MUMBAI, February 6: The Securities and Exchange Board of India (SEBI) on Friday announced new guidelines for operations of mutual funds and their asset management companies. The major amendments include restriction on investments by mutual funds in group companies of the sponsor and prohibit investments in unlisted group companies as well as in any privately placed securities of group companies.The revised norms will be effective from January 12, 1998, SEBI said in a statement.
Asset management companies (AMCs) - which manage funds on behalf of investors - are also not permitted to undertake security transactions with associate brokers beyond five per cent of the quarterly business done by the mutual fund. If the five per cent quarterly limit is breached in the case of other brokers, who are not associates, AMCs will have to justify the breach in writing and report this to the trustees on a quarterly basis, the regulator said.
SEBI said mutual funds can now roll over schemes and convert close-endedschemes into open-ended ones without approval of unitholders. However, they will have to redeem the holdings in full at net asset value based price as per offer terms of all unit holders who do not give their written consent to rollovers or conversions of schemes, it said.
``To help trustees of mutual funds play their role in a more effective manner, independent trustees shall now constitute two-thirds of the board,'' SEBI said. It said abridged prospectus containing key information will now be circulated along with all application forms and will be available for all investors.
``The full portfolio disclosure in annual reports will now be mandatory,'' it said, adding, ``the fundamental attributes of a scheme have now been defined to include, type of a scheme, investment objective and terms of issue and any amendments in these would require approval from the unitholders.''
The regulator has also defined the term `fundamental attributes' of a scheme to include type of a scheme, investment objective andterms of issue. The type of scheme has to be specified as open ended, close ended, interval, sectoral, equity, balance, income, index or any other type. The investment objective has to state whether the main objective is growth or income or both. The investment pattern also has to be specified stating the tentative equity or debt or money market portfolio break-up.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
