Securities and Exchange Board of India
CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT
MFD/CIR.No 04/11488 /2003
June 12, 2003
All Mutual Funds Registered with SEBI
Association of Mutual Funds in India (AMFI)
Dear Sirs,
We are enclosing a copy of the gazette notification no. S.O 632(E) dated May 29, 2003 pertaining to SEBI (Mutual Funds)(Amendment) Regulations, 2003 for your information and implementation.
1. Role of Chief Executive Officers and Fund Managers
The amended Regulations define the roles of Chief Executive Officers and Fund Managers of mutual funds with a view to strengthen their positions and specifying their accountability and to protect the interest of investors. However, it is clarified that AMCs and trustees shall continue to discharge their responsibilities as specified in the Regulations.
2. Fund of Funds
The amendments to Regulations permit mutual funds to launch Fund of Funds schemes.It is clarified in accordance with the provisions of Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996 that in case of Fund of Funds scheme, the mutual funds shall disclose in the offer document as well as in the advertisements that the investors are bearing the recurring expenses of the scheme in addition to the expenses of other schemes in which Fund of Funds scheme makes investment.
Yours faithfully,
P.K. NAGPAL
THE GAZETTE OF INDIA
EXTRAORDINARY
PART –II – SECTION 3 – SUB SECTION (ii)
PUBLISHED BY AUTHORITY
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 29th May, 2003
SECURITIES AND EXCHANGE BOARD OF INDIA
(MUTUAL FUNDS) (AMENDMENT) REGULATIONS, 2003
S.O. 632(E).—- In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to further amend the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, namely :-
1. These Regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2003.
2. They shall come into force on the date of their publication in the Official Gazette.
3. In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996:
(i) in regulation 2, the following clause (ma) shall be added after the existing clause (m):
(ma) ‘fund of funds scheme’ means a mutual fund scheme that invests primarily in other schemes of the same mutual fund or other mutual funds.” (ii) In regulation 25, the following sub-regulations shall be inserted after sub-regulation (6), namely:-
“(6A). The Chief Executive Officer (whatever his designation may be) of the asset management company shall ensure that the mutual fund complies with all the provisions of these regulations and the guidelines or circulars issued in relation thereto from time to time and that the investments made by the fund managers are in the interest of the unitholders and shall also be responsible for the overall risk management function of the mutual fund. Explanation: For the purpose of this sub-regulation, the words ‘these regulations’ shall mean and include the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 as amended from time to time. (6B) The fund managers (whatever the designation may be) shall ensure that the funds of the schemes are invested to achieve the objectives of the scheme and in the interest of the unitholders”.
(iii) in regulation 52, in sub-regulation (6), the following proviso shall be inserted after the existing proviso, namely:- “Provided further that in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall not exceed 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis.”(iv) in the Seventh Schedule,
(a) in clause 4, the following proviso shall be inserted, namely:-
“Provided that this clause shall not apply to any fund of funds scheme”(b) after the existing clause 9, the following clause shall be inserted, namely: “9A. No scheme of a mutual fund shall make any investment in any fund of funds scheme.”(c) after the existing clause 11, the following clause shall be inserted, namely:- “12. A fund of funds scheme shall be subject to the following investment restrictions:
(a) A fund of funds scheme shall not invest in any other fund of funds scheme;
(b) A fund of funds scheme shall not invest its assets other than in schemes of mutual funds, except to the extent of funds required for meeting the liquidity requirements for the purpose of repurchases or redemptions, as disclosed in the offer document of fund of funds scheme.”
[F.No. SEBI/LE/16330 /2003]
G.N. BAJPAI
CHAIRMAN
SECURITIES AND EXCHANGE BOARD OF INDIA
Footnotes:
1. The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the Principal Regulations were published in the Gazette of India on December 9, 1996 vide S.O. No. 856(E).
2. The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 were subsequently amended –
1. on April 15, 1997 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1997 vide S.O. No.327(E).
2. on January 12, 1998 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1998 vide S.O. No.32(E).
3. on December 08, 1999 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 1999 vide S.O. No.1223(E).
4. on March 14, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2000 vide S.O. No.235 (E).
5. on March 28, 2000 by the Securities and Exchange Board of India (Appeal to the Securities Appellate Tribunal) (Amendment) Regulations, 2000 vide S.O. No.278(E).
6. on May 22, 2000 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2000 vide S.O. No.484 (E).
7. on January 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2001 vide S.O. No.69 (E).
8. on May 29, 2001 by the Securities and Exchange Board of India (Investment Advice by Intermediaries) (Amendment) Regulations, 2001 vide S.O. No.476(E).
9. on July 23, 2001 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2001 vide S.O. No.698(E).
10. on February 19, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2002 vide S.O. No.219 (E).
11. on June 11, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2002 vide S.O. No.625 (E).
12. on July 30, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Third Amendment) Regulations, 2002 vide S.O. No.809(E).
13. on September 9, 2002 by the Securities and Exchange Board of India (Mutual Funds) (Fourth Amendment) Regulations, 2002 vide S.O. No.956(E).
14. on September 27, 2002 by the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide S.O. No.1045(E).
