MASTER CIRCULAR
SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/90 June 27, 2024
To,
All Mutual Funds (‘MFs’)
Asset Management Companies (‘AMCs’)
Trustee Companies/ Boards of Trustees of Mutual Funds
Registrar to an Issue and Share Transfer Agents (‘RTAs’)
Association of Mutual Funds in India (AMFI)
All Recognized Stock Exchanges & Clearing Corporations
All Stock Brokers
All Depositories
All Custodians
Dear Sir/ Madam,
Subject: Master Circular for Mutual Funds
1. For effective regulation of Mutual Fund Industry, the Securities and
Exchange Board of India (“SEBI”) has been issuing various circulars from
time to time. In order to enable the stakeholders to have an access to all
the applicable regulatory requirements at one place, the provisions of the
said circulars issued till March 31, 2023 were incorporated in the Master
Circular for Mutual Funds dated May 19, 2023.
2. Subsequently, various guidelines/directions were issued to Mutual Funds
by way of circulars/letters. In view of the same, the Master Circular dated
May 19, 2023 has been updated to include all relevant circulars that were
issued on/before March 31, 2024. The instant Master Circular supersedes
the Master Circular for Mutual Funds dated May 19, 2023.
3. Vide Master Circular for Mutual Funds dated May 19, 2023, the
guidelines/directions contained in the circulars listed out in the Appendix
to that Master Circular were rescinded. In addition, with the issuance of
this Master Circular, the guidelines/directions contained in the circulars
listed out at Sr. Nos. 1 to 16 in the Appendix to this Master Circular, to
the extent they relate to the Mutual Funds industry, shall stand rescinded.
4. With respect to the directions or other guidance issued by SEBI, as
specifically applicable to Mutual Funds, the same shall continue to remain
in force in addition to the provisions of any other law for the time being in
force. Terms not defined in this Master Circular shall have the same
meaning as provided under the relevant Regulations.
5. Notwithstanding such rescission,
5.1. anything done or any action taken or purported to have been done or
taken under the rescinded circulars, including registrations or
approvals granted, fees collected, registration suspended or cancelled,
any inspection or investigation or enquiry or adjudication commenced
or show cause notice issued prior to such rescission, shall be deemed
to have been done or taken under the corresponding provisions of this
Master Circular;
5.2. any application made to SEBI under the rescinded circulars, prior to
such rescission, and pending before it shall be deemed to have been
made under the corresponding provisions of this Master Circular;
5.3. the previous operation of the rescinded circulars or anything duly
done or suffered thereunder, any right, privilege, obligation or liability
acquired, accrued or incurred under the rescinded circulars, any
penalty, incurred in respect of any violation committed against the
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Master Circular for Mutual Funds as on March 31, 2024
rescinded circulars, or any investigation, legal proceeding or remedy
in respect of any such right, privilege, obligation, liability, penalty as
aforesaid, shall remain unaffected as if the rescinded circulars have
never been rescinded;
6. Pursuant to issuance of this Master Circular, the entities which are
required to ensure compliance with various provisions shall submit
necessary reports as envisaged in this Master Circular on a periodic/
continuous basis.
7. This Master Circular is issued in exercise of powers conferred under
Section 11(1) of the Securities and Exchange Board of India Act, 1992 to
protect the interests of investors in securities and to promote the
development of, and to regulate the securities market.
8. This Master Circular is available on the SEBI website at
https://www.sebi.gov.in/ under the category “Legal -> Master Circulars”.
Yours faithfully,
Peter Mardi
Deputy General Manager
Investment Management Department
Tel: 022 - 26449233
Email: peterm@sebi.gov.in
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Master Circular for Mutual Funds as on March 31, 2024
INDEX
ABBREVIATIONS .................................................................................................. 6
CHAPTER 1: OFFER DOCUMENT FOR SCHEMES ................................................. 8
CHAPTER 1A: REGISTRATION ........................................................................... 26
CHAPTER 2: CONVERSION & CONSOLIDATION OF SCHEMES, LAUNCH OF
ADDITIONAL PLAN AND CATEGORIZATION & RATIONALIZATION OF MUTUAL FUND
SCHEMES .......................................................................................................... 35
CHAPTER 3: NEW PRODUCTS ............................................................................ 57
CHAPTER 4: RISK MANAGEMENT FRAMEWORK ............................................... 91
CHAPTER 5: DISCLOSURES & REPORTING NORMS ......................................... 115
CHAPTER 6: GOVERNANCE NORMS ................................................................. 138
CHAPTER 7: SECONDARY MARKET ISSUES ..................................................... 196
CHAPTER 8: NET ASSET VALUE ....................................................................... 202
CHAPTER 9: VALUATION ................................................................................. 216
CHAPTER 10: LOADS, FEES, CHARGES AND EXPENSES ................................... 243
CHAPTER 11: DIVIDEND DISTRIBUTION PROCEDURE ..................................... 261
CHAPTER 12: INVESTMENT BY SCHEMES ....................................................... 266
CHAPTER 13: ADVERTISEMENTS .................................................................... 320
CHAPTER 14: INVESTOR RIGHTS & OBLIGATIONS .......................................... 328
CHAPTER 15: CERTIFICATION AND REGISTRATION OF INTERMEDIARIES ..... 345
CHAPTER 16: TRANSACTION IN MUTUAL FUNDS UNITS ................................... 355
CHAPTER 16A: CORPORATE DEBT MARKET DEVELOPMENT FUND (CDMDF) ... 381
CHAPTER 16B: EXECUTION ONLY PLATFORMS (EOP) ...................................... 389
CHAPTER 17: MISCELLANEOUS ...................................................................... 403
APPENDIX: LIST OF RESCINDED CIRCULARS ................................................... 434
INDEX OF ANNEXURES .................................................................................... 455
INDEX OF FORMATS ......................................................................................... 590
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Master Circular for Mutual Funds as on March 31, 2024
POLICY RELATED LETTERS/ EMAIL ISSUED BY SEBI ---------- Refer the attachment
AMFI BEST PRACTICE GUIDELINES ------------------------------------------Refer AMFI Website
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Master Circular for Mutual Funds as on March 31, 2024
ABBREVIATIONS
American Depository Receipt ADR
Asset Management Company AMC
Asset under Management AUM
Association of Mutual Funds in India AMFI
Authorized Dealer AD
Bombay Stock Exchange BSE
Central Board of Direct Taxes CBDT
Clearing Corporation of India Limited CCIL
Compliance Test Reports CTR(s)
Common Account Statement CAS
Contingent Deferred Sales Charge CDSC
Compound Annual Growth Rate CAGR
Corporate Debt Market Development Fund CDMDF
Depository Participant DP
External Commercial Borrowings ECB
Financial Action Task Force FATF
Foreign Exchange Management Act FEMA
Foreign Institutional Investor FII
Foreign Portfolio Investor FPI
Fixed Maturity Plans FMP(s)
Global Depository Receipt GDR
Gold Exchange Traded Fund GETF
Gold Monetization Scheme GMS
Hindu Undivided Family HUF
International Organization of Securities Commission IOSCO
Investor Service Center ISC
Key Information Memorandum KIM
Know Your Client KYC
London Bullion Market Association LBMA
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Master Circular for Mutual Funds as on March 31, 2024
Monthly Cumulative Report MCR
Monthly Average Assets Under Management MAAUM
Multilateral Memorandum of Understanding MMOU
Mutual Fund Advisory Committee MFAC
Mutual Fund Distributor MFD
National Stock Exchange NSE
Net Asset Value NAV
New Fund Offer NFO
Permanent Account Number PAN
Prevention of Money Laundering Act PMLA
Regulation Reg.
SEBI (Mutual Funds) Regulations 1996 Regulations
Securities and Exchange Board of India the Board
Scheme Information Document SID Offer
Statement of Additional Information SAI Document
Systematic Investment Plan SIP
Systematic Transfer Plan STP
Systematic Withdrawal Plan SWP
Trustee(s) Board of Trustee(s)/
Trustee Company
Unique Client Code UCC
Unit Confirmation Receipt UCR
Unit Holder Protection Committee UHPC
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 1: OFFER DOCUMENT FOR SCHEMES
1.1 Filing of Offer Document with the Board1
1.1.1. The Offer Document shall have two parts i.e. Scheme Information
Document (SID) and Statement of Additional Information (SAI). SID
shall incorporate all information pertaining to a particular scheme.
SAI shall incorporate all statutory information on Mutual Fund.
1.1.2. The Mutual Funds shall prepare SID and SAI in the prescribed
formats2. Contents of SID and SAI shall follow the same sequence as
prescribed in the format. The Board of the AMC and the Trustee(s)
shall exercise necessary due diligence, ensuring that the SID/SAI and
the fees paid3 are in conformity with the Mutual Funds Regulations4.
[1.1.2A Revision in the format of SID:
a. In order to enhance ease of preparation of the SID by mutual
funds and increase its readability for investors, SEBI in
consultation with AMFI, undertook an exercise to revamp the
format of SID.
b. Based on the suggestions of AMFI and the recommendations of
the Mutual Fund Advisory Committee, the format of SID was
simplified and rationalized. The revised format is aimed at
streamlining the dissemination of relevant information to
1 SEBI Circular No. SEBI/IMD/CIR No.5/ 126096/08 dated May 23,2008 and SEBI Circular
No – SEBI/IMD/CIR No.10/178129/09 dated September 29,2009, Refer SEBI email dated
November 15, 2011, Refer SEBI letter No. SEBI/HO/OW/IMD-II/DOF3/P/2022/4580/1
dated February 03, 2022
< 2 ,, For format of SID & SAI, please refer to format no. 5.A & 5.B. under the section on Formats,
Refer SEBI email dated January 07, 2009
3 The filing fees was revised via gazette notification No. LAD-NRO/GN/2014-15/03/1089 on
SEBI (Payment of Fees) (Amendment) Regulations, 2014 dated 23 May, 2014, applicable from
May 23, 2014, Refer SEBI email dated April 13, 2015.
4 SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997, Refer SEBI letter
No. SEBI/HO/OW/IMD-II/DOF3/P/25096/2022 dated June 17, 2022
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Master Circular for Mutual Funds as on March 31, 2024
investors, rationalizing the preparation of SID and facilitating its
periodic updation by mutual funds.
1.1.2B In line with the new SID format, AMFI shall carry out necessary changes
in the formats of KIM and SAI in consultation with SEBI, within two
months from the date of this circular.]5
[1.1.2C Applicability of revised format: The revised format for SID, KIM and
SAI shall be adopted as under:
a. Updated format for SID/KIM/SAI to be implemented w.e.f. June
01, 2024.
b. Draft SIDs to be filed with SEBI on or before May 31, 2024 or
SIDs already filed with SEBI (final observations yet to be issued)
or SIDs for which the final observations have already been
received from SEBI (if launched on or before May 31, 2024), can
use the old format of SID, provided that the SIDs are updated as
per timeline mentioned at (c) below.
c. For Existing SIDs – by June 30, 2024 with data as on May 31,
2024.
d. Reference is drawn to para 1.2.1 and 1.2.4 of this Master Circular
w.r.t updation of SID and KIM within 1 month from the end of
half year i.e. April 30, 2024 for half year ended March 31, 2024.
In order to avoid duplication of efforts of AMCs as well as to
ensure uniform implementation of revised formats, the scheduled
updation of SID and KIM for half year ended March 31, 2024,
may be carried out by AMCs by June 30, 2024. This extension
shall be applicable specifically for half year ended March 31,
2024 only.
5 Inserted vide SEBI Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/000175 dated
November 01, 2023. Refer SEBI letter No. SEBI/HO/IMD/IMD-RAC-2/P/OW/2023/ 44197
/1 dated November 02, 2023
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Master Circular for Mutual Funds as on March 31, 2024
All updated/revised SIDs shall be made available on the website of
SEBI/AMFI/AMCs within the specified timelines.] 6
1.1.3. All offer documents (ODs) of Mutual Fund schemes shall be filed with
SEBI in terms of the Regulations7.
1.1.3.1. Filing of Draft SID:
a. Draft SID of schemes of Mutual Funds filed with the Board shall
also be available on SEBI’s website – http://www.sebi.gov.in for
21 working days from the date of filing8.
b. AMC shall submit a soft copy of draft SID to the Board in HTML
or PDF format. For this purpose, AMC shall be fully responsible
for the contents of soft copies of the SID. AMC shall also submit
an undertaking to the Board while filing the soft copy of draft
SID certifying that the information contained in the soft copy
matches exactly with the contents of the hard copy filed with
the Board.
c. In case of any inaccurate filing, the SID will be returned and
refiling will be required. 21 working days9 shall be calculated
from the date of refiling;10
6 Inserted vide SEBI Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2024/000015 dated
March 12, 2024
7 Regulation 28 (1) of SEBI (Mutual Funds) Regulation 1996
8 SEBI Circular No. IIMARP/MF/CIR/06/793/98 dated March 31, 1998
9 Regulation 29(3) of SEBI (Mutual Funds) Regulation 1996
, 1 ,,, 0 SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997.
,,,,
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Master Circular for Mutual Funds as on March 31, 2024
d. If any changes to the SID are made after filing, the 21 working
day(s) period will recommence from the date of submission of
the last additional statement(s)11.
1.1.3.2. Filing of SAI
a. A single SAI (common for all the schemes) can be filed with
Board along with first draft of SID or can be filed separately.
After incorporating the comments/observations, if any, from the
Board, AMC shall file a soft copy of SAI with the Board in PDF
format along with printed copy of the same12, upload the SAI on
its website and on AMFI website. The printed copy of SAI shall
be made available to the investor on request.
b. Updation of SAI - SAI shall be updated within 3 months from
end of financial year and filed with SEBI. Any material changes
in the SAI shall be made on an ongoing basis by way of updation
on the Mutual Fund and AMFI website. SEBI shall be intimated
of the changes made in the SAI within 7 days. The effective date
for such changes shall be mentioned in the updated SAI.
1.1.3.3. Filing of Final SID
a. Final SID (after incorporating comments of the Board) must
reach the Board before it is issued for circulation. [As a part of
the go green initiative and based on consultation with AMFI, it
has been decided that AMCs shall file all final offer documents
(final SID & final KIM) only digitally by emailing the same to a
dedicated email id. viz. imdsidfiling@sebi.gov.in and there
11 SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997, SEBI Circular
No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997.
12 SEBI Circular No – SEBI/IMD/CIR No.10/178129/09 dated September 29, 2009
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Master Circular for Mutual Funds as on March 31, 2024
would be no requirement of filing of physical copies of the same
with SEBI. Such submission of all final SID and KIM in digital
form shall be made at least two working days prior to the launch
of the scheme.]13 AMC shall also submit an undertaking to the
Board while filing the soft copy that information contained in
the soft copy of SID to be uploaded on SEBI website is current
and relevant and matches exactly with the contents of the hard
copy and that the AMC is fully responsible for the contents of
the soft copy of SID. The soft copy of SID should also be
uploaded on AMFI website two working days prior to launch of
the scheme 14. Failure to submit the printed SID to the Board
before it is issued for circulation shall invite penalties under the
Mutual Funds Regulations15.
b. In case of any difference, in nature of material alteration of the
suggestions made by the Board16 between the printed SID and
the SID filed with the Board, immediate withdrawal of the SID
from circulation will be ordered and such withdrawal shall be
publicized by the Board
1.2 Updation of SID & KIM17
The procedure for updation of SID and KIM shall be as follows:
13 Substituted vide SEBI Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/60 dated
April 25, 2023. Prior to substitution, clause read as under:
“Soft copy of the final SID in PDF format along with a printed copy should be filed with Board
seven working days prior to the launch of the scheme.”
14 SEBI Circular No – SEBI/IMD/CIR No.10/178129/09 dated September 29,2009
15 SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997.
, 1 6 Regulation 29(2) of the SEBI (Mutual Funds) Regulations, 1996
17 SEBI Circular- SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008 and SEBI Circular
No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021, Refer SEBI letter No.
SEBI/HO/OW/IMD-II/DOF3/P/397002021 dated December 28, 2021 & SEBI email dated
March 25, 2022 for Scheme Summary Document. Refer SEBI letter No. SEBI/HO/IMD/IMD-
RAC-2/P/OW/2023/45312/1 dated November 10, 2023
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Master Circular for Mutual Funds as on March 31, 2024
1.2.1 18For the open ended and interval schemes, the SID shall be updated
within next six months from the end of the 1st half or 2nd half of the
financial year in which schemes were launched, based on the relevant
data and information as at the end of previous month. Subsequently,
SID shall be updated within one month from the end of the half-year,
based on the relevant data and information as at the end of September
and March respectively. A soft copy of updated SID shall be filed with
SEBI in PDF format within 7 days along with a printed copy of the
same19.
1.2.2 20The procedure to be followed in case of changes to the open ended
and interval scheme shall be as under:
a. In case of change in fundamental attributes in terms of Regulation 18
(15A):
i. An addendum to the existing SID shall be issued and displayed on
AMC website immediately.
ii. SID shall be revised and updated immediately after completion of
duration of the exit option (not less than 30 days from the notice
date).
iii. A public notice shall be given in respect of such changes in one
English daily newspaper having nationwide circulation as well as in
a newspaper published in the language of region where the Head
Office of the Mutual Fund is situated.
b. In case of other changes:
i. The AMC shall be required to issue an addendum and display the
same on its website immediately.
18SEBI Circular- SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/0560 dated April 30, 2021.
