Regulator tightens MF norms- Disclose salaries of top executives, agent commissions: Sebi

The term ‘commission’ here refers to all direct monetary payments and other payments made in the form of gifts, rewards, trips, event sponsorships etc by AMCs/MFs to distributors.”

By: ENS Economic Bureau | New Delhi | Updated: March 19, 2016 1:24:13 am

The Securities and Exchange Board of India (Sebi) has asked mutual funds to disclose the salaries of top executives and commissions paid to their distributors, including payouts in the form of gifts, trips and sponsorships.

According to the Sebi, they should disclose “the amount of actual commission paid by AMCs/ mutual funds (MFs) to distributors (in absolute terms) during the half-year period against the concerned investor’s total investments in each MF scheme. The term ‘commission’ here refers to all direct monetary payments and other payments made in the form of gifts, rewards, trips, event sponsorships etc by AMCs/MFs to distributors.”

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Mutual funds (MFs) will also have to disclose the annual salary of those earning Rs 60 lakh or above, and also the ratio of CEO’s remuneration to median employee salary.

In a bid to promote transparency in remuneration policies so that top executive remuneration is aligned with the interest of investors, fund houses will have to make the disclosures pertaining to a financial year on its website under a separate head ‘Remuneration’, it said in a circular.

According to MF sources, some fund houses were against the idea of additional disclosures, including about total commissions, following opposition from investors. However, Sebi overruled the objections.

Further, in order to ensure that MFs and AMCs are able to carry out their own credit assessment of assets and reduce reliance on credit rating agencies, they are required to have an appropriate policy and system in place to conduct an in-house credit risk assessment/due diligence before investing in fixed income products, Sebi said. The fund houses will also have to disclose in the Consolidated Account Statement (CAS), sent to investors, the ratio of the total purchase value and the cost of investment.

The regulator further asked MFs to provide additional disclosures in their scheme documents, including the tenure for which a fund manager has been managing the scheme, the portfolio holdings, and also illustrate impact of expense ratio on the scheme’s returns.

Sebi said the MF is required to have a dashboard on their website providing performance and key disclosures pertaining to each scheme managed by it. The information should include the scheme’s AUM, investment objective, expense ratios, portfolio details and its past performance, among others.

Sebi also allowed MFs to deploy new fund offer (NFO) proceeds in CBLO (Collateralized Borrowing And Lending Obligation) before the closure of NFO period. However, AMCs should not charge any investment management and advisory fees on funds deployed in CBLOs during the NFO period. The appreciation received from investment in CBLO will be passed on to investors.

In case minimum subscription amount is not garnered by the scheme during the NFO period, the interest earned upon investment will be returned to investors, in proportion of their investments, along with the refund of the subscription amount.

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