with the Unitholders of the Mutual Fund Schemes
SEBI has taken steps to standardize the scheme categories and characteristics of each category.
Now, the risk return profile of the schemes rests with the AMCs and its key employees. SEBI decided that the part of the compensation of Key employees of the AMCs shall be paid in the form of units of the scheme(s) of their Mutual Fund as under:
The said compensation shall be paid in the proportion to the AUM of the schemes in which the Key Employees has a role/oversight. For this purpose, ETFs, Index Funds, Overnight Funds and existing close ended schemes shall be excluded. It shall be paid proportionately over 12 months on the date of payment of such compensation.
The compensation shall remain locked-in for a minimum period of three years or the tenure of schemes whichever is less. No redemption shall be allowed in case of resignation or retirement before attaining the age of superannuation as defined in the AMC service rules.
In case of dedicated fund managers managing only a single scheme/single category of schemes, 50% of the aforementioned compensation shall be by way of units of the scheme/category managed by the fund manager and the remaining 50% can, if they so desire, be by way of units of those schemes whose risk value as per the risk-o-meter is
equivalent or higher than the scheme managed by the fund manager.
The AMC may decide to have a provision of borrowing from the AMC by Key Employees against such units in exigencies such as medical emergencies or on humanitarian grounds, as per the policy laid down by the AMC.
Units allotted to the Key Employees shall be subject to clawback in the event of violation of Code of Conduct, fraud, gross negligence by them, as determined by SEBI. Upon clawback, the units shall be redeemed and amount shall be credited to the scheme.
Any non-compliance in this regard shall be disclosed in quarterly CTR and half yearly Trustee report. Further, the compensation paid in the form of units to the Key Employees shall be disclosed on the AMC website.
The said Circular is applicable with effect from October 01, 2021 (i.e. compensation to be paid in the form of units from September 2021 salary).