19 SEBI Circular No – SEBI/IMD/CIR No.10/178129/09 dated September 29,2009
20 Refer SEBI letter No. IMD/DF3/OW/P/2021/32220/1 dated November 11, 2021
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Master Circular for Mutual Funds as on March 31, 2024
ii. The addendum shall be circulated to all the
distributors/brokers/Investor Service Centre (ISC) so that the same
can be attached to all KIM and SID already in stock till it is updated.
iii. Latest applicable addendum shall be a part of KIM and SID. (E.g.
in case of changes in load structure the addendum carrying the
latest applicable load structure shall be attached to all KIM and SID
already in stock till it is updated).
iv. Further, the account statements shall continue to include
applicable load structure.
1.2.3 A copy of all changes made to the scheme shall be filed with SEBI within
7 days of the change.
1.2.4 21KIM shall be updated at least once in half-year, within one month
from the end of the respective half-year, based on the relevant data and
information as at the end of September and March and shall be filed
with SEBI forthwith through electronic mode only.
1.3 Validity of SEBI Observations on SID
1.3.1 The AMCs shall file their replies to the modifications suggested by SEBI
on SID as required under Regulation 29 (2), if any, within six months
from the date of the letter. In case of lapse of six-month period, the
AMC shall be required to refile the SID along with filing fees.
1.3.2 The scheme shall be launched within six months from the date of the
issuance of final observations from SEBI. If the AMC intends to launch
the scheme at a date later than six months, it shall refile the SID with
SEBI under Regulation 28 (1) along with filing fees.
1.4 Undertaking from Trustees for new Scheme22
21 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/0560 dated April 30, 2021
22 SEBI Cir. No. IMD/CIR No.5/70559/06 dated June 30, 2006
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Master Circular for Mutual Funds as on March 31, 2024
1.4.1 In the certificate submitted by Trustees with regard to compliance of
AMC with Regulations23, the Trustees are required to certify as
follows:
“The Trustees have ensured that the (name of the scheme/Fund)
approved by them is a new product offered by (name of the Mutual
Fund) and is not a minor modification of any existing
scheme/fund/product.”
1.4.2 This certification shall be disclosed in the SID along with the date of
approval of the scheme by the Trustees.
1.4.3 This certification is not applicable to fixed maturity plans and close
ended schemes except for those close ended schemes which have the
option of conversion into open ended schemes on maturity and also
to Interval Schemes.
1.5 Standard Observations
1.5.1 Standard Observations have been prescribed to ensure minimum level
of disclosures in the SID and SAI24.
1.5.2 SEBI may revise the Standard Observations from time to time and in
that case the date of revision shall also be mentioned.
1.5.3 While filing the SID and SAI, AMC shall highlight and clearly mention
the page number of the SAI and SID on which each standard
observation has been incorporated.
1.6 KIM
23 Regulation 18 (4) of SEBI (Mutual Funds) Regulations, 1996
24 For Standard Observations, please refer to format no. 6 under the section on Formats
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Master Circular for Mutual Funds as on March 31, 2024
1.6.1 Application forms for schemes of mutual funds shall be accompanied
by the KIM in terms of Regulation 29 (4). KIM shall be printed at least
in 7-point font size with proper spacing for easy readability.
1.6.2 Format of KIM25
1.6.2.1 AMCs shall prepare KIM in the prescribed format26. The
contents of KIM shall follow the same sequence as prescribed in
the format.
1.7 Easy Availability of Offer Document27
1.7.1 Trustees and AMCs shall ensure that the SID of the schemes and SAI
are readily available with all the distributors/ISCs and confirm the
same to SEBI in the half yearly trustee report.
1.8 Selection of Benchmarks28
1.8.1 In case of equity oriented schemes, mutual funds may appropriately
select any of the indices available, (e.g. BSE (Sensitive) Index, S&P
CNX Nifty, BSE 100, BSE 200 or S&P CNX 500 etc.) as a benchmark
index depending on the investment objective and portfolio of the
scheme(s).
1.8.2 Benchmarks for debt oriented and balanced fund schemes29
developed by research and rating agencies recommended by the AMFI
on a regular basis shall be used by the Mutual Funds.
25 Refer SEBI email dated March 29, 2010
26 For format of KIM, please refer format no. 5.C under the section on Formats
27 SEBI Circular- SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008
28 SEBI Circular No. MFD/CIR/16/400/02 dated March 26, 2002, SEBI Circular No.
MFD/CIR/01/071/02 April 15, 2002
29 SEBI Circular No. MFD/CIR/01/071/02 dated April 15, 2002
,
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Master Circular for Mutual Funds as on March 31, 2024
1.8.3 In case of sector or industry specific schemes, Mutual Funds may
select any sectoral indices as published by the Stock Exchanges and
other reputed agencies.
1.8.4 These benchmark indices may be decided by the AMC(s) and Trustees.
Any change at a later date in the benchmark index shall be recorded
and reasonably justified30.
1.8.5 Examples of benchmarks are illustrated below:
1.8.5.1 Growth funds maintaining minimum 65% of their investments
in equities shall always be compared against The Bombay Stock
Exchange Ltd. (BSE) Sensex or The National Stock Exchange
Ltd. (NSE) Nifty or BSE 100 or CRISIL 500 or similar standard
indices.
1.8.5.2 Income funds maintaining 65% or more of investments in debt
instruments shall be compared with a suitable index that is a
representative of the fund’s portfolio.
1.8.5.3 Balanced funds with equity investments of 40%-60% shall be
compared with a tailored index having 50% of its weight selected
from any equity index as above and the other 50% from an
appropriate bond return index.
1.8.5.4 Money Market funds or liquid plans can be compared against a
suitable Money Market Instrument or a combination of such
instruments.
30 SEBI Circular No. MFD/CIR/16/400/02 dated March 26, 2002. Also please note that for
review of scheme performance with benchmark indices please refer to Chapter 6 on governance
norms.
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Master Circular for Mutual Funds as on March 31, 2024
1.9 Guiding Principles for bringing uniformity in Benchmarks of
Mutual Fund Schemes31
1.9.1 It has been decided that there would be two-tiered structure for
benchmarking of schemes for certain categories of schemes. The first
tier benchmark shall be reflective of the category of the scheme, and
the second tier benchmark should be demonstrative of the investment
style / strategy of the Fund Manager within the category. All the
benchmarks followed should necessarily be Total Return Indices.
1.9.2 The following are the guiding principles for first tier benchmarks:
For Income / Debt Oriented Schemes
First Tier: One Broad Market Index per Index Provider for each
category e.g.: NIFTY Ultra Short Duration Debt Index or CRISIL
Ultra Short Term Debt Index for Ultra Short Duration Fund
Category
Second Tier: Bespoke according to Investment Style/Strategy of
the Index e.g.: AAA Bond Index
For Growth / Equity Oriented Schemes
First Tier: One Broad Market Index per Index Provider for each
category e.g.: S&P BSE 100 Index or NSE 100 Index for Large Cap
Fund Category
Second Tier: Bespoke according to Investment Style/Strategy of
the Index e.g.: Nifty 50 Index
For Hybrid and Solution Oriented Schemes:
31SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010, SEBI
circular no. SEBI/HO/IMD/IMD-II DF3/P/CIR/2021/652 dated October 27, 2021. Refer
SEBI letter No. SEBI/HO/IMD/POD-II/P/OW/2023/50162/1 dated December 14, 2023
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Master Circular for Mutual Funds as on March 31, 2024
There would be a single benchmark, i.e., Broad Market
Benchmark wherever available or bespoke to be created for
schemes, which would then be applicable across industry.
For Thematic / Sectoral schemes:
There would be a single benchmark as characteristics of the
schemes are already tapered according to the theme/sector.
For Index Funds and Exchange Traded Funds (ETFs):
There would be a single benchmark as these schemes replicate an
underlying index.
For Fund of Funds Schemes (FoFs):
Similar to Index Fund and ETFs, if a FoF scheme is investing in a
single fund, then benchmark of the underlying scheme shall be
used for corresponding FoF.
However, in case a FoF scheme invests in multiple schemes, then
Broad Market Index shall be applied.
For Other Schemes:
Depending on underlying asset allocation, Broad Market
benchmark may be arrived at.
1.9.3 AMFI has been advised to publish:
a) Benchmarks intended to be used by AMCs as first tier
benchmarks
b) Benchmarks intended to be used as first tier benchmark
as per the Potential Risk Class Matrix from April 1, 2022
by AMCs for open ended debt schemes.
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Master Circular for Mutual Funds as on March 31, 2024
1.9.4 The second tier Benchmark is optional and shall be decided by the
AMCs according to Investment Style/Strategy of the Index.
1.10 New Fund Offer (NFO) Period32
1.10.1 In case of open ended and close ended schemes (except ELSS
schemes), the NFO should be open for 15 days.
[1.10.1A All NFO shall remain open for subscription for a minimum period of
three working days.]33
1.10.2 The NFO period in case of ELSS schemes shall continue to be governed
by guidelines issued by Government of India.
1.10.3 Mutual Funds/AMCs are allowed to deploy the NFO proceeds in
triparty repo on Government securities or treasury bills 34 before the
closure of NFO period. However, AMCs shall not charge any
investment management and advisory fees on funds deployed in
triparty repo on Government securities or treasury bills during the
NFO period. The appreciation received from investment in triparty
repo on Government securities or treasury bills shall be passed on to
investors. Further, in case the minimum subscription amount is not
garnered by the scheme during the NFO period, the interest earned
upon investment of NFO proceeds in triparty repo on Government
securities or treasury bills shall be returned to investors, in proportion
of their investments, along-with the refund of the subscription
amount.
32 SEBI Circular no MFD/Cir. No 9/120/2000 dated November 24, 2000. SEBI Circular No.
SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010.
33 Inserted vide SEBI Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/60 dated April
25, 2023
34 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016 and SEBI
circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021.
20
Master Circular for Mutual Funds as on March 31, 2024
1.10.4 The mutual fund should allot units/refund of money and dispatch
statements of accounts within five business days from the closure of
the NFO and all the schemes (except ELSS) shall be available for
ongoing repurchase/sale/trading within five business days of
allotment.
1.11 Timelines related to processing of scheme related applications
filed by AMCs35
1.11.1 The application filed by AMCs for the following matters may be deemed
to be taken on record in case no modifications are suggested or no
queries are raised by SEBI within 21 working days:
a) Change in the Fundamental Attributes of a scheme
b) Merger/Consolidation of Schemes
c) Rollover of Close-ended schemes
d) Conversion of Close-ended scheme to Open ended schemes.
1.11.2 In respect of applications filed by AMCs under Regulation 24 (b) of
SEBI (Mutual Funds) Regulations, 1996, no objection will have been
deemed to be communicated in case no modifications are suggested
or no queries are raised by SEBI within 21 working days.
1.11.3 The timelines mentioned at Paragraph 1.11.1 and 1.11.2 above shall
generally be adhered to -
(a) provided the application is complete in all respects and in
compliance with all the relevant Regulations and circulars issued
by SEBI.
35 SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/603 dated July 23, 2021
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Master Circular for Mutual Funds as on March 31, 2024
(b) except in cases where subject matter of approval requires a policy
view to be taken or presents a unique situation which requires
wider consultation and deliberation.
1.12 Restriction on Redemption in Mutual Funds36
1.12.1 In order to bring more clarity and to protect the interest of the
investors, the following requirement shall be observed before imposing
restriction on redemptions:
1.12.1.1 Restriction may be imposed when there are circumstances
leading to a systemic crisis or event that severely constricts
market liquidity or the efficient functioning of markets such as:
1.12.1.1.1 Liquidity issues - when market at large becomes illiquid
affecting almost all securities rather than any issuer specific
security. AMCs should have in place sound internal liquidity
management tools for schemes. Restriction on redemption
cannot be used as an ordinary tool in order to manage the
liquidity of a scheme. Further, restriction on redemption due
to illiquidity of a specific security in the portfolio of a scheme
due to a poor investment decision, shall not be allowed.
1.12.1.1.2 Market Failures, exchange closures - when markets are
affected by unexpected events which impact the functioning
of exchanges or the regular course of transactions. Such
unexpected events could also be related to political,
economic, military, monetary or other emergencies.
1.12.1.1.3 Operational Issues - when exceptional circumstances are
caused by force majeure, unpredictable operational problems
and technical failures (e.g. a black out). Such cases can only
36 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/57 dated May 31, 2016
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Master Circular for Mutual Funds as on March 31, 2024
be considered if they are reasonably unpredictable and occur
in spite of appropriate diligence of third parties, adequate and
effective disaster recovery procedures and systems.
1.12.1.2 Restrictions on redemption may be imposed for a specified period
of time not exceeding 10 working days in any 90 days period.
1.12.1.3 Any imposition of restriction would require specific approval of
Board of AMCs and Trustees and the same should be informed
to SEBI immediately.
1.12.1.4 When restriction on redemption is imposed, the following
procedure shall be applied:
1.12.1.4.1 No redemption requests up to INR 2 lakh shall be subject to
such restriction.
1.12.1.4.2 When redemption requests are above INR 2 lakh, AMCs shall
redeem the first INR 2 lakh without such restriction and
remaining part over and above INR 2 lakh shall be subject to
such restriction.
1.12.2 Disclosure: The above information to investors shall be disclosed
prominently and extensively in the scheme related documents
regarding the possibility that their right to redeem may be restricted
in such exceptional circumstances and the time limit for which it can
be restricted.
1.13 Discontinuation of the nomenclature – ‘Liquid Plus Scheme(s)’37
37 SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009
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Master Circular for Mutual Funds as on March 31, 2024
1.13.1 The nomenclature “Liquid Plus Scheme(s)” has been discontinued
from January 2009 since it gives a wrong impression of added
liquidity.
1.14 Fundament al Attributes38
1.14.1 The words "fundamental attributes"39 are elaborated below:
1.14.1.1 Type of a scheme
a. Open ended/Close ended/Interval scheme
b. Equity Schemes, Debt Schemes, Hybrid Schemes, Solution
Oriented Schemes and Other Schemes40
1.14.1.2 Investment Objective(s)
a. Main Objective - Growth/Income/Both.
b. 41Investment pattern - The tentative portfolio break-up of
Equity, Debt, Money Market Instruments, other permitted
securities and such other securities as may be permitted by
the Board from time to time with minimum and maximum
asset allocation, while retaining the option to alter the asset
allocation for a short term period on defensive
considerations.
1.14.1.3 Terms of Issue
a. Liquidity provisions such as listing, repurchase,
redemption.
b. Aggregate fees and expenses charged to the scheme.
38 SEBI Circular No- IIMARP/MF/CIR/01/294/98 dated February 4, 1998, Refer SEBI letter
No. SEBI/HO/OW/IMD/RAC2/P/2022/511371/1 dated October 04, 2022
39 Sub-regulation (15A) of Regulation 18 of SEBI (Mutual Funds) Regulations, 1996
40 SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 06, 2017
41 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
24
Master Circular for Mutual Funds as on March 31, 2024
c. Any safety net or guarantee provided.
1.14.1.4 42Comments from SEBI for change in Fundamental Attributes:
In addition to the conditions specified under Regulation 18
(15A) for bringing change in the fundamental attributes of
any scheme, trustees shall take comments of the Board
before bringing such change(s).
42 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 1A: REGISTRATION
1A.1 Regulatory Framework for Sponsors of a Mutual Fund43
1A.1.1 In order to enhance the penetration of the Mutual Fund industry, and
to facilitate new types of players to act as sponsors of Mutual Funds,
an alternative set of eligibility criteria is introduced. This is with the
objective of facilitating fresh flow of capital into the industry, fostering
innovation, encouraging competition, providing ease of consolidation
and easing exit for existing sponsors.
1A.1.2 In this regard, a Working Group was formed by SEBI to examine the
aforesaid issues. The recommendations of the Working Group were
deliberated in the Mutual Funds Advisory Committee and subsequent
to that, SEBI (Mutual Funds) Regulations, 1996 have been amended
vide notification No. SEBI/LAD-NRO/GN/2023/134 dated June 26,
2023.
1A.1.3 In furtherance to the same, the following has been decided:
1A.1.3.A Deployment of liquid net worth by Asset Management Company
(AMC)
i. In terms of Regulation 21(1)(f) of the MF Regulations, an AMC
shall deploy the minimum net worth required, as applicable, in
assets as may be specified by SEBI.
ii. In this regard, the following has been decided:
a. AMCs shall deploy the minimum net worth required either in
cash, money market instruments, Government Securities,
Treasury bills, Repo on Government securities, or in listed
43 Inserted vide SEBI Circular No. SEBI/HO/IMD/IMD-PoD-2/P/CIR/2023/118 dated July
07, 2023. Refer SEBI email dated December 14, 2024
26
Master Circular for Mutual Funds as on March 31, 2024
AAA rated debt securities without bespoke
structures/structured obligations, credit enhancements or
embedded options or any other structure/ feature which
increase the liquidity risk of the instrument on a continuous
basis and such investments shall be unencumbered.
