SEBI / IMD / CIR No 14 / 187175/ 2009 , Dated:- December 15, 2009

In terms of the provisions of Securities and Exchange Board of India Act, 1992, read with the provisions of the SEBI (Mutual Funds) Regulations, 1996, SEBI has issued various guidelines/circular s from time to time for compliance by Mutual Funds and AMCs, the first such circular being issued in 1993.Over the years, certain circulars/ guidelines have been revised in line with the requirements of investor protection, market development or effective regulation. In continuation of the effort and in consultation with AMFI , modifications in following existing circulars have been carried out (For modification( s), please refer Annexure I):

1.Payment of interest on delay in dispatch of redemption or repurchase proceeds – SEBI Circular SEBI/ MFD/CIR/2/266/ 2000 dated May 19, 2000.

2. Guidelines for participation by Mutual Funds in Stock Lending Scheme- SEBI circular MFD/CIR/01/047/ 99 dated February 10, 1999

3. Consolidation of schemes – SEBI Circular No. SEBI/MFD/CIR No.5/12031/03 dated June 23, 2003

4. Launch of Additional Plan under existing Schemes- SEBI Circular No. MFD/CIR No.12/175/01 dated February 15, 2001.

5.  Guidelines for Investment/Trading in Securities by Employees of Asset Management Company & Mutual Fund Trustee Companies – SEBI Circular No. MFD/CIR No.4/216/2001 dated May 8, 2001

6. Guidelines for Advertisement by Mutual Funds- SEBI Circular No. MFD/CIR/4/51/ 2000 dated June 5, 2000

7. Advertisements by Mutual Funds – SEBI Circular No. SEBI/MFD/CIR No.6/12357/03 dated June 26, 2003.

Besides the modifications indicated in Annexure I, all other provisions of the aforesaid SEBI circulars remain unchanged, where applicable.  These modifications shall be applicable from the date of issue of this circular.

This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

Ruchi Chojer


Annexure I

 1. Payment of interest on delay in dispatch of redemption or repurchase proceeds – SEBI Circular SEBI/ MFD/ CIR /2/266/2000 dated May 19, 2000

After the second paragraph of the said circular, the following shall be inserted –

“Sub-clause (a) of Regulation 53 of SEBI (Mutual Funds) Regulations, 1996 requires Asset Management Companies to dispatch dividend warrants within 30 days of the declaration of the dividend.It is clarified that, in the event of failure of dispatch of dividend within the stipulated 30 day period, the AMC (s) shall be liable to pay interest @ 15 per cent per annum to the unit holders.”

Below the format for statement of interest paid to the investors for delays in despatch of redemption / repurchase warrants, the following table shall be inserted. This statement shall be sent to SEBI alongwith the Compliance Test Report(s)

STATEMENT OF INTEREST PAID TO THE INVESTORS FOR DELAYS IN DESPATCH OF DIVIDEND

Name of
the Investor
Date of Dividend Declaration Date of Despatch
of Dividend
Period of
Delay
Amount of
Interest Paid
(Rs.)

2. Guidelines for participation by Mutual Funds in Stock Lending Scheme – SEBI circular MFD/ CIR /01/047/99 dated February 10, 1999

Clause 2 – Valuation of collateral securities stands deleted.

Accordingly, mutual funds are required to comply with guidelines issued in this regard by SEBI/ Stock Exchange from time to time.

3. Consolidation of schemes – SEBI Circular No. SEBI/MFD/ CIR No.5/12031/03 dated June 23, 2003

Under ‘Maintenance of Records’, the following shall be inserted at the end of the paragraph:

“……within 21 days from the date of closure of the exit option

4. Launch of Additional Plan under existing schemes- SEBI Circular No. MFD/ CIR No.12/175/01 dated February 15, 2001

The provisions contained in SEBI Circular No. MFD/ CIR No.12/175/01 dated February 15, 2001 shall be replaced with the following:

“For launching additional plans in existing open ended schemes, Mutual Funds shall comply with the following provisions:

a.      Additional plans sought to be launched under existing open ended schemes which differ substantially from that scheme in terms of portfolio or other characteristics shall be launched as separate schemes in accordance with the regulatory provisions.

b.However, plan(s) which are consistent with the characteristics of the scheme may be launched as additional plans as part of existing schemes by issuing an addendum. Such proposal should be approved by the Board(s) of AMC and Trustees.In this regard please note that:

i.        The addendum shall contain information pertaining to salient features like applicable entry/exit loads, expenses or such other details which in the opinion of the AMC / Trustees is material. The addendum shall be filed with SEBI 21 days in advance of opening of plan(s).

ii.      AMC(s) shall publish an advertisement or issue a press release at the time of launch of such additional plan(s)”

5. Guidelines for Investment/Trading in Securities by Employees of Asset Management Companies & Mutual Fund Trustee Companies – SEBI Circular No. MFD/ CIR No.4/216/2001 dated May 8, 2001

The tenure of ‘10 calendar days’ as stipulated in Clause 1.5 under prior approval of personal investment transactions shall be replaced with ‘7 calendar days’.

6. Guidelines for Advertisement by Mutual Funds – SEBI Circular No. MFD/ CIR /4/51/2000 dated June 5, 2000

a.      Tombstone advertisement

The first paragraph under point (1) of Section III – Forms of advertisement, shall stand modified as under:

This form of advertisement can only give basic information about a

i. Mutual fund registered with SEBI whose Statement of Additional Information is filed with SEBI and has been uploaded on its website; or

ii. Scheme which is already launched and is in existence and whose Scheme information document is available.”

Accordingly, Point (2) under Section I – Applicability, shall stand modified as under:

“Issue of advertisements or distribution of sales literature must be accompanied or preceded by issue of SID and SAI , unless stated otherwise”

b.      Use of Rankings in Advertisements and Sales Literature

Under para 3.7 (c) – Required Disclosures, in clause (2) (G), “current standardized yield” shall be replaced with “compounded annualized yield”.

Accordingly, under point (d) – Time Periods, para 2(c) on ‘current standardised yield’ stands deleted

7. Performance advertisement –SEBI Circular No. MFD/ CIR /4/51/2000 dated June 5, 2000 read with SEBI Circular No. SEBI/MFD/ CIR No.6/12357/03 dated June 26, 2003.

Regarding clause 4(ii) on Performance of Money Market Schemes in SEBI Circular No. SEBI/MFD/ CIR No.6/12357/03 dated June 26, 2003, Mutual Funds while advertising simple annualized returns of such schemes based on a period of 30 days can also advertise simple annualized returns based on 15 day or 7 day period.

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