SEBI vide its notification dated 06th March, 2020 amends the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. These amendments in Mutual Funds regulations have come into force from March 6, 2020.
Mutual funds are regulated by the SEBI (Mutual Fund) Regulations, 1996.
What is mutual Fund?
Different investment avenues are available to investors, one of them being Mutual Fund. Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document.
SEBI (Mutual Fund) Regulations, 1996, define mutual fund as a fund established in the form of a trust to raise monies through the sale of units to the public or a section of the public under one or more schemes for investing in securities including money market instruments or gold or gold related instruments or real estate assets.
What is amendment?
♦ The amendment has been brought in regulation 26 regarding the appointment of a custodian. Earlier, in case of a gold exchange-traded fund scheme, the assets of the scheme being gold or gold-related instruments where to be kept in custody of a bank that is registered as a custodian with the Board. The new regulation eases this by notifying that these assets can be kept in the custody of a custodian registered with the Board.
♦ Another important amendment comes in regulation 28 (4) that the sponsor or asset management company shall invest not less than one percent of the amount which would be raised in the new fund offer or fifty lakh rupees, whichever is less and such investment shall not be redeemed unless the scheme is wound up. This investment, in such an option of the scheme, shall now be specified by the Board according to the new amendment.
| S.No. | Pre- Amendment | Post-Amendment
[Amendment by SEBI (Mutual Funds) (Amendment) Regulations, 2020] |
| 1. | Provided that in case of a gold exchange traded fund scheme, the assets of the scheme being gold or gold related instruments may be kept in custody of a bank which is registered as a custodian with the Board. | in regulation 26,-
first proviso to sub-regulation (1)shall be substituted by the following clause, namely,- “Provided that in case of a gold exchange traded fund scheme, the assets of the scheme being gold or gold related instruments may be kept in the custody of a custodian registered with the Board”. |
| 2. | The sponsor or asset management company shall invest not less than one percent of the amount which would be raised in the new fund offer or fifty lakh rupees, whichever is less, in the growth option of the scheme and such investment shall not be redeemed unless the scheme is wound up:
Provided that this |
in regulation 28, –
sub-regulation (4) shall be substituted by the following clause, namely,- “28(4). The sponsor or asset management company shall invest not less than one percent of the amount which would be raised in the new fund offer or fifty lakh rupees, whichever is less, and such investment shall not be redeemed unless the scheme is wound up. Provided that the investment by the sponsor or asset management company shall be made in such option of the scheme, as may be specified by the Board.” |
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