1A.1.3.B Acquisition of an AMC
i. In terms of Regulation 7 (a) (iii) of the MF Regulations, in case of
change in control of an existing AMC due to acquisition of shares,
the sponsor shall ensure that the positive liquid net worth of the
sponsor or funds tied up by the sponsor is to the extent of
aggregate par value or market value of the shares proposed to be
acquired, whichever is higher.
ii. In this regard, the following has been decided.
a. In case of change in control of an existing AMC due to
acquisition of shares, the cost of acquisition may also be
funded out of borrowings by a sponsor but in such cases, the
sponsor shall have sufficient other assets to encumber for
borrowings other than the shares of the proposed AMC.
b. The sponsor’s stake in the proposed AMC shall be free from
any encumbrance at all times.
iii. In terms of clause (iv) to the first proviso to Regulation 7 (a) of
the MF Regulations, the sponsor has to ensure that in case of
acquisition of an existing AMC, the sponsor shall have
minimum positive liquid net worth equal to incremental
capitalization required to ensure minimum capitalization of the
AMC and the positive liquid net worth of the sponsor or the
27
Master Circular for Mutual Funds as on March 31, 2024
funds tied up by the sponsor are to the extent of aggregate par
value or market value of the shares proposed to be acquired,
whichever is higher.
iv. In this regard, the following has been decided.
a. In case of change in control of the existing AMC due to
acquisition of shares, the cost of acquisition may be funded
out of borrowings by a sponsor but the sponsor shall have
sufficient other assets to encumber for borrowings other
than the shares of the proposed AMC.
b. Minimum incremental capital contribution required in the
AMC shall not be funded through borrowings and shall be
funded only out of the net worth of the acquirer.
c. The sponsor’s stake in an AMC shall be free from
encumbrances in any form at all points of time.
1A.1.3.C Pooled Investment Vehicle as sponsor of Mutual Funds
i. Second proviso to Regulation 7 (a) of the MF Regulations
permits to allow a private equity fund or a pooled investment
vehicle or a pooled investment fund to sponsor Mutual Funds
subject to conditions as may be specified by SEBI from time to
time.
ii. In this regard, the following has been decided.
a. Among the pooled investment vehicles, only the private
equity funds (PEs) can sponsor a Mutual Fund.
b. Such PEs shall comply with clauses (i) to (vi) of the first
proviso to clause 7 (a) of the MF Regulations.
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Master Circular for Mutual Funds as on March 31, 2024
c. For any PE to qualify as a Mutual Fund sponsor, the
following criteria shall be applicable;
I. The applicant PE (scheme/ fund) shall itself be a body
corporate or, a body corporate set up by a PE. The
applicant body corporate may be set up in India or
abroad.
II. The applicant PE or its manager shall have a minimum of
five years of experience in the capacity of
fund/investment manager and an experience of investing
in the financial sector, where it should have managed
committed and drawn-down capital of not less than INR
5,000 Cr. as on the date of its application made to SEBI.
d. The following additional safeguards shall also be applicable
for PEs acting as Mutual Fund sponsor.
I. There shall be no off-market transactions between the
schemes of the Mutual Fund and
a) Sponsor PE; or
b) Schemes/ Funds managed by the manager of the
sponsor PE; or
c) Investee Companies of schemes/ funds of sponsor PE,
where it holds more than 10% stake; or has a board
representation or a right to nominate Board
representation.
II. As per clause (ii) of the first proviso to Regulation 7(a) of
the MF Regulations, an initial shareholding of sponsor
equivalent to capital contributed to an AMC to the extent
29
Master Circular for Mutual Funds as on March 31, 2024
of not less than INR 150 Cr. shall be locked-in for a period
of 5 years. In such cases, the lock in period of 5 years
shall continue in case of transfer of sponsorship to any
other entity within the PE group provided all the criteria
required for a PE to act as sponsor are met by the
transferee PE as well.
III. The said lock in period of 5 years shall also be applicable
to the shareholding of PE in the corporate entity, which is
sponsoring the Mutual Fund.
IV. The experience, track record and eligibility regarding the
fit and proper criteria of any applicant PE to become
sponsor of a Mutual Fund shall be ascertained through
its conduct in the respective home jurisdiction.
1A.1.3.D Reduction of stake and disassociation of sponsor
i. Considering the evolution of the Mutual Fund industry and
significant shift in the nature of roles and responsibilities of the
AMCs in the last few decades, most of the AMCs can be stated to
be prepared enough to stand on their own and create trust
among their investors. In view of the above, it has been decided
to allow a sponsor to voluntarily reduce its stake in an AMC
subject to certain conditions.
ii. Regulations 7C (1) and 7C (2) of the MF Regulations permit a
sponsor to disassociate itself from an AMC and a Mutual Fund
and allow such AMC of an existing Mutual Fund to act as sponsor
of the same Mutual Fund in the event of the sponsor
disassociating itself from the AMC.
30
Master Circular for Mutual Funds as on March 31, 2024
iii. In view of the above, it has been decided that an AMC can become
a “self- sponsored AMC”, subject to fulfilling the following
conditions:
a. The AMC should have been carrying on business in financial
services for a period of not less than 5 years;
b. The AMC should have positive net worth in all the
immediately preceding five years;
c. Net profit of the AMC after providing for depreciation, interest
and tax in each of the immediately preceding five years and
average net annual profit after providing for depreciation,
interest and tax during the immediately preceding 5 years
should be at least INR 10 cr.
iv. Any sponsor proposing to disassociate should have been a
sponsor of the concerned Mutual Fund for at least 5 years before
the proposed date of disassociation;
v. The shareholding proposed to be reduced by a sponsor shall not
be under any encumbrance or lock-in.
vi. Any sponsor proposing to disassociate may undertake to reduce
shareholding below 10% from the proposed date of disassociation
as per the following timelines:
a. Within a period of 5 years in case of listed AMCs.
b. Within a period of 3 years in case of unlisted AMCs.
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Master Circular for Mutual Funds as on March 31, 2024
c. During the above period, the obligations of an outgoing
sponsor shall be as per the applicable regulatory framework
for a sponsor.
d. The sponsor shall commit to a graded stepwise reduction over
the applicable time period.
vii. Post disassociation of any sponsor from an AMC, all the
shareholders of such AMC shall be classified as “financial
investors” and there shall not be any sponsor of such AMC.
viii. Post disassociation, the upper limit of shareholding for any
financial investor shall be below 10%.
ix. Any sponsor proposing to disassociate itself shall undertake to
honour all the obligations applicable to it under Regulation 38
of MF Regulations (Guaranteed Returns) as on proposed date of
disassociation.
x. A self- sponsored AMC shall maintain the minimum net worth
requirement as per SEBI MF Regulations on a continuous basis.
xi. The statutory auditor of a Mutual Fund shall submit a
compliance report on the fulfilment of eligibility criteria by a
self- sponsored AMC, as defined at paragraph 1A.1.3.D (iii)
above on an yearly basis. The trustees and Board of a self-
sponsored AMC shall provide a compliance status to SEBI in
the half yearly and quarterly compliance reports furnished by
them respectively.
xii. The constitution of trustee company of a self- sponsored AMC
shall be as under:
32
Master Circular for Mutual Funds as on March 31, 2024
a. In case of trustee company of a MF with an unlisted AMC,
the shareholding of trustee company shall be a mirror image
of the shareholding of the AMC at all times.
b. In case of trustee companies of a MF with a listed AMC, the
financial investors shall continue to hold shares in the
trustee company that is a mirror image of their holding in
the AMC. Further, the shareholding in the trustee company
that is equivalent to the public shareholding in the AMC,
shall be held with a trust whose beneficial owner shall be
the erstwhile sponsor with Independent directors of the
trustee company as its trustees.
xiii. Regulation 14 of the MF Regulations has been amended
specifying signatory to the trust deed in case of disassociation
of the sponsor. In this regard, it has been decided that upon
disassociation of the sponsor, the largest financial investor shall
be the signatory to the trust deed instead of the sponsor.
1A.1.3.E Re- Association of the Sponsor(s)
i. Regulation 7C (5) of the MF Regulations provides for the
dissociated sponsor as described at paragraph 1A.1.3.D above or
any new entity to become sponsor of the Mutual Fund managed
by the self- sponsored AMC, in case the AMC fails to meet the
conditions specified at paragraph 1A.1.3.D (iii) above.
ii. In this regard, for the scenarios mentioned at paragraph 1A.1.3.E
(i) above, it has been decided that a disassociated sponsor and/or
any new entity can become sponsor of a Mutual Fund subject to
the following conditions:
33
Master Circular for Mutual Funds as on March 31, 2024
a. If the AMC fails to meet the criteria of self-sponsored AMC as
defined at paragraph 1A.1.3.D (iii) above, a cure period of one
year shall be provided within which, the AMC shall be
required to meet the criteria for self-sponsored AMCs.
b. If even after the cure period, the AMC fails to meet the
conditions for self- sponsored AMCs, then either the
disassociated sponsor or any new entity shall become
sponsor of the concerned Mutual Fund.
c. The proposed sponsor should meet all the requirements and
obligations specified in MF Regulations pertaining to the
sponsors and,
d. The proposed sponsor shall follow due process of obtaining
approval as a sponsor from SEBI.
iii. In such cases, an exit option shall be provided to the
unitholders of the existing schemes of the concerned Mutual
Fund, without any exit load.
34
Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 2: CONVERSION & CONSOLIDATION OF SCHEMES, LAUNCH
OF ADDITIONAL PLAN AND CATEGORIZATION & RATIONALIZATION OF
MUTUAL FUND SCHEMES
PART I - CONVERSION OF SCHEMES
2.1 Conversion of Close Ended Scheme(s) to Open Ended Scheme(s)44
2.1.1 Although the procedure for conversion of close ended scheme(s) to
open ended scheme(s) has been clearly enumerated in the Mutual
Funds Regulations45, following requirements are clarified again:
2.1.1.1 Since the scheme(s) would reopen for fresh subscriptions,
disclosures contained in the SID shall be revised and updated. A
copy of the draft SID shall be filed with the Board as required under
Regulation 28(1) of the Mutual Funds Regulations along with filing
fees prescribed under Regulation 28(2) of the Mutual Funds
Regulations. Instructions issued by the Board46 for filing of the SID
shall also be followed.
2.1.1.2 A draft of the communication to be sent to unit holders shall be
submitted to the Board which shall include the following:
a. Latest portfolio of the scheme(s) in the prescribed format47
b. Details of the financial performance of the scheme(s) since
inception in the format prescribed in SID48 along with
comparisons with appropriate benchmark(s)49.
c. The addendum to the SID detailing the modifications (if any)
made to the scheme(s).
44 SEBI Circular No. MFD/CIR No.22/2311/03 dated January 30, 2003.
, 4 , 5 Regulation 33(3) of the SEBI (Mutual Funds), Regulations, 1996.
, 4 , 6 SEBI Circular No. SEBI/IMD/Cir No 5/126096/08 dated May 23, 2008
47 Refer to format no. 3.C on half yearly portfolio disclosure under section on formats.
, 4 8 Please refer to format no. 5.A. of SID under section on Formats.
49 For examples of Benchmarks, refer to Chapter 1 – ‘Offer Documents for Schemes’
35
Master Circular for Mutual Funds as on March 31, 2024
2.1.1.3 The letter to unit holders and revised SID (if any) shall be issued
only after the final observations as communicated by the Board in
terms of Regulation 29(3) of the Mutual Funds Regulations have
been incorporated therein and final copies of the same have been
filed with the Board.
2.1.1.4 Unit holders shall be given at least 30 days to exercise exit option.
During this period, the unit holders who opt to redeem their
holdings in part or in full shall be allowed to exit at the NAV
applicable for the day on which the request is received, without
charging exit load.
36
Master Circular for Mutual Funds as on March 31, 2024
PART II – CONSOLIDATION OF SCHEMES
2.2 Consolidation of Schemes50
2.2.1 Any consolidation or merger of Mutual Fund schemes will be treated
as a change in the fundamental attributes of the related schemes and
AMCs shall be required to comply with the Mutual Funds Regulations
in this regard51.
2.2.2 Further, in order to ensure that all important disclosures are made to
the investors of the schemes sought to be consolidated or merged and
their interests are protected; AMCs shall take the following steps:
2.2.2.1 Approval by the Board of the AMC and Trustee(s):
a. The proposal and modalities of the consolidation or merger shall
be approved by the Board of the AMC and Trustee(s), after they
ensure that the interest of unit holders under all the concerned
schemes have been protected in the said proposal.
2.2.2.2 Disclosures:
a. Subsequent to approval from the Board of the AMC and
Trustee(s), AMCs shall file the proposal with the Board, along
with the draft SID, requisite fees (if a new scheme emerges after
such consolidation or merger) and draft of the letter to be issued
to the unit holders of all the concerned schemes.
b. The letter addressed to the unit holders, giving them the option
to exit at prevailing NAV without charging exit load, shall
50 SEBI Circular No. SEBI/MFD/CIR No.5/12031/03 dated June 23, 2003.
, 5 1 Regulation 18(15A) of the Mutual Funds Regulations.
37
Master Circular for Mutual Funds as on March 31, 2024
disclose all relevant information enabling them to take well
informed decisions. This information will include, inter alia:
1. Latest portfolio of the concerned schemes52.
2. Details of the financial performance of the concerned
schemes since inception in the format prescribed in SID53
along with comparisons with appropriate benchmarks.
3. Information on the investment objective, asset allocation
and the main features of the new consolidated scheme.
4. Basis of allocation of new units by way of a numerical
illustration
5. Percentage of total exposure to securities classified as below
investment grade or default and percentage of total illiquid
assets to net assets of each individual scheme(s) as well the
consolidated scheme.54
6. Tax impact of the consolidation on the unit holders.
7. Any other disclosure as specified by the Trustees.
8. Any other disclosure as directed by the Board.
2.2.2.3 Updation of SID shall be as per the requirements for change in
fundamental attribute of the scheme55.
2.2.2.4 Maintenance of Records:
a. AMC(s) shall maintain records of dispatch of the letters to the
unit holders and the responses received from them. A report
giving information on total number of unit holders in the
schemes and their net assets, number of unit holders who opted
52 Refer format no. 3.C. on half yearly portfolio disclosure under section on Formats
<5 3 Please refer format no. 5.A. on SID under section on Formats
54 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019.
55 Please refer Chapter 1 on ‘Offer Documents for Schemes’ for further details
38
Master Circular for Mutual Funds as on March 31, 2024
to exit and net assets held by them and number of unit holders
and net assets in the consolidated scheme shall be filed with the
Board within 21 days from the date of closure of the exit
option56.
2.2.2.5 Merger or consolidation shall not be seen as change in fundamental
attribute of the surviving scheme if the following conditions are
met57:
a. Fundamental attributes58 of the surviving scheme do not
change. The ‘surviving scheme’ means the scheme which
remains in existence after the merger.
b. Mutual Funds are able to demonstrate that the circumstances
merit merger or consolidation of schemes and the interest of the
unit holders of surviving scheme is not adversely affected.
2.2.2.6 After approval by the Boards of AMCs and Trustees, the AMCs shall
file such proposal with SEBI. SEBI would communicate its
observations on the proposal within the time period prescribed59.
2.2.2.7 The letter to unit holders shall be issued only after the final
observations communicated by SEBI have been incorporated and
final copies of the same have been filed with SEBI.
56 SEBI Circular No- SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009
57 SEBI Circular No- Cir / IMD / DF / 15/ 2010 dated October 22, 2010
58 SEBI Circular No-IIMARP/MF/CIR/01/294/98 dated February 4, 1998
59 Regulation 29(3) of SEBI (Mutual Funds) Regulations, 1996
39
Master Circular for Mutual Funds as on March 31, 2024
PART III – LAUNCH OF ADDITIONAL PLANS60
2.3 Launch of Additional Plans
2.3.1 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.
2.3.2 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:
2.3.2.1 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).
2.3.2.2 AMC(s) shall publish an advertisement or issue a press release at
the time of launch of such additional plan(s).
2.4 Single Plan61
2.4.1 Mutual funds/AMCs shall launch schemes under a single plan and
ensure that all new investors are subject to single expense structure.
2.4.2 Existing schemes with multiple plans based on the amount of
investment (i.e. retail, institutional, super-institutional, etc.) shall
accept fresh subscriptions only under one plan.
60 SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15, 2009
61 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012
40
Master Circular for Mutual Funds as on March 31, 2024
2.4.3 Other plans will continue till the existing investors remain invested in
the plan.
2.5 Direct Plan62
2.5.1 Mutual funds/AMCs shall provide a separate plan for direct
investments, i.e., investments not routed through a distributor, in
existing as well as new schemes.
2.5.2 Such separate plan shall have a lower expense ratio excluding
distribution expenses, commission, etc., and no commission shall be
paid from such plans. The plan shall also have a separate NAV.
62 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012, Refer SEBI Email
dated April 28, 2015
41
Master Circular for Mutual Funds as on March 31, 2024
PART IV – CATEGORIZATION AND RATIONALIZATION OF MUTUAL FUND
SCHEMES63
It is desirable that different schemes launched by a Mutual Fund are clearly
distinct in terms of asset allocation, investment strategy etc. Further, there is
a need to bring in uniformity in the characteristics of similar type of schemes
launched by different Mutual Funds. This would ensure that an investor of
Mutual Funds is able to evaluate the different options available, before taking
an informed decision to invest in a scheme.
In order to bring the desired uniformity in the practice, across Mutual Funds
and to standardize the scheme categories and characteristics of each category,
it has been decided to categorize the MF schemes as given below:
2.6 Categories of Schemes, Scheme Characteristics and Type of
Scheme (Uniform Description of Schemes)64:
2.6.1 The Schemes would be broadly classified in the following groups:
i. Equity Schemes
ii. Debt Schemes
iii. Hybrid Schemes
iv. Solution Oriented Schemes
v. Other Schemes
63 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 06, 2017, Refer
SEBI letter No. SEBI/HO/OW/IMD-II/DOF3/P/5249/2022 dated February 08, 2022, Refer
SEBI letter No. SEBI/HO/OW/IMD-II/DOF3/P/25379/2022 dated June 21, 2022. Refer SEBI
letter No. SEBI/HO/IMD/IMD-RAC-2/P/OW/2023/40331/1 dated September 26, 2023 &
Refer SEBI letter No. SEBI/HO/IMD/IMD-SEC-3/P/OW/2023/ 43062/1 dated October 19,
2023.
64 Refer SEBI letter No. SEBI/HO/OW/IMD-II/DOF3/P/25096/2022 dated June 17, 2022
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Master Circular for Mutual Funds as on March 31, 2024
The details of the scheme categories under each of the aforesaid
groups along with their characteristics and uniform description are as
under:
A. Equity Schemes:
Sr. Category of Scheme Characteristics Type of scheme
No. Schemes (uniform description of
scheme)
1 Multi Cap Minimum investment in equity Multi Cap Fund- An open
Fund & equity related instruments- ended equity scheme
75% of total assets in the investing across large
following manner:65 cap, mid cap, small cap
stocks
a) Minimum investment in
equity & equity related
instruments of large cap
companies - 25% of total
assets;
b) Minimum investment in
equity & equity related
instruments of mid cap
companies - 25% of total
assets;
c) Minimum investment in
equity & equity related
instruments of small cap
companies - 25% of total
assets
2 Large Cap Minimum investment in equity Large Cap Fund- An open
Fund & equity related instruments of ended equity scheme
large cap companies- 80% of predominantly investing
total assets in large cap stocks
65 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/172 dated September 11, 2020
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Master Circular for Mutual Funds as on March 31, 2024
3 Large & Mid Minimum investment in equity Large & Mid Cap Fund-
Cap Fund & equity related instruments of An open ended equity
large cap companies- 35% of scheme investing in both
total assets large cap and mid cap
Minimum investment in equity stocks.
& equity related instruments of
mid cap stocks- 35% of total
assets
4 Mid Cap Minimum investment in equity Mid Cap Fund- An open
Fund & equity related instruments of ended equity scheme
mid cap companies- 65% of total predominantly investing
assets in mid cap stocks
5 Small cap Minimum investment in equity Small Cap Fund- An open
Fund & equity related instruments of ended equity scheme
small cap companies- 65% of predominantly investing
total assets in small cap stocks
6 Dividend Scheme should predominantly An open ended equity
Yield Fund invest in dividend yielding scheme predominantly
stocks. investing in dividend
yielding stocks
Minimum investment in equity-
65% of total assets
7 Value Fund* Scheme should follow a value An open ended equity
investment strategy. scheme following a value
Minimum investment in equity investment strategy
& equity related instruments -
65% of total assets
Contra Scheme should follow a An open ended equity
Fund* contrarian investment strategy. scheme following
Minimum investment in equity contrarian investment
& equity related instruments - strategy
65% of total assets
8 Focused A scheme focused on the An open ended equity
Fund number of stocks (maximum 30) scheme investing in
Minimum investment in equity maximum 30 stocks
& equity related instruments - (mention where the
65% of total assets scheme intends to focus,
viz., multi cap, large cap,
mid cap, small cap)
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Master Circular for Mutual Funds as on March 31, 2024
9 Sectoral/ Minimum investment in equity An open ended equity
Thematic66 & equity related instruments of scheme investing in __
a particular sector/ particular sector (mention the
(Also refer to theme- 80% of total assets sector)/
para 3.11 of An open ended equity
this Master scheme following __
Circular for theme (mention the
sub-category theme)
for ESG
investments)
10 ELSS67 Minimum investment in equity An open ended equity
& equity related instruments - linked saving scheme
80% of total assets (in with a statutory lock in of
accordance with Equity Linked 3 years and tax benefit
Saving Scheme, 2005 notified by
Ministry of Finance)
11 Flexi Cap Minimum Investment in equity An open ended dynamic
Fund68 & equity related instruments – equity scheme investing
65% of total assets across large cap, mid cap,
small cap stocks
* Mutual Funds will be permitted to offer either Value fund or Contra fund.
B. Debt Schemes
Sr. Category of Scheme Characteristics Type of scheme
No Schemes (uniform description of
. scheme)
1 Overnight Investment in overnight An open ended debt
Fund** securities having maturity of 1 scheme investing in
day*** overnight securities
2 Liquid Fund Investment in Debt and money An open ended liquid
$ ** market securities with maturity scheme
of upto 91 days only
66 Refer SEBI letter No. SEBI/H0/0W/IMD-II/DOF3/P/24098/2022 dated June 10, 2022
67 Refer SEBI letter No. SEBI/HO/IMD- POD-2/P/OW/2023/1114/1 dated January 10, 2023
68 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/228 dated November 06, 2020
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Master Circular for Mutual Funds as on March 31, 2024
3 ++ Ultra Short Investment in Debt & Money An open ended ultra-
Duration Market instruments such that short term debt scheme
Fund the Macaulay duration of the investing in instruments
portfolio is between such that the Macaulay
3 months to 6 months duration of the portfolio
is between 3 months to 6
months (please refer to
page no.__) #.
4++ Low Investment in Debt & Money An open ended low
Duration Market instruments such that duration debt scheme
Fund the Macaulay duration of the investing in instruments
portfolio is between such that the Macaulay
6 months to 12 months duration of the portfolio
is between 6 months to
12 months (please refer
to page no.__) #.
5 Money Investment in Money Market An open ended debt
Market instruments having maturity up scheme investing in
Fund to 1 year money market
instruments
6++ Short Investment in Debt & Money An open ended short
Duration Market instruments such that term debt scheme
Fund the Macaulay duration of the investing in instruments
portfolio is between such that the Macaulay
1 year to 3 years duration of the portfolio
is between 1 year to 3
years (please refer to
page no.__) # .
7++ Medium Investment in Debt & Money An open ended medium
Duration Market instruments such that term debt scheme
Fund ^^ the Macaulay duration of the investing in instruments
portfolio is between such that the Macaulay
3 years to 4 years. duration of the portfolio
is between 3 years to 4
Portfolio Macaulay duration years (please refer to
under anticipated adverse page no.__) #.
situation is 1 year to 4 years
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Master Circular for Mutual Funds as on March 31, 2024
8++ Medium to Investment in Debt & Money An open ended medium
Long Market instruments such that term debt scheme
Duration the Macaulay duration of the investing in instruments
Fund ^^ portfolio is between such that the Macaulay
4 to 7 years. duration of the portfolio
is between 4 years to 7
Portfolio Macaulay duration years (please refer to
under anticipated adverse page no.__) #.
situation is 1 year to 7 years
9++ Long Investment in Debt & Money An open ended debt
Duration Market Instruments such that scheme investing in
Fund the Macaulay duration of the instruments such that
portfolio is greater the Macaulay duration of
than 7 years the portfolio is greater
than 7 years (please refer
to page no.__) # .
10 Dynamic Investment across duration An open ended dynamic
Bond debt scheme investing
across duration
11 Corporate Minimum investment in An open ended debt
Bond corporate bonds- 80% of total scheme predominantly
Fund assets (only in AA+ and above investing in AA+ and
rated corporate bonds) @ above rated corporate
bonds
12 Credit Risk Minimum investment in An open ended debt
Fund ^ corporate bonds- 65% of total scheme predominantly
assets (only in AA* and below investing in AA and
rated corporate bonds) @ below rated
corporate bonds
(excluding AA+ rated
corporate bonds)
13 Banking and Minimum investment in Debt An open ended debt
PSU Fund instruments of banks, Public scheme predominantly
Sector Undertakings, Public investing in Debt
Financial Institutions and instruments of banks,
Municipal Bonds - 80% of total Public Sector
assets @ Undertakings, Public
Financial Institutions
and Municipal Bonds
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Master Circular for Mutual Funds as on March 31, 2024
14 Gilt Fund Minimum investment in Gsecs- An open ended debt
80% of total assets (across scheme investing in
maturity) government securities
across maturity
15 Gilt Fund Minimum investment in Gsecs- An open ended debt
with 10 year 80% of total assets such that the scheme investing in
constant Macaulay duration of the government securities
duration portfolio is equal to 10 years having a constant
maturity of 10 years
16 Floater Fund Minimum investment in floating An open ended debt
rate instruments (including fixed scheme predominantly
rate instruments converted to investing in floating rate
floating rate exposures using instruments (including
swaps/derivatives)- 65% of total fixed rate instruments
assets @ converted to floating rate
exposures using
swaps/derivatives)
**Provision as mentioned at Paragraph 8.4.5 of this Master Circular shall be
followed for Uniform cut-off timings for applicability of Net Asset Value in respect
of Liquid Fund and Overnight Fund.
*** Overnight funds can deploy, not exceeding, 5% of the net assets of the
scheme in G-secs and/or T-bills with a residual maturity of upto 30 days for the
purpose of placing the same as margin and collateral for certain transactions69.
$ All provisions mentioned at Paragraph 1.13, 8.4.2.1.c, 12.6 of this Master
Circular in respect of liquid schemes shall be applicable.
# Please refer to the page number of the Offer Document on which the concept of
Macaulay's Duration has been explained
^ Words/ phrases that highlight/ emphasize only the return aspect of the
scheme shall not be used in the name of the scheme (for instance Credit
Opportunities Fund, High Yield Fund, Credit Advantage etc.)
* excludes AA+ rated corporate bonds
^^ With respect to the Medium Duration Fund and Medium to Long Duration
Fund, the characteristics of the scheme shall remain the same under normal
69 SEBI/HO/IMD/DF2/CIR/P/2021/683 dated December 10, 2021
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Master Circular for Mutual Funds as on March 31, 2024
circumstances. However, the fund manager, in the interest of investors, may
reduce the portfolio duration of the aforementioned schemes up to one year, in
case he has a view on interest rate movements in light of anticipated adverse
situation. The AMC shall be required to mention its asset allocation under such
adverse situation in its offer documents.
Whenever the portfolio duration is reduced below the specified floors of 3 years
and 4 years in respect of Medium Duration Fund and Medium to Long
Duration Fund respectively, the AMC shall be required to record the reasons
for the same with adequate justification and maintain the same for inspection.
The written justifications shall be placed before the Trustees in the subsequent
Trustee meeting. Further, the Trustees shall also review the portfolio and
report the same in their Half Yearly Trustee Report to SEBI.
++ It is clarified that Macaulay duration shall be at portfolio level70.
@ For asset allocation limits considering minimum liquid assets requirement,
refer Paragraph 4.6 of this Master Circular. For exclusion of investment in
units of CDMDF from asset allocation limits, please refer Paragraph 2.10 of
this Master Circular.
C. Hybrid Schemes
Sr. Category of Scheme Characteristics Type of scheme
No Schemes (uniform description of
. scheme)
1 Conservative Investment in equity & equity An open ended hybrid
Hybrid Fund related instruments- between scheme investing
10% and 25% of total assets; predominantly in debt
Investment in Debt instruments
instruments- between 75%
and 90% of total assets
2 Balanced Equity & Equity related An open ended balanced
Hybrid instruments- between 40% scheme investing in
Fund @ and 60% of total assets; equity and debt
Debt instruments- between instruments
40% and 60% of total assets
No Arbitrage would be
permitted in this scheme
70 SEBI circular no. SEBI/HO/IMD/DF3/CIR/P/2017/126 dated December 04, 2017
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Master Circular for Mutual Funds as on March 31, 2024
Aggressive Equity & Equity related An open ended hybrid
Hybrid Fund instruments- between 65% scheme investing
@ and 80% of total assets; predominantly in
Debt instruments- between equity and equity related
20% 35% of total assets instruments
3 Dynamic Investment in equity/ debt An open ended dynamic
Asset that is managed dynamically asset allocation fund
Allocation or
Balanced
Advantage
4 Multi Asset Invests in at least three asset An open ended scheme
Allocation ## classes with a minimum investing in _ , _ ,___
allocation of at least 10% each (mention the three
in all three asset classes different asset
classes)
5 Arbitrage Scheme following arbitrage An open ended scheme
Fund strategy. Minimum investing in arbitrage
investment in equity & equity opportunities
related instruments-
65% of total assets
6 Equity Minimum investment in An open ended scheme
Savings equity & equity related investing in equity,
instruments- 65% of total arbitrage and debt
assets and minimum
investment in debt- 10% of
total assets
Minimum hedged &
unhedged to be stated in the
SID.
Asset Allocation under
defensive considerations may
also be stated in the Offer
Document
@ Mutual Funds will be permitted to offer either an Aggressive Hybrid fund or
Balanced fund
## Foreign securities will not be treated as a separate asset class
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Master Circular for Mutual Funds as on March 31, 2024
D. Solution Oriented Schemes:
Sr. Category of Scheme Characteristics Type of scheme
No Schemes (uniform description
of scheme)
1 Retirement Scheme having a lock-in for at An open ended
Fund least 5 years or till retirement retirement solution
age whichever is earlier oriented scheme
having a lock-in of 5
years or till retirement
age (whichever is
earlier)
2 Children's Scheme having a lock-in for at An open ended fund for
Fund least 5 years or till the child investment for children
attains age of majority having a lock-in for at
whichever is earlier least 5 years or till the
child attains age of
majority (whichever is
earlier)
E. Other Schemes:
Sr. Category of Scheme Characteristics Type of scheme
No Schemes (uniform
description of scheme)
1 Index Funds/ Minimum investment in An open ended scheme
ETFs securities of a particular replicating/ tracking _
index (which is being index
replicated/ tracked)- 95% of
total
assets
2 FoFs Minimum investment in the An open ended fund of
(Overseas/ underlying fund- 95% of total fund scheme investing in
Domestic) assets fund (mention the
underlying fund)
2.6.2 As per the above, the ‘type of scheme’ (mentioned below the scheme
name in the offer documents/ advertisements/ marketing
material/etc.) would be the type of scheme (given in the third column
of the tables) as applicable to each category of scheme.
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Master Circular for Mutual Funds as on March 31, 2024
2.6.3 In case of Solution oriented schemes, there will be specified period of
lock in as stated in the above tables.
However, the said lock- in period would not be applicable to any
existing investment by an investor, registered SIPs and incoming STPs
in the existing solution oriented schemes as on the date on which
such scheme is getting realigned with these provisions.
2.6.4 The investment objective, investment strategy and benchmark of each
scheme shall be suitably modified (wherever applicable) to bring it in
line with the categories of schemes listed above.
2.6.5 For easy identification by investors and in order to bring uniformity in
names of schemes for a particular category across Mutual Funds, the
scheme name shall be the same as the scheme category.71
2.7 Definition of Large Cap, Mid Cap and Small Cap72:
2.7.1 In order to ensure uniformity in respect of the investment universe for
equity schemes, it has been decided to define large cap, mid cap and
small cap as follows:
i. Large Cap: 1st -100th company in terms of full market
capitalization
ii. Mid Cap: 101st -250th company in terms of full market
capitalization
iii. Small Cap: 251st company onwards in terms of full market
capitalization
71 SEBI Circular no. SEBI/HO/IMD/DF3/CIR/P/2020/228 dated November 06, 2020
72 Refer SEBI email dated January 28, 2022
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Master Circular for Mutual Funds as on March 31, 2024
2.7.2 Mutual Funds would be required to adopt the list of stocks prepared
by AMFI in this regard and AMFI would adhere to the following points
while preparing the list:
i. If a stock is listed on more than one recognized stock exchange,
an average of full market capitalization of the stock on all such
stock exchanges, will be computed;
ii. In case a stock is listed on only one of the recognized stock
exchanges, the full market capitalization of that stock on such an
exchange will be considered.
iii. This list would be uploaded on the AMFI website and the same
would be updated every six months based on the data as on the
end of June and December of each year. The data shall be
available on the AMFI website within 5 calendar days from the end
of the 6 months period.
iv. While preparing the single consolidated list of stocks, average full
market capitalization of the previous six month of the stocks shall
be considered73.
2.7.3 Subsequent to any updation in the list, Mutual Funds would have to
rebalance their portfolios (if required) in line with updated list, within
a period of one month.
2.8 Process to be followed for categorization and rationalization of
schemes:
2.8.1 Only one scheme per category would be permitted, except:
i. Index Funds/ ETFs replicating/ tracking different indices;
ii. Fund of Funds having different underlying schemes; and
iii. Sectoral/ thematic funds investing in different sectors/ themes
73 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/126 dated December 04, 2017
53
Master Circular for Mutual Funds as on March 31, 2024
2.8.2 74Further, Mutual Funds can launch either of the following ELSS
scheme in open ended Scheme Category, subject to compliance with
guidelines on Equity Linked Saving Scheme, 2005 notified by Ministry
of Finance:
i. Active ELSS Scheme - In terms of Paragraph 2.6.1.A.10 above
under “Equity Schemes” category or;
ii. Passive ELSS Scheme (through Index Fund) - In terms of
Paragraph 2.6.1.E.1 under “Other Schemes” category. The passive
ELSS scheme shall be based on one of the indices comprising of
equity shares from top 250 companies in terms of market
capitalization
2.9 Timelines for Rebalancing of Portfolios of Mutual Fund Schemes75
In order to bring uniformity across Mutual Funds with respect to
timelines for rebalancing of portfolio, the following has been decided:
2.9.1 In the event of deviation from mandated asset allocation mentioned in
the Scheme Information Document (SID) due to passive breaches
(occurrence of instances not arising out of omission and commission
of AMCs), rebalancing period across schemes shall be as follows:
SI. Category of Scheme Mandated
No. Rebalancing Period
i. Overnight Fund NA
74 SEBI Circular no. SEBI/HO/IMD/DOF2/P/CIR/2022/69 dated May 23, 2022
75 SEBI circular no SEBI/HO/IMD/IMD-II DF3/P/CIR/2022/39 dated March 30, 2022, Refer
SEBI Letter No. – SEBI/HO/IMD-I DOF-2/P/OW/2022/26571/1 dated June 29, 2022
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Master Circular for Mutual Funds as on March 31, 2024
ii. All schemes other than Index Funds Thirty (30) business
and Exchange Traded Funds days
2.9.2 In case the portfolio of schemes (all schemes other than Index Funds
and Exchange Traded Funds) mentioned at Paragraph above are not
rebalanced within the above mandated timelines, justification in
writing, including details of efforts taken to rebalance the portfolio
shall be placed before Investment Committee. The Investment
Committee, if so desires, can extend the timelines up to sixty (60)
business days from the date of completion of mandated rebalancing
period.
2.9.3 In case the portfolio of schemes is not rebalanced within the
aforementioned mandated plus extended timelines, AMCs shall:
a) not be permitted to launch any new scheme till the time the
portfolio is rebalanced.
b) not to levy exit load, if any, on the investors exiting such
scheme(s).
2.9.4 Reporting and Disclosure Requirements:
a) AMCs to report the deviation to Trustees at each stage.
b) In case the AUM of deviated portfolio is more than 10% of the AUM
of main portfolio of scheme:
i. AMCs have to immediately disclose the same to the investors
through SMS and email / letter including details of portfolio not
rebalanced.
55
Master Circular for Mutual Funds as on March 31, 2024
ii. AMCs shall also have to immediately communicate to investors
through SMS and email / letter when the portfolio is
rebalanced.
iii. Subject line of the aforementioned emails / letters should be
uniform across industry and clearly indicate “breach of” /
“deviation” from mandated asset allocation.
c) AMCs have to disclose any deviation from the mandated asset
allocation to investors along with periodic portfolio disclosures as
specified by SEBI from the date of lapse of mandated plus
extended rebalancing timelines.
2.9.5 The above mentioned norms shall be applicable to main portfolio only
and not to segregated portfolio(s), if any.
2.10 Exclusion of investment in units of CDMDF from asset allocation
limits76
2.10.1 For calculation of asset allocation limits of mutual fund schemes in
terms of Part IV of this Chapter, investment in units of CDMDF shall
be excluded from base of net assets.
76 Inserted by SEBI Circular No. SEBI/HO/IMD/PoD2/P/CIR/2023/152 dated September 06,
2023
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 3: NEW PRODUCTS
3.1 Fund of Funds Scheme77
3.1.1 The SID and the advertisements pertaining to Fund of Funds
Scheme78 shall disclose that the investors are bearing the recurring
expenses of the scheme, in addition to the expenses of other schemes
in which the Fund of Funds Scheme makes investments.
3.1.2 AMCs shall not enter into any revenue sharing arrangement with the
underlying funds in any manner and shall not receive any revenue by
whatever means/head from the underlying fund. Any commission or
brokerage received from the underlying fund shall be credited into
concerned scheme’s account79.
3.1.3 Fund of funds mutual fund schemes shall adopt the total expense
structures laid out in Regulations80, which Asset Management
Companies shall clearly indicate in the SIDs.
3.2 Gold Exchange Traded Fund Scheme81
3.2.1 A Gold Exchange Traded Fund (GETF) Scheme82 shall invest primarily
in:
3.2.1.1 Gold and
77 SEBI Circular No. MFD/CIR. No.04/11488/2003 dated June 12, 2003.
78 Regulation 2(ma) of the Mutual Funds Regulations introduced vide Gazette Notification No.
S.O 632(E) dated May 29, 2003.
79 SEBI Circular No. SEBI/IMD/CIR No 18/198647/2010 dated March 15, 2010
80 Regulation 52(6)(a) of SEBI (Mutual Funds) Regulations, 1996
81 SEBI Circular No. SEBI/IMD/CIR. No.4/58422/06 dated January 24, 2006, SEBI Circular
No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006, SEBI Circular No. SEBI/IMD/CIR
No.14/84243/07 dated January 15, 2007.
82 Regulation 2(mb) of the SEBI (Mutual Funds) Regulations, 1996 introduced vide Gazette
Notification No. S.O. 38(E) dated January 12, 2006.
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Master Circular for Mutual Funds as on March 31, 2024
3.2.1.2 Gold related instruments83. However investments in gold related
instruments shall be done only after such instruments are specified
by the Board84
3.2.1.3 Gold Deposit Scheme (GDS)85 of banks had been designated as one
such gold related instrument. However, as per RBI notification
dated October 22, 2015, the Gold Monetisation Scheme, 2015
(GMS) will replace the Gold Deposit Scheme, 1999. Accordingly, it
has been decided that GMS will also be designated as a gold related
instrument86, in line with GDS of Banks.
3.2.1.4 Exchange Traded Commodity Derivatives (ETCDs)87 having gold as
the underlying, shall also be considered as ‘gold related instrument’
for GETFs.
3.2.1.5 Investment in GDS, GMS and ETCD having gold as the underlying
by GETFs of mutual funds will be subject to following conditions:
a. The cumulative exposure to gold related instruments i.e. GDS
of banks, GMS and ETCD having gold as the underlying shall
not exceed 50% of net asset value of the scheme. However,
within the 50% limit, the investment limit for GDS of banks and
GMS as part of gold related instrument shall not exceed 20% of
net asset value of the scheme. The unutilized portion of the limit
for GDS of banks and GMS can be utilized for ETCD having gold
as the underlying.
b. Before investing in GDS of Banks, GMS and ETCDs having gold
as the underlying, mutual funds shall put in place a written
policy with regard to such investments with due approval from
83 Regulations 2(mc) of the Mutual Funds Regulations introduced vide Gazette Notification No.
S.O. 38(E) dated January 12, 2006.
84 SEBI Circula r No. SEBI/IMD/CIR No. 4/58422/06 dated January 24, 2006.
85 SEBI Circular No. CIR/IMD/DF/04/2013 dated February 15, 2013
86 SEBI Circular No. CIR/IMD/DF/11/2015 dated December 31, 2015
87 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/65 dated May 21, 2019
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Master Circular for Mutual Funds as on March 31, 2024
the Board of the Asset Management Company and the Trustees.
The policy should have provision to make it necessary for the
mutual fund to obtain approval of trustees for investment
proposal in GDS of any bank and GMS. The policy shall be
reviewed by Trustees of Mutual Funds, at least once a year.
c. Certificates issued in respect of investments made by GETFs in
GDS of banks and GMS can be held by the mutual funds in
dematerialized or physical form88.
3.2.1.6 Existing investments by Gold ETFs of Mutual Funds under the GDS
will be allowed to run till maturity unless these are withdrawn
prematurely.
3.2.2 Valuation:
3.2.2.1 Gold shall be valued based on the methodology provided in Clause
3A of, Schedule Eight of the Mutual Funds Regulations89.
3.2.3 Determination of Net Asset Value90
3.2.3.1 The NAV of units under the GETF Scheme shall be calculated up to
four decimal points as shown below:
Market or Fair Value of Scheme's investments +
Current Assets - Current Liabilities and Provision
NAV (in Rs. terms) = ______________________________________________
Number of Units outstanding under Scheme on the
Valuation Date
88 SEBI Circular No. CIR/IMD/DF/16/2013 dated October 18, 2013
89 SEBI Circular No. SEBI/IMD/CIR No.14/84243/07 dated January 15, 2007 read with
Gazette Notification F. No. SEBI/LAD/DoP/82534/2006 dated December 20, 2006.
90 SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006.
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Master Circular for Mutual Funds as on March 31, 2024
3.2.4 Recurring Expenses91
3.2.4.1 The recurring expenses limits as per applicable regulations92 shall
be applicable to GETF Scheme(s).
3.2.5 Benchmarks for GETF Scheme93
3.2.5.1 GETF Scheme(s) shall be benchmarked against the price of gold.
3.2.6 Half yearly report by Trustees94
3.2.6.1 Physical verification of gold underlying the Gold ETF units shall be
carried out by statutory auditors of mutual fund schemes and
reported to trustees on half yearly basis.
3.2.6.2 The confirmation on physical verification of gold as above shall also
form part of half yearly report95 by trustees to SEBI.
3.2.7 Additional Norms for Gold ETFs96
3.2.7.1 Gold ETFs shall additionally comply with the norms as stated at
Paragraphs 3.3.6, 3.3.9, 3.3.10 and 3.3.11 of this Master Circular.
3.3 Norms for Silver Exchange Traded Funds (Silver ETFs) 97
3.3.1 Investment Objective: To generate returns that are in line with the
performance of physical silver in domestic prices, subject to tracking
error.
3.3.2 A Silver ETF scheme shall invest at least 95% of the net assets of the
scheme in:
91 SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006.
92 Regulation 52(6)(b) of the SEBI (Mutual Funds) Regulations, 1996.
93 SEBI Circular No. SEBI/IMD/CIR No.2/65348/06 dated April 21, 2006.
94 SEBI Circular No. Cir/IMD/DF/20/2010 dated December 06, 2010
95 Please refer to Format No. 2.C. under the section on Formats for the disclosures in the Half
Yearly Trustee Report w.r.t physical verification of Gold. This will be effective from the half
yearly report ending April 2011 by Trustees to SEBI.
96 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/668 dated November 24, 2021
9 7 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/668 dated November 24, 2021.
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Master Circular for Mutual Funds as on March 31, 2024
3.3.2.1 Silver and
3.3.2.2 Silver related instruments. Exchange Traded Commodity
Derivatives (ETCDs) having silver as the underlying shall be
considered as ‘silver related instrument’ for Silver ETFs.
3.3.2.3 Investment in ETCDs having silver as the underlying by Silver ETFs
will be subject to following conditions:
a) The exposure to ETCDs having silver as the underlying shall not
exceed 10% of net asset value of the scheme. However, the above
limit of 10% shall not be applicable to Silver ETFs where the
intention is to take delivery of the physical silver and not to roll
over its position to next contract cycle.
b) Before investing in ETCDs having silver as the underlying,
mutual funds shall put in place a written policy with regard to
such investment with due approval from the Board of the AMC
and the Trustees. The policy shall be reviewed by the Board of
AMC and Trustees at least once a year.
c) The cumulative gross exposure of Silver ETFs shall not exceed
100% of the net assets of the scheme.
3.3.2.4 The physical silver shall be of standard 30 kg bars with fineness of
999 parts per thousand (or 99.9% purity) confirming to London
Bullion Market Association (LBMA) Good Delivery Standards.
3.3.3 Valuation: Silver shall be valued based on the methodology provided
in paragraph 3B of Eighth Schedule to MF Regulations.
3.3.4 Determination of Net Asset Value
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Master Circular for Mutual Funds as on March 31, 2024
3.3.4.1 The NAV of units of Silver ETF Scheme shall be calculated up to
four decimal points as shown below:
Market or Fair Value of Scheme's investments +
Current Assets - Current Liabilities and Provision
NAV (in Rs. terms) = ______________________________________________
Number of Units outstanding under the Scheme on
the Valuation Date
3.3.5 Total Expense Ratio (TER): The TER applicable for Silver ETF
schemes shall be same as the TER applicable for ETFs in terms of
Regulation 52 of MF Regulations.
3.3.6 Disclosure of NAV: The NAV of Silver ETFs shall be disclosed on every
business day on the website of the AMC. Further, the indicative NAVs
of Silver ETFs shall be disclosed on Stock Exchange platforms, where
the units of these ETFs are listed, on continuous basis during the
trading hours.
3.3.7 Benchmark for Silver ETF Scheme: Silver ETF Scheme(s) shall be
benchmarked against the price of silver (based on LBMA Silver daily
spot fixing price).
3.3.8 Liquidity:
3.3.8.1 Units of Silver ETFs shall be listed on the recognized Stock
Exchange(s).
3.3.8.2 The AMC shall appoint Authorized Participants (APs)/ Market
Makers (MMs) to provide liquidity for the units of Silver ETFs in
secondary market on an ongoing basis.
3.3.8.3 APs/ MMs and large investors may directly buy/sell units with the
Mutual Fund in creation unit size. The AMC shall disclose the
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Master Circular for Mutual Funds as on March 31, 2024
details about the creation unit size of Silver ETF in Scheme
Information Document (SID).
3.3.9 Tracking Error & Tracking Difference:
3.3.9.1 The provisions mentioned at Paragraph 3.6.3 below, shall be
followed for tracking error & tracking difference for Silver Exchange
Traded Funds.98
3.3.10 Disclosures: To enable the investors to take an informed decision, the
SID of Silver ETFs shall, inter-alia, disclose the following:
3.3.10.1 Tracking error and tracking difference,
3.3.10.2 Market risk due to volatility in silver prices,
3.3.10.3 Liquidity risks in physical or derivative markets impairing the
ability of the fund to buy and sell silver,
3.3.10.4 Risks associated with handling, storing and safekeeping of
physical silver;
3.3.10.5 Applicable tax provisions.
3.3.11 Dedicated Fund Manager: For commodity based funds such as Gold
ETFs, Silver ETFs and other funds participating in commodities
market, a dedicated fund manager with relevant skill and experience
in commodities market including commodity derivatives market shall
be appointed to manage the fund. However, it is clarified that
dedicated fund manager(s) for each Commodity based fund is not
mandatory.
3.3.12 Half Yearly Trustee Report:
3.3.12.1 Physical verification of silver underlying the Silver ETF units shall
be carried out by the statutory auditor of mutual fund and shall
report the same to trustees on half yearly basis.
98 SEBI Circular No. SEBI/HO/IMD/DOF2/P/CIR/2022/69 dated May 23, 2022
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Master Circular for Mutual Funds as on March 31, 2024
3.3.12.2 The confirmation on physical verification of silver as stated above
shall also form part of half yearly report by trustees to SEBI.
3.4 Portfolio Concentration Norms for Equity Exchange Traded Funds
(ETFs) and Index Funds99
3.4.1 In order to address the risk related to portfolio concentration in ETFs
and Index Funds, it has been decided to adopt the following norms:
3.4.1.1 The index shall have a minimum of 10 stocks as its constituents.
3.4.1.2 For a sectoral/ thematic Index, no single stock shall have more
than 35% weight in the index. For other than sectoral/ thematic
indices, no single stock shall have more than 25% weight in the
index.
3.4.1.3 The weightage of the top three constituents of the index,
cumulatively shall not be more than 65% of the Index.
3.4.1.4 The individual constituent of the index shall have a trading
frequency greater than or equal to 80% and an average impact cost
of 1% or less over previous six months.
Accordingly, any ETF/ Index Fund that seeks to replicate a
particular Index shall ensure that such index complies with the
aforesaid norms.
3.4.2 Compliance Procedure:
3.4.2.1 The aforesaid norms shall be applicable to all ETFs/ Index Funds
tracking equity indices.
3.4.2.2 The ETF/ Index Fund issuer shall evaluate and ensure compliance
to the aforesaid norms for all its ETFs/ Index Funds at the end of
every calendar quarter.
99 SEBI Circular No SEBI/HO/IMD/DF3/CIR/P/2019/011 dated January 10, 2019.
,
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Master Circular for Mutual Funds as on March 31, 2024
3.4.2.3 The ETF/Index Fund issuer shall ensure that the updated
constituents of the Indices (for all its ETFs/ Index Funds) are
available on the website of such ETF/Index Fund issuers at all
points of time.
3.5 Norms for Debt Exchange Traded Funds (ETFs)/Index Funds100
3.5.1 Debt ETFs/ Index Funds could be based on indices comprising of
3.5.1.1 Corporate Debt Securities (Corporate debt indices); or
3.5.1.2 Government Securities (G-sec), t-bills and/or State Development
Loans (SDLs) (G-sec indices); or
3.5.1.3 A combination of Corporate Debt Securities and G-sec/t-
bills/SDLs (Hybrid debt indices).
The detailed provisions in this regard are given below:
3.5.2 Debt ETFs/ Index Funds: Index Constitution
For Debt ETFs/ Index Funds, the AMCs shall ensure the following:
3.5.2.1 Constituents of the index are aggregated at issuer level for the
purpose of determining investment limits for single issuer, group,
sector, etc.
3.5.2.2 Constituents of the index shall have a defined credit rating and
defined maturity and the same shall be specified in the index
methodology.
3.5.2.3 Rating of the constituents of the index shall be of investment grade
and above.
100 SEBI Circular No. SEBI/HO/IMD/DOF2/P/CIR/2022/69 dated May 23, 2022 & SEBI
Circular No SEBI/HO/IMD/DF3/CIR/P/2019/147 dated November 29, 2019, Refer SEBI
Letter No. – SEBI/HO/IMD-I DOF-2/P/OW/2022/26571/1 dated June 29, 2022
,
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Master Circular for Mutual Funds as on March 31, 2024
3.5.2.4 Constituents of the index should have adequate liquidity and
diversification (other than for the portion of indices comprising of
G-sec and/or SDLs) at issuer level.
3.5.2.5 Constituents of the index shall be periodically reviewed (at least
on half-yearly basis).
3.5.2.6 Debt ETFs/ Index Funds shall replicate the underlying debt index.
The portfolio of ETF/Index Funds shall be considered to be
replicating the index subject to meeting the requirements specified
at Paragraph 3.5.3, 3.5.4 & 3.5.5 below.
3.5.2.7 Single issuer limit for debt indices shall be as follows:
a) For an index with at least 80% weight of corporate debt
securities, single issuer limit shall be as under:
i. In respect of AAA rated securities, a single issuer shall not
have more than 15% weight in the index.
ii. In respect of AA rated securities, a single issuer shall not
have more than 12.5% weight in the index.
iii. In respect of A and below rated securities, a single issuer
shall not have more than 10% weight in the index.
b) For a hybrid index (comprising both corporate debt securities
and G-sec /SDL) with up to 80% weight of corporate debt
securities,
i. In respect of AAA rated securities, a single issuer shall not
have more than 10% weight in the index. However, for
AAA rated securities of PSU and AAA rated securities of
PFI issuers the said limit shall be 15%.
ii. In respect of AA rated securities, a single issuer shall not
have more than 8% weight in the index.
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Master Circular for Mutual Funds as on March 31, 2024
iii. In respect of A and below rated securities, a single issuer
shall not have more than 6% weight in the index.
c) For an index based on G-Sec and SDLs, single issuer limit
shall not be applicable.
3.5.2.8 The index shall not have more than 25% weight in a particular
group (excluding securities issued by Public Sector Units (PSUs),
Public Financial Institutions (PFIs) and Public Sector Banks
(PSBs)). For the purpose of this provision, ‘group’ shall have the
same meaning as defined in Paragraph 12.9.3.3 of this Master
Circular.
3.5.2.9 The index shall not have more than 25% weight in a particular
sector (excluding G-sec, t-bills, SDLs and AAA rated securities
issued by PSUs, PFIs and PSBs). However, this provision shall not
be applicable for sectoral or thematic debt indices.
3.5.2.10 AMCs shall ensure that the updated constituents of the indices
and methodology for all their Debt ETFs/ Index Funds are
available on their respective websites at all points of time. Further,
the historical data with respect to constituents of the indices since
inception of schemes shall also be disclosed on their website.
3.5.2.11 AMFI has issued a list of debt indices for launching of debt ETFs/
Index Funds. The said list is available on AMFI’s website.
3.5.3 Corporate Debt ETF/Index Funds: Debt ETFs/ Index Funds based on
Index of Corporate Debt Securities
Debt ETFs/ Index Funds based on index comprising of only corporate
debt securities shall be considered to be replicating the underlying
debt index provided:
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Master Circular for Mutual Funds as on March 31, 2024
3.5.3.1 Investment in securities of issuers accounting for at least 60% of
weight in the index, represents at least 80% of net asset value
(NAV) of the ETF/ Index Fund.
3.5.3.2 At no point of time the securities of issuers not forming part of the
index exceed 20% of NAV of the ETF/ Index Fund.
3.5.3.3 At least 8 issuers from the underlying index form part of the
portfolio of the ETF/ Index Fund.
3.5.3.4 The investment in various securities are aggregated at issuer level
for the purpose of exposure limits.
3.5.3.5 The exposure limit to a single issuer by the ETF/ Index Fund shall
be as under:
a) For AAA rated securities, exposure to a single issuer by the
ETF/ Index Fund shall not have more than 15% weight in the
portfolio.
b) For AA rated securities, exposure to a single issuer by the
ETF/ Index Fund shall not have more than 12.5% weight in
the portfolio.
c) For A and below rated securities, exposure to a single issuer
by the ETF/ Index Fund shall not have more than 10% weight
in the portfolio.
3.5.3.6 Total exposure of the ETF/ Index Fund in a particular group
(excluding investments in securities issued by PSUs, PFIs and
PSBs) shall not exceed 25% of NAV of the scheme. For the purpose
of this provision, ‘group’ shall have the same meaning as defined
in Paragraph 12.9.3.3 of this Master Circular.
3.5.3.7 Total exposure of the ETF/ Index Fund in a particular sector
(excluding G-sec, t-Bills, SDLs and AAA rated securities issued by
PSUs, PFIs and PSBs) shall not exceed 25% of the NAV of the
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Master Circular for Mutual Funds as on March 31, 2024
scheme. However, this provision shall not be applicable for
schemes based on sectoral or thematic debt indices.
3.5.3.8 The Macaulay Duration (hereinafter referred as “duration”) of the
portfolio of the ETF/ Index Fund replicates the duration of the
underlying index within a maximum permissible deviation of +/-
10%.
3.5.3.9 In case of Target Maturity (or Target Date) ETFs/ Index Funds, the
following norms for permissible deviation in duration shall apply:
a) For portfolio with residual maturity of greater than 5 years:
Either +/- 6 months or +/- 10% of duration, whichever is
higher.
b) For a portfolio with residual maturity of up to 5 years: Either
+/- 3 months or +/- 10% of duration, whichever is higher.
c) However, at no point of time, the residual maturity of any
security forming part of the portfolio shall be beyond the
target maturity date of the ETF/ Index Fund.
3.5.3.10 The rating wise weightage of debt securities in the portfolio of ETF/
Index Fund replicates the underlying index. However, greater
allocation of up to 10% of the portfolio may be made to higher
rated debt securities.
3.5.3.11 Rebalancing Period:
For rebalancing the portfolio of the ETF/ Index Fund, the following
norms shall apply:
a) In case of change in constituents of the index due to periodic
review, the portfolio of ETF/ Index Funds be rebalanced
within 7 calendar days.
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Master Circular for Mutual Funds as on March 31, 2024
b) In case the rating of any security is downgraded to below the
rating mandated in the index methodology (including
downgrade to below investment grade), the portfolio be
rebalanced within 30 calendar days.
c) In case the rating of any security is downgraded to below
investment grade, the said security may be segregated in
accordance with Paragraph 4.4.4 & 4.4.5 of this Master
Circular on “Segregated portfolio in mutual fund schemes”.
3.5.4 G-sec ETF/Index Fund: Debt ETFs/ Index Funds based on G-sec, t-
bills and SDLs
3.5.4.1 The duration of the portfolio of ETF/ Index Fund replicates the
duration of the underlying index within a maximum permissible
deviation of +/- 10%.
3.5.4.2 ETFs/Index Funds replicating a Constant Maturity index may
invest in securities with residual maturity within +/- 10% of
maturity range of the index.
3.5.4.3 In case of Target Maturity (or Target Date) ETFs/ Index Funds, the
following norms for permissible deviation in duration shall apply:
a) For portfolio with residual maturity of greater than 5 years:
Either +/- 6 months or +/- 10% of duration, whichever is
higher.
b) For a portfolio with residual maturity of up to 5 years: Either
+/- 3 months or +/- 10% of duration, whichever is higher.
c) However, at no point of time, the residual maturity of any
security forming part of the portfolio shall be beyond the
target maturity date of the ETF/ Index Fund.
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Master Circular for Mutual Funds as on March 31, 2024
3.5.5 Hybrid Debt ETF/ Index Fund - Debt ETFs/ Index Funds based on a
Hybrid Index of Corporate Debt Securities and G-Sec/t-bills/SDLs
Hybrid Debt ETFs/ Index Funds shall be considered to be replicating
the underlying index, provided:
3.5.5.1 For ETF/ Index Fund based on an index comprising of more than
80% weight for corporate debt securities, the provisions mentioned
at paragraph 3.5.3 above shall be followed.
3.5.5.2 For ETF/ Index Fund based on an index comprising of up to 80%
weight of corporate debt securities, the provisions mentioned at
Paragraph 3.5.3 above, apart from Paragraph 3.5.3.3 & 3.5.3.5,
shall apply on the portion of the portfolio comprising of corporate
debt securities. Further, the exposure limit to a single issuer by
the ETF/ Index Fund shall be as under:
a) For AAA rated securities, exposure to a single issuer by the
ETF/ Index Fund shall not have more than 10% weight in the
portfolio. However, for AAA rated securities of PSU and AAA
rated securities of PFI issuers the said limit shall be 15%.
b) For AA rated securities, exposure to a single issuer by the
ETF/ Index Fund shall not have more than 8% weight in the
portfolio.
c) For A and below rated issuances, exposure to a single issuer
by the ETF/ Index Fund shall not have more than 6% weight
in the portfolio.
3.5.5.3 For the portion of the portfolio of the ETF/ Index Fund comprising
of G-sec/tbills/SDLs, the provisions mentioned at Paragraph
3.5.4 above shall apply.
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Master Circular for Mutual Funds as on March 31, 2024
3.5.6 At all points of time, positioning of the ETF/ Index Fund in the
Potential Risk Class (PRC) matrix shall be in the same cell as that of
positioning of the index in the PRC matrix.
3.5.7 Any transactions undertaken in the scheme portfolio of ETF/ Index
Fund in order to meet the redemption and subscription obligations
shall be done while ensuring that post such transactions replication
of the portfolio with the index is maintained at all points of time.
3.6 Development of Passive Funds101
3.6.1 Norms for Market Making Framework for ETFs
3.6.1.1 AMC shall appoint at least two Market Makers (MMs), who are
members of the Stock Exchanges, for ETFs to provide continuous
liquidity on the stock exchange platform. MM shall transact with
AMC only in multiples of creation unit size.
3.6.1.2 The AMC shall have an approved policy regarding market making
in ETFs based on the framework for market making as provided at
Annexure 12.
3.6.1.3 AMCs shall facilitate in-kind creation and redemption of units of
ETFs (including Debt ETFs) by MMs on a best effort basis.
3.6.1.4 Incentive for MMs
a) Incentives, if any, to MMs shall be charged to the scheme within
the maximum permissible limit of TER.
b) A transparent incentive structure for the MMs shall be put in
place, and the incentives shall, inter alia, be linked to performance
101 SEBI Circular No. SEBI/HO/IMD/DOF2/P/CIR/2022/69 dated May 23, 2022, Refer SEBI
letter No. SEBI/HO/IMD-I DOF2/P/OW/2022/26517/1 dated June 29, 2022. SEBI letter No.
SEBI/HO/IMD/IMD-PoD-2/P/OW/2023/17644/1 dated April 28, 2023, SEBI letter No.
SEBI/HO/IMD-POD-2/P/OW/2023/43653/1 dated October 26, 2023 & SEBI letter No.
SEBI/HO/IMD/POD-II/P/OW/2023/44633/1 dated November 06, 2023.
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Master Circular for Mutual Funds as on March 31, 2024
of the MMs in terms of generating liquidity in units of ETFs. The
relevant data regarding trading volume, bid-ask spread in units of
ETFs, and such other information as may be required to formalize
performance based incentive structure, shall be obtained from the
stock exchanges.
c) Stock Exchanges may also incentivize the MMs through Liquidity
Enhancement Schemes (LES) as per the applicable provisions.
d) There should be necessary checks and balances and adequate
disclosure of the principles of incentive structure on the website of
the AMCs and also in the Scheme Information Documents (SIDs)
of ETFs.
e) There shall be proper audit trail for scheme wise incentives.
3.6.1.5 Market Making Settlement Process for domestic Equity ETFs
In order to make the market making process less capital intensive,
it has been decided that net settlement between cash leg of
transactions in units of ETF by the MM and consequent
transaction in underlying basket by the ETF shall be implemented.
In this regard, the following has been decided:
a) MMs shall be permitted to transact in the basket of securities
underlying the ETF against equivalent transactions in units of
ETFs and transfer the net obligation of such transactions to the
ETF for unit creation or redemption. The AMCs shall be allowed to
create or redeem units of ETFs without upfront payment of 100%
value of such units or upfront delivery of such units by the MMs,
respectively.
b) The above mechanism shall be permitted subject to equivalent
transactions in units and underlying basket for the same
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Master Circular for Mutual Funds as on March 31, 2024
settlement cycle and confirmation of both the legs by the
Custodian.
c) For the above mechanism,
i. ETFs shall be allowed to buy or sell their own units, without
the same forming part of the asset allocation of the scheme.
ii. Provisions mentioned at Paragraph 12.29.3.b.III) of this Master
Circular shall not be applicable.
iii. The transactions by the MM in the underlying basket shall be
excluded for the purpose of computation of aggregate purchase
or sale of securities through any broker as required under the
Regulations102.
d) Facilitation of the above mechanism for equity ETFs shall be at the
discretion of the AMC.
e) The detailed operational guidelines in this regard, has been issued
by AMFI in consultation with Clearing Corporations. The Clearing
Corporations shall ensure that the necessary systems are in place
to enable the netting mechanism.
f) The AMC shall ensure that at no point of time, the above
mechanism shall increase the risk of the ETF.
3.6.2 Direct transaction in ETFs through AMCs
3.6.2.1 In order to enhance liquidity in units of ETFs on stock exchange
platform, it has been decided that direct transaction with AMCs
shall be facilitated for investors only for transactions above a
specified threshold.
102 Regulation 25(7)(a) and (b) of SEBI (Mutual Funds) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
3.6.2.2 In this regard, to begin with any order placed for redemption or
subscription directly with the AMC must be of greater than INR 25
Cr. The aforesaid threshold shall not be applicable for MMs and
shall be periodically reviewed. 103This provision shall be applicable
with effect from May 01, 2023.
3.6.2.3 Further, as in terms of Paragraph 8.7 of this Master Circular, all
direct transactions in units of ETFs by MMs or other eligible
investors (as per Paragraph 3.6.2.1 above) with AMCs shall be at
intra-day NAV based on the actual execution price of the underlying
portfolio, the following has been decided:
a) The provisions as mentioned at Paragraph 4.10 of this Master
Circular on "Swing pricing framework for mutual fund schemes”
shall not be applicable to Debt ETFs.
b) The requirement of “cut-off” timing for NAV applicability as
prescribed by SEBI from time to time shall not be applicable for
direct transaction with AMCs in ETFs by MMs and other eligible
investors.
3.6.3 Tracking Error and Tracking Difference
3.6.3.1 Tracking Error (TE)
a) The tracking error i.e. the annualized standard deviation of the
difference in daily returns between the underlying index or goods
and the NAV of the ETF/ Index Fund (other than Debt ETFs/
Index Funds) based on past one year rolling data shall not exceed
2%. In case of unavoidable circumstances in the nature of force
majeure, which are beyond the control of the AMCs, the tracking
103 SEBI Circular No. SEBI/HO/IMD/DOF2/P/CIR/2022/145 dated October 28, 2022 & SEBI
Circular No. SEBI/HO/IMD/DF2/CIR/P/2022/102 July 28, 2022
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Master Circular for Mutual Funds as on March 31, 2024
error may exceed 2% and the same shall be brought to the notice
of Trustees with corrective actions taken by the AMC, if any.
b) For ETFs/ Index Funds in existence for a period of less than one
year, the annualized standard deviation shall be calculated based
on available data.
c) All ETFs/ Index Funds (including Debt ETFs/ Index Funds), shall
disclose the tracking error based on past one year rolling data, on
a daily basis, on the website of respective AMCs and AMFI.
3.6.3.2 Tracking Difference (TD)
a) Along with tracking error, tracking difference i.e. the annualized
difference of daily returns between the index or goods and the NAV
of the ETF/ Index Fund shall also be disclosed on the website of
the AMC and AMFI, on a monthly basis, for tenures 1 year, 3 year,
5 year, 10 year and since the date of allotment of units.
b) For Debt ETFs/ Index Funds the annualized tracking difference
averaged over one year period shall not exceed 1.25%. In case the
average annualized tracking difference over one year period for
Debt ETFs/ Index Funds is higher than 1.25%, the same shall be
brought to the notice of trustees with corrective actions taken by
the AMC, if any.
3.6.4 Valuation by Fund of Funds (FoFs) investing in ETFs
3.6.4.1 The closing price of the units of ETFs on Stock Exchange shall be
used for valuation by FoFs investing in such ETFs.
3.6.5 Disclosure of indicative Net Asset Value (iNAV)
3.6.5.1 iNAV of an ETF i.e. the per unit NAV based on the current market
value of its portfolio during the trading hours of the ETF, shall be
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Master Circular for Mutual Funds as on March 31, 2024
disclosed on a continuous basis on the Stock Exchange(s), where
the units of these ETFs are listed and traded and shall be updated
in the following manner:
a) For Equity ETFs, within a maximum time lag of 15 seconds from
underlying market.
b) For Debt ETFs, at least four times a day i.e. opening and closing
iNAV and at least two times during the intervening period with
minimum time lag of 90 minutes between the two disclosures.
c) For ETFs on Gold or Silver, based on the latest available data for
Gold or Silver. Accordingly, iNAV disclosed for Gold or Silver ETFs
may either be static or dynamic depending upon the availability
of the underlying price.
d) For ETFs on international indices, based on the latest available
data regarding the portfolio of the ETF. Accordingly, iNAV
disclosed for international ETFs may either be static or dynamic
depending on the intersection in trading hours of domestic and
overseas markets.
e) For disclosure of iNAV, AMCs and Stock Exchanges shall develop
suitable mechanism for data sharing.
3.6.6 Liquidity window for Investors of ETFs with AMCs
3.6.6.1 Investors can directly approach the AMC for redemption of units of
ETFs, for transaction of upto INR 25 Cr. without any exit load, in
case of the following scenarios:
a) Traded price (closing price) of the ETF units is at discount of more
than 1% to the day end NAV for 7 continuous trading days, or
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Master Circular for Mutual Funds as on March 31, 2024
b) No quotes for such ETFs are available on stock exchange(s) for 3
consecutive trading days, or
c) Total bid size on the exchange is less than half of creation units
size daily, averaged over a period of 7 consecutive trading days.
3.6.6.2 In case of the above scenarios, applications received from investors
for redemption up to 3.00 p.m. on any trading day, shall be
processed by the AMC at the closing NAV of the day.
3.6.6.3 The above instances shall be tracked by the AMC on a continuous
basis and in case if any of the above mentioned scenario arises, the
same shall be disclosed on the website of AMC.
3.6.7 Rebalancing period for Equity ETFs/ Index Funds
3.6.7.1 In case of change in constituents of the index due to periodic review,
the portfolio of equity ETF/ Index Funds be rebalanced within 7
calendar days.
3.6.7.2 Any transactions undertaken in the scheme portfolio of ETF/ Index
Fund in order to meet the redemption and subscription obligations
shall be done while ensuring that post such transactions replication
of the portfolio with the index is maintained at all points of time.
3.6.8 Disclosure Norms for ETFs/ Index Funds
3.6.8.1 The debt and equity ETFs/ Index Funds shall disclose the following
on monthly basis:
a) Name and exposure to top 7 issuers and stocks respectively as a
percentage of NAV of the scheme
b) Name and exposure to top 7 groups as a percentage of NAV of the
scheme.
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Master Circular for Mutual Funds as on March 31, 2024
c) Name and exposure to top 4 sectors as a percentage of NAV of the
scheme.
Change in constituents of the index, if any, shall be disclosed on
the AMC website on the day of change
3.6.9 Nomenclature of ETFs/ Index Funds
3.6.9.1 In order to have proper understanding and clarity for investors, the
nomenclature for ETFs/ Index Funds shall include the name of the
underlying index or goods.
3.6.9.2 Further, for ETFs, after listing of the units, the scrip code of such
ETFs shall also be disclosed in the nomenclature at all places.
3.7 Capital Protection Oriented Scheme104
3.7.1 The SID, KIM and advertisements pertaining to Capital Protection
Oriented Scheme105 shall disclose that the scheme is “oriented
towards protection of capital” and not “with guaranteed returns.” It
shall also be indicated that the orientation towards protection of
capital originates from the portfolio structure of the scheme and not
from any bank guarantee, insurance cover etc.
3.7.2 The proposed portfolio structure indicated in the SID and KIM shall
be rated by a Credit Rating Agency registered with the Board from the
view point of assessing the degree of certainty for achieving the
objective of capital protection and the rating shall be reviewed on a
quarterly basis.
1 04 SEB I Circular No. SEBI/IMD/CIR No.9/74364/06 dated August 14, 2006.
105 Regulation 2 (ea), 33(2A) and 38A of the Mutual Funds Regulations introduced vide Gazette
Notification No. S.O. 1254(E) dated August 3, 2006.
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Master Circular for Mutual Funds as on March 31, 2024
3.7.3 The Trustees shall continuously monitor the portfolio structure of the
scheme and report the same in the Half Yearly Trustee Reports106 to
the Board. The AMC(s) shall also report on the same in its quarterly
CTR(s)107 to the Board.
3.7.4 It shall also be ensured that the debt component of the portfolio
structure has the highest investment grade rating.
3.8 Guaranteed Return Schemes
3.8.1 All Mutual Funds which offer Guaranteed Return Schemes shall
clearly indicate in the scheme information document as to who is
offering guarantee and that the guarantee is for both, initial capital
invested and the return assured108.
3.8.2 AMC in its report to Trustees and Trustees in their half yearly reports
to SEBI shall comment on ability of the AMC/sponsor to honour the
guaranteed returns in case of any Scheme guaranteeing returns109.
3.9 Real Estate Mutual Funds110:
3.9.1 A real estate mutual fund scheme111 can invest in real estate assets
in the cities mentioned in:
3.9.1.1 List of Million Plus Urban Agglomerations/Cities; or
3.9.1.2 List of Million Plus Cities
106 For format of Half Yearly Trustee Report, please refer format no. 2.C under the section on
Formats
107 For format of quarterly CTR, please refer format no. 2.B under the section on Formats
108 SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997
109 SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000 and SEBI Circular No.
SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/550 dated April 12, 2021
110 SEBI Circular No - SEBI/IMD/CIR No.4/124477/08 dated May 2,2008
111Regulation 49 A(a)(i) of SEBI (Mutual Fund) Regulations, 1996
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3.9.2 Such list appears in Census Statistics of India (2001) at
www.censusindia.gov.in. A printout of cities which appear in the
foresaid categories taken from the said website is attached for ready
reference at Annexure 3.
3.10 Infrastructure Debt Schemes112
3.10.1 Placement Memorandum:
3.10.1.1 Private Placement to less than 50 investors has been permitted as
an alternative to New Fund Offer to the public, in case of
Infrastructure Debt Funds (IDF). In case of private placement, the
mutual funds would have to file a Placement Memorandum with
SEBI instead of a Scheme Information Document and a Key
Information Memorandum. However, all the other conditions
applicable to IDFs offered through the NFO route like kind of
investments, investment restrictions, etc. would be applicable to
IDFs offered through private placement.
3.10.1.2 In terms of regulation 49-OA of the SEBI (Mutual Funds)
Regulations, 1996, the Placement Memorandum shall be filed with
SEBI as per the prescribed format113.
3.10.2 The Asset Management Companies shall ensure that the Placement
Memorandum is uploaded on their respective websites after allotment
of units, and on the website of such recognized Stock Exchange, where
it is proposed to be listed, at the time of listing of the scheme.
3.10.3 FPIs which are long term investors
112 SEBI Circular No. CIR/IMD/DF/7/2013 dated April 23, 2013
113 Please refer to format no. 5.D under the section on Formats
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3.10.3.1 The universe of strategic investors in the IDF has been expanded
to include, inter alia, FPIs registered with SEBI which are long
term investors subject to their existing investment limits.
3.10.3.2 With reference to regulation 49L of the SEBI (Mutual Funds)
Regulations, 1996 the following categories of FPIs are designated
as long term investors only for the purpose of IDF:
a. Foreign Central Banks
b. Governmental Agencies
c. Sovereign Wealth Funds
d. International/Multilateral Organizations/ Agencies
e. Insurance Funds
f. Pension Funds
g. Foreign feeder funds, having at all times, at least 20% of their
assets under management held by investors belonging to one
of more of the above categories of FPIs114
3.10.4 Investments by the IDF scheme
3.10.4.1 With reference to regulation 49P (1) of the SEBI (Mutual Funds)
Regulations, 1996, the investments in bank loans shall be made
only through the securitization mode.
3.11 New category of Mutual Fund schemes for Environmental, Social
and Governance (“ESG”) Investing and related disclosures by
Mutual Funds115
3.11.1 Under the then regulatory requirements, Mutual Funds were
permitted to launch only one scheme with ESG investing under the
thematic category for Equity schemes. In view of the industry
114 SEBI Circular No. CIR/IMD/DF/20/2013 dated November 29, 2013
115 Inserted vide SEBI Circular No. SEBI/HO/IMD/IMD-I –PoD1/P/CIR/2023/125 dated
July 20, 2023
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representations for allowing multiple schemes with different ESG
strategies and considering the increasing need for green financing, it
was decided to permit launch of multiple ESG schemes with different
strategies by Mutual Funds.
3.11.2 The concept of ESG investments is emerging and therefore consistent,
comparable, and decision-useful scheme disclosures is desirable to
enable investors to make informed investment decision and to prevent
greenwashing. In this regard, SEBI, vide letters dated February 08,
2022 and June 21, 2022 to AMFI, had prescribed disclosure norms
for ESG schemes of Mutual Funds, as available under the ‘Policy
related letters/Emails issued by SEBI’ section of this Master Circular.
3.11.3 In order to suggest further measures to improve transparency, with a
particular focus on mitigation of risks of mis-selling and
greenwashing, an ESG Advisory Committee was set up by SEBI which
provided recommendations for expanding the disclosure norms for
ESG funds. Considering the recommendations of the ESG Advisory
Committee and pursuant to public consultation on the matter, the
provisions of the SEBI (Mutual Funds) Regulations, 1996 were
amended on June 27, 2023 (link) to inter-alia specify that the funds
under ESG schemes shall be invested in the manner as specified by
SEBI from time to time.
3.11.4 Accordingly, it has been decided to implement the following measures
to facilitate green financing with thrust on enhanced disclosures and
mitigation of green washing risk.
3.11.4.1 Thematic schemes on ESG Strategies
3.11.4.1.1 Previously, as Mutual Funds could launch only one ESG
scheme under the thematic category of Equity schemes
(reference: paragraph 2.6.1(A)(9)), it is decided to introduce a
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separate sub-category for ESG investments under the thematic
category of Equity schemes. Any scheme under the ESG
category shall be launched with one of the following strategies
(details of strategies are at Annexure 14) –
a. Exclusion
b. Integration
c. Best-in-class & Positive Screening
d. Impact investing
e. Sustainable objectives
f. Transition or transition related investments
3.11.4.1.2 Minimum 80% of the total assets under management (AUM) of
ESG schemes shall be invested in equity & equity related
instruments of that particular strategy of the scheme (as per the
above specified sub-strategies). The remaining portion of the
investment shall not be in contrast to the strategy of the
scheme. Mutual Funds shall endeavour to deploy a higher
proportion of the assets towards the scheme’s strategy under
the ESG theme and make suitable disclosures.
3.11.4.1.3 AMCs shall ensure that the schemes launched by Mutual Funds
are clearly distinct in terms of asset allocation, investment
strategy etc.
3.11.4.1.4 The provision of new category for ESG schemes was applicable
with effect from July 20, 2023.
3.11.4.2 Investment criteria for ESG Schemes
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3.11.4.2.1 Previously, the ESG schemes of Mutual Funds were mandated
to invest only in such companies which had comprehensive
Business Responsibility and Sustainability Reporting (BRSR)
disclosures. It is decided that an ESG scheme shall invest at
least 65% of its AUM in companies which are reporting on
comprehensive BRSR and are also providing assurance on
BRSR Core disclosures (details on BRSR Core disclosures are
as specified vide SEBI circular No. SEBI/HO/CFD/CFD-SEC-
2/P/CIR/2023/122 dated July 12, 2023). The balance AUM of
the scheme can be invested in companies having BRSR
disclosures. This requirement shall be applicable with effect
from October 01, 2024.
3.11.4.2.2 Such ESG schemes which are not in compliance with the
aforesaid investment criteria as on October 01, 2024, shall
ensure compliance with the requirement by September 30,
2025. During the said period of one year, ESG schemes shall
not undertake any fresh investments in companies without
assurance on BRSR Core.
3.11.4.3 Disclosure requirements for ESG Schemes
3.11.4.3.1 Scheme strategy to be reflected in scheme name
Mutual Funds shall clearly disclose the name of ESG strategy
in the name of the concerned ESG fund/scheme. For eg., XYZ
ESG Exclusionary Strategy Fund, ABC ESG Best-in-class
Strategy Fund etc.
3.11.4.3.2 ESG scores of securities
a. Mutual Funds shall disclose the following in their monthly
portfolio statements of ESG schemes:
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i. Security wise BRSR Core scores {as and when the same
is made available by SEBI registered ESG Rating
Provider (ERPs)}, along with the BRSR scores.
ii. Name of the ERPs providing ESG scores for the ESG
schemes, along with the ESG scores. In case there is a
change in ERP, the reason for such change shall also be
disclosed in the next monthly portfolio statements of
ESG schemes.
b. These requirements were applicable with effect from July
20, 2023.
3.11.4.3.3 Voting disclosures by ESG schemes
a. Clauses 6.16.10 and 6.16.11 of this Master Circular
requires the Mutual Funds to compulsory cast votes in
respect of all resolutions of their investee companies.
Further, the AMCs are required to make disclosures of
votes cast on their website on a quarterly basis, along-with
the specific rationale supporting their voting decision.
b. In addition to the above, in order to enhance transparency
on votes cast by ESG schemes, it is decided that under the
rationale for voting decisions (whether” in favour” or
“against”), the AMCs shall categorically disclose whether
the resolution has or has not been supported due to any
environmental, social or governance reasons.
c. The disclosure of voting rationale may be made at the
Mutual Fund level. However, in instances wherein the
voting approach for ESG and non-ESG schemes of any
Mutual Fund is not same, the details and rationale for
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votes cast on behalf of ESG schemes and non-ESG
schemes shall be disclosed separately.
d. The enhanced voting disclosures are applicable from FY
2024-25 i.e. for Annual General Meetings held from April
01, 2024 onwards.
3.11.4.3.4 Annual Fund Manager commentary and disclosure of case
studies
a. A ‘Fund Manager Commentary’ along with the additional
disclosures with respect to engagements undertaken by
Mutual Funds for ESG schemes, as required to be
disclosed in terms of SEBI letter dated February 08, 2022,
shall be provided in the Annual Report of the ESG
schemes. The Fund Managers Commentary shall include
the following:
i. Examples on how ESG strategy was applied on the fund,
how engagements were carried out, any escalation
strategy that the Fund Manager may have applied on the
portfolio companies, annual tracking of ESG rating
movements in the investee companies etc.
ii. Case studies where Fund Managers have engaged with
portfolio companies with a clear objective of engagement
and engagements carried out for exercise of votes.
iii. The details on number of engagements carried out in a
year, the modes of communication employed, and if any
outcomes were achieved in the reporting year shall be
included in the fund managers’ commentary. If ESG
schemes have a specific objective, then reporting shall
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be done on engagements and outcomes achieved (if any)
in the reporting year based on that objective. Additional
areas to be covered in case studies and minimum
disclosures shall be specified by AMFI in consultation
with SEBI.
iv. Annual tracking of ESG rating / score movements in the
investee companies.
b. The Fund Manager commentary shall suitably disclose
percentage of AUM invested in such companies where there
is no BRSR disclosures (investments prior to October 01,
2022) and its impact, if any, on the Fund score.
c. In case there is a change in ERP, reason(s) for such change
recorded by AMCs shall also be disclosed in the fund
manager’s commentary.
d. The requirement of Annual Fund Manager commentary are
applicable from FY 2023-24. The disclosure of case studies
at para a(ii) and a(iii) above are applicable from FY 2024-
25 and the engagement details shall be disclosed from FY
2025-26 onwards.
3.11.4.3.5 Assurance on ESG Schemes
a. Independent assurance
i. The AMCs shall obtain an independent reasonable
assurance on an annual basis regarding their ESG
scheme’s portfolio being in compliance with the strategy
and objective of the scheme, as stated in respective
Scheme Information Documents. Such an assurance
was on a “comply or explain basis” for all ESG schemes
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for FY 2022-23 by December 31, 2023. Thereafter,
disclosure of assurance shall mandatorily be made in
the scheme’s annual report.
ii. The Board of AMCs shall ensure that the assurance
provider for an ESG scheme has the necessary expertise,
for undertaking reasonable assurance.
iii. The AMCs shall also ensure that there is no conflict of
interest with the assurance provider appointed for
providing assurance on their ESG schemes. For
instance, it shall be ensured that the assurance provider
or any of its associates do not sell its products or provide
any non-audit / non-assurance related service including
consulting services, to the AMC or its group entities.
b. Certification by the Board of AMCs
i. The board of directors of AMCs, based on comprehensive
internal ESG audit, shall certify the compliance of ESG
schemes with the regulatory requirements including
disclosures, in annual report of the scheme.
ii. The aforementioned internal ESG audit shall inter-alia
include verifying the Scheme Information Documents,
Stewardship Reporting and Responsible Investment
Policy of the ESG Funds and any other relevant
document, to ensure that what the statements made in
these documents are factual.
iii. This certification shall be applicable with immediate
effect. The board of directors of AMCs were to provide the
certificate for FY 2022-23 by December 31, 2023.
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Master Circular for Mutual Funds as on March 31, 2024
Thereafter, the certification shall be disclosed in the
Annual Reports of the schemes.
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 4: RISK MANAGEMENT FRAMEWORK116
4.1 Risk Management Framework for Mutual Funds
4.1.1 With the overall objective of management of key risks involved in
mutual fund operation, the Risk Management Framework (RMF) shall
provide a set of principles or standards, which inter alia comprise the
policies, procedures, risk management functions and roles &
responsibilities of the management, the Board of AMC and the Board
of Trustees.
4.1.2 The detailed RMF for mutual funds are placed at Annexure 1.
4.1.3 The elements of RMF, wherever applicable, have been segregated into
‘mandatory elements' which should be implemented by the AMCs and
‘recommendatory elements' which address other leading industry
practices that can be considered for implementation by the AMCs, to
the extent relevant to them.
4.1.4 AMCs shall perform a self-assessment of their RMF and practices and
submit a report, thereon, to their Board along with the roadmap for
implementation of the framework.
4.1.5 Compliance with the RMF should be reviewed annually by the AMC.
Reports of such reviews shall be placed before the Board of AMC and
Trustees for their consideration and appropriate directions, if any.
Trustees may forward the findings and steps taken to mitigate the risk
along with their comments to SEBI in the half-yearly trustee reports.
116 SEBI Circular No. MFD/CIR/15/19133/2002 dated September 30, 2002 replaced by SEBI
Circular No SEBI/HO/IMD/IMD-1 DOF2/P/CIR/2021/630 dated September 27, 2021 with
effect from April 1, 2022, Refer SEBI email dated September 13, 2022.
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4.2 Stress Testing of Liquid Fund and Money Market Mutual Fund
Schemes 117
4.2.1 As a part of risk management framework, Mutual Funds (MFs) carry
out stress testing of their portfolio, particularly for debt schemes. In
order to standardize this practice across industry, AMFI came out with
Best Practice Guidelines dated September 12, 2014 on stress testing
of Liquid Funds and Money Market Mutual Fund Schemes (MMMFs).
4.2.2 In order to further strengthen the risk management practices and to
develop a sound framework that would evaluate potential
vulnerabilities on account of plausible events and provide early
warning on the health of the underlying portfolio of Liquid Fund and
MMMF Schemes, it has been decided to stipulate the following
guidelines:
4.2.2.1 As a part of the extant risk management framework, AMCs should
have stress testing policy in place which mandates them to conduct
stress test on all Liquid Fund and MMMF Schemes.
4.2.2.2 The stress test should be carried out internally at least on a
monthly basis, and if the market conditions require so, AMC should
conduct more frequent stress test.
4.2.2.3 The concerned schemes shall be tested on the following risk
parameters, among others deemed necessary by the AMC:
a) Interest rate risk;
b) Credit risk;
c) Liquidity & Redemption risk.
117 SEBI Circular No. CIR/IMD/DF/03/2015 dated April 30, 2015. Refer SEBI email dated
February 27, 2024.
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4.2.2.4 While conducting stress test, it will be required to evaluate impact
of the various risk parameters on the scheme and its Net Asset
Value (NAV). The parameters used and the methodology adopted for
conducting stress test on such type of scheme, should be detailed
in the stress testing policy, which is required to be approved by the
Board of AMC.
4.2.2.5 Further, in the event of stress test revealing any vulnerability or
early warning signal, it would be required to bring it to the notice of
the Trustees and take corrective action as deemed necessary, to
reinforce their robustness. Each AMC should also be required to
have documented guidelines, to deal with the adverse situation
effectively.
4.2.2.6 Such stress-testing policy shall be reviewed by the Board of AMC
and Trustees, at least on an annual basis, in light of the evolving
market scenarios and should cover the following aspects:
i. Adequacy of the documentation for various elements of the
stress testing framework
ii. Scope of coverage of the stress testing policy and the levels of
stress applied
iii. Integration of the stress testing framework in the day-to-day
risk management processes
iv. Adequacy of the corrective actions and the efficacy of the
systems for their activation.
4.2.2.7 Further, Trustees shall be required to report compliance with
provisions of Paragraph 4.2 above and steps taken to deal with
adverse situations faced, if any, in the Half Yearly Trustee Report
submitted to SEBI.
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4.2.3 118From December 01, 2020, all open ended Debt Schemes (except
Overnight scheme) are mandated to conduct stress testing and AMC
shall stipulate the guidelines to carry out stress testing in line with
paragraph 4.2 of this Master Circular.
4.3 Internal Credit Risk Assessment119:
4.3.1 In order to ensure that mutual funds are able to carry out their own
credit assessment of assets and reduce reliance on credit rating
agencies, all AMCs are required to have an appropriate policy and
system in place to conduct an in-house credit risk assessment/ due
diligence of debt and money market instruments/ products at all
points of time i.e. before investing in such instruments/ products and
also on continuous basis in order to have proper assessment of the
credit risk of the portfolio. Further, the internal policy should have
adequate provisions to generate early warning signals (including yield
based alerts) on deterioration of credit profile of the issuer. Based on
the alerts generated, the AMCs shall take appropriate measures and
report the same to trustees.
4.4 Creation of segregated portfolio in mutual fund schemes120,121
4.4.1 In order to ensure fair treatment to all investors in case of a credit
event and to deal with liquidity risk, it has been decided to permit
creation of segregated portfolio of debt and money market instruments
by mutual funds schemes.
1 18 SEB I Circular No.SEBI/HO/IMD/DF3/CIR/P/2020/229 dated November 06, 2020.
119SEBI Circula r No. SEBI/HO/IMD/DF2/CIR/2016/42 dated March 18, 2016 and SEBI
Circular No. SEBI/HO/IMD/DF2/CIR/2019/104 dated October 01, 2019.
120 SEBI Circul ar No. SEBI/HO/IMD/DF2/CIR/P/2018/160 dated December 28, 2018, Refer
SEBI letter No. SEBI/HO/IMD/DF2/OW/P/2019/22447/1 dated August 29, 2019, Refer
SEBI letter No. SEBI/HO/IMD/DF2/OW/P/2019/28242/1 dated October 24, 2019
121 SEBI Circu lar No. SEBI/HO/IMD/DF2/CIR/P/2019/127 dated November 07, 2019.
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4.4.2 For this purpose,
4.4.2.1 The term ‘segregated portfolio’ shall mean a portfolio, comprising of
debt or money market instrument affected by a credit event, that
has been segregated in a mutual fund scheme.
4.4.2.2 The term ‘main portfolio’ shall mean the scheme portfolio excluding
the segregated portfolio.
4.4.2.3 The term ‘total portfolio’ shall mean the scheme portfolio including
the securities affected by the credit event.
4.4.3 AMC may create segregated portfolio in a mutual fund scheme subject
to the following:
4.4.3.1 Segregated portfolio may be created, in case of a credit event at
issuer level i.e. downgrade in credit rating by a SEBI registered
Credit Rating Agency (CRA), as under:
a. Downgrade of a debt or money market instrument to ‘below
investment grade’, or
b. Subsequent downgrades of the said instruments from
‘below investment grade’, or
c. Similar such downgrades of a loan rating.
4.4.3.2 In case of difference in rating by multiple CRAs, the most
conservative rating shall be considered. Creation of segregated
portfolio shall be based on issuer level credit events as detailed at
Paragraph 4.4.3.1 and implemented at the ISIN level.
4.4.3.3 Segregated portfolio of unrated debt or money market instruments
may be created only in case of actual default of either the interest
or principal amount. Actual default by the issuer of such
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Master Circular for Mutual Funds as on March 31, 2024
instruments shall be considered as credit event for creation of
segregated portfolio.
4.4.3.4 AMCs shall inform AMFI immediately about the actual default by
the issuer. Upon being informed about the default, AMFI shall
immediately inform the same to all AMCs. Pursuant to
dissemination of information by AMFI about actual default by the
issuer, AMCs may segregate the portfolio of debt or money market
instruments of the said issuer.
4.4.3.5 [Creation of segregated portfolio shall be optional and at the
discretion of the AMC. It should be created only if the Scheme
Information Document (SID) of the scheme has enabling provision
for segregated portfolio with detailed disclosures made in Statement
of Additional Information (SAI). All new schemes shall have the
enabling provision included in the SID for creation of segregated
portfolio.]122
4.4.3.6 AMCs shall have a detailed written down policy on creation of
segregated portfolio and the same shall be approved by the trustees.
4.4.4 123Provisions for Segregation of Portfolio in SID of scheme having
investment in instrument with special features:
a) Debt schemes which have investment in instruments with special
features viz. subordination to equity (absorbs losses before equity
capital) and /or convertible to equity upon trigger of a pre-
specified event for loss absorption (Additional Tier I bonds and Tier
122 Substituted vide SEBI Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/000175
dated November 01, 2023. Prior to substitution, clause 4.4.3.5 read as under:
“Creation of segregated portfolio shall be optional and at the discretion of the AMC. It should be
created only if the Scheme Information Document (SID) of the scheme has provisions for
segregated portfolio with adequate disclosures. All new schemes116 shall have the enabling
provisions included in the SID for creation of segregated portfolio.”
1 23 SEB I Circular No. SEBI/HO/IMD/DF4/CIR/P/2021/032 dated March 10, 2021.
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Master Circular for Mutual Funds as on March 31, 2024
2 bonds issued under Basel III) or debt schemes that have
provision to invest in such instruments shall ensure that the
Scheme Information Document (SID) of the scheme has provisions
for segregated portfolio. The provision to enable creation of
segregated portfolio in the existing schemes shall be subject to
compliance with Regulation 18(15A) of SEBI (Mutual Funds)
Regulations, 1996.
b) In case, the said instrument is to be written off or converted to
equity pursuant to any proposal, the date of said proposal may be
treated as the trigger date. However, if the said instruments are
written off or converted to equity without proposal, the date of
write off or conversion of debt instrument to equity may be treated
as the trigger date.
c) On the said trigger date, AMCs may, at their option, create
segregated portfolio in a mutual fund scheme subject to
compliance with relevant provisions of Paragraph 4.4 of this
Master Circular and any other relevant
Regulations/Circulars/Guidelines issued from time to time.
d) Further, Asset Management Companies/Valuation Agencies shall
ensure that the financial stress of the issuer and the capabilities
of issuer to repay the dues/borrowings are reflected in the
valuation of the securities from the trigger date onwards.
4.4.5 Process for creation of segregated portfolio
4.4.5.1 AMC shall decide on creation of segregated portfolio on the day of
credit event. Once an AMC decides to segregate portfolio, it shall
i. seek approval of trustees prior to creation of the segregated
portfolio.
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ii. immediately issue a press release disclosing its intention to
segregate such debt and money market instrument and its
impact on the investors. The mutual fund should also disclose
that the segregation shall be subject to trustee approval.
Additionally, the said press release shall be prominently
disclosed on the website of the AMC.
iii. ensure that till the time the trustee approval is received, which
in no case shall exceed 1 business day from the day of credit
event, the subscription and redemption in the scheme shall be
suspended for processing with respect to creation of units and
payment on redemptions.
4.4.5.2 Once trustee approval is received by the AMC,
i. Segregated portfolio shall be effective from the day of credit
event
ii. AMC shall issue a press release immediately with all relevant
information pertaining to the segregated portfolio. The said
information shall also be submitted to SEBI.
iii. An e-mail or SMS should be sent to all unit holders of the
concerned scheme.
iv. The NAV of both segregated and main portfolio shall be
disclosed from the day of the credit event.
v. All existing investors in the scheme as on the day of the credit
event shall be allotted equal number of units in the segregated
portfolio as held in the main portfolio.
vi. No redemption and subscription shall be allowed in the
segregated portfolio. However, in order to facilitate exit to unit
holders in segregated portfolio, AMC shall enable listing of
units of segregated portfolio on the recognized stock exchange
within 10 working days of creation of segregated portfolio and
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Master Circular for Mutual Funds as on March 31, 2024
also enable transfer of such units on receipt of transfer
requests.
4.4.5.3 If the trustees do not approve the proposal to segregate portfolio,
AMC shall issue a press release immediately informing investors of
the same.
4.4.6 Valuation and processing of subscriptions and redemptions
4.4.6.1 Notwithstanding the decision to segregate the debt and money
market instrument, the valuation should take into account the
credit event and the portfolio shall be valued based on the principles
of fair valuation (i.e. realizable value of the assets) in terms of the
relevant provisions of SEBI (Mutual Funds) Regulations, 1996 and
Circular(s) issued thereunder.
4.4.6.2 All subscription and redemption requests for which NAV of the day
of credit event or subsequent day is applicable will be processed as
per the provisions on applicability of NAV as under:
i. Upon trustees’ approval to create a segregated portfolio -
a. Investors redeeming their units will get redemption
proceeds based on the NAV of main portfolio and will
continue to hold the units of segregated portfolio.
b. Investors subscribing to the scheme will be allotted
units only in the main portfolio based on its NAV.
ii. In case trustees do not approve the proposal of segregated
portfolio, subscription and redemption applications will be
processed based on the NAV of total portfolio.
4.4.7 Disclosure Requirements
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In order to enable the existing as well as the prospective investors
to take informed decision, the following shall be adhered to:
4.4.7.1 A statement of holding indicating the units held by the investors in
the segregated portfolio along with the NAV of both segregated
portfolio and main portfolio as on the day of the credit event shall
be communicated to the investors within 5 working days of creation
of the segregated portfolio.
4.4.7.2 Adequate disclosure of the segregated portfolio shall appear in all
scheme related documents, in monthly and half-yearly portfolio
disclosures and in the annual report of the mutual fund and the
scheme.
4.4.7.3 The Net Asset Value (NAV) of the segregated portfolio shall be
declared on every business day.
4.4.7.4 The information regarding number of segregated portfolios created
in a scheme shall appear prominently under the name of the
scheme at all relevant places such as SID, KIM-cum-Application
Form, advertisement, AMC and AMFI websites, etc.
4.4.7.5 The scheme performance required to be disclosed at various places
shall include the impact of creation of segregated portfolio. The
scheme performance should clearly reflect the fall in NAV to the
extent of the portfolio segregated due to the credit event and the
said fall in NAV along with recovery(ies), if any, shall be disclosed
as a footnote to the scheme performance.
4.4.7.6 The disclosures at paragraphs 4.4.7.4 and 4.4.7.5 above regarding
the segregated portfolio shall be carried out for a period of at least
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3 years after the investments in segregated portfolio are fully
recovered/ written-off.
4.4.7.7 The investors of the segregated portfolio shall be duly informed of
the recovery proceedings of the investments of the segregated
portfolio. Status update may be provided to the investors at the time
of recovery and also at the time of writing-off of the segregated
securities.
4.4.8 TER for the Segregated Portfolio
4.4.8.1 AMC shall not charge investment and advisory fees on the
segregated portfolio. However, TER (excluding the investment and
advisory fees) can be charged, on a pro-rata basis only upon
recovery of the investments in segregated portfolio.
4.4.8.2 The TER so levied shall not exceed the simple average of such
expenses (excluding the investment and advisory fees) charged on
daily basis on the main portfolio (in % terms) during the period for
which the segregated portfolio was in existence.
4.4.8.3 The legal charges related to recovery of the investments of the
segregated portfolio may be charged to the segregated portfolio in
proportion to the amount of recovery. However, the same shall be
within the maximum TER limit as applicable to the main portfolio.
The legal charges in excess of the TER limits, if any, shall be borne
by the AMC.
4.4.8.4 The costs related to segregated portfolio shall in no case be charged
to the main portfolio.
4.4.9 Monitoring by Trustees
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4.4.9.1 In order to ensure timely recovery of investments of the segregated
portfolio, trustees shall ensure that:
i. The AMC puts in sincere efforts to recover the investments of
the segregated portfolio.
ii. Upon recovery of money, whether partial or full, it shall be
immediately distributed to the investors in proportion to their
holding in the segregated portfolio. Any recovery of amount of
the security in the segregated portfolio even after the write off
shall be distributed to the investors of the segregated portfolio.
iii. An Action Taken Report (ATR) on the efforts made by the AMC
to recover the investments of the segregated portfolio is placed
in every trustee meeting till the investments are fully recovered/
written-off.
iv. The trustees shall monitor the compliance with the guidelines
issued by SEBI regarding segregation of portfolio in mutual fund
schemes and disclose in the half-yearly trustee reports filed with
SEBI, the compliance in respect of every segregated portfolio
created.
4.4.9.2 In order to avoid mis-use of segregated portfolio, trustees shall
ensure to have a mechanism in place to negatively impact the
performance incentives of Fund Managers, Chief Investment
Officers (CIOs), etc. involved in the investment process of securities
under the segregated portfolio, mirroring the existing mechanism
for performance incentives of the AMC, including claw back of such
amount to the segregated portfolio of the scheme.
4.4.10 AMCs desirous of having a provision of segregated portfolio in existing
scheme (schemes as on December 28, 2018) shall ensure that all
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relevant disclosures are made in the SID of such schemes. The
provision to enable creation of segregated portfolio in the existing
scheme shall be subject to compliance with Regulation 18(15A) of
SEBI (Mutual Funds) Regulations, 1996.
4.4.11 The existence of the provisions for segregated portfolio should not
encourage the AMCs to take undue credit risk in the scheme portfolio.
Any mis-use of the provisions of segregated portfolio, would be
considered serious and stringent action may be taken.
4.5 Risk management framework for liquid and overnight funds124
In order to augment the risk management framework for liquid and
overnight funds, the following has been decided:
4.5.1 Liquid funds shall hold at least 20% of its net assets in liquid assets.
For this purpose, ‘liquid assets’ shall include Cash, Government
Securities, T-bills and Repo on Government Securities.
In case, the exposure in such liquid assets falls below 20% of net
assets of the scheme, the AMC shall ensure compliance with the above
requirement before making any further investments.
4.5.2 Liquid Funds and Overnight Funds shall not park funds pending
deployment in short term deposits of scheduled commercial banks.
4.5.3 Liquid Funds and Overnight Funds shall not invest in debt securities
having structured obligations (SO rating) and/ or credit
enhancements (CE rating). However, debt securities with government
guarantee shall be excluded from such restriction.
124 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/101 dated September 20, 2019.
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4.5.4 Mutual Fund shall levy exit load on investors who exit the Liquid Fund
within 7 days of their investment.
To ensure uniformity across the industry, AMFI had been advised to
prescribe the minimum exit load in a liquid and overnight fund on a
graded basis as specified above in consultation with SEBI.
4.6 Prudential Norms regarding holding of liquid assets in Open ended
Debt Schemes125:
4.6.1 All open ended debt schemes (except Overnight Fund, Liquid Fund,
Gilt Fund and Gilt Fund with 10-year constant duration) shall hold at
least 10% of their net assets in liquid assets. For this purpose, ‘liquid
assets’ shall include Cash, Government Securities, T-bills and Repo
on Government Securities.
4.6.2 The liquid assets specified above shall not be included for determining
the scheme characteristics of the open ended debt schemes as
specified under Part IV of Chapter 2 of this Master Circular126. In this
regards it is clarified that –
4.6.2.1 For all regulatory limit calculations other than Asset Allocation
Limits (e.g. for Macaulay Duration, Risk-o-meter, investment
restrictions pertaining to issuer, sector and group), the base to
be considered is 100% of Net Assets
4.6.2.2 For asset allocation limits (applicable for Banking and PSU Bond
Fund, Floater Fund, Credit Risk Fund and Corporate Bond
Funds scheme categories in terms of Part IV of Chapter 2 on
‘Categorization and Rationalization of Mutual Fund Schemes’ of
125 SEBI Circular No.SEBI/HO/IMD/DF3/CIR/P/2020/229 dated November 06, 2020. Refer
SEBI letter No. SEBI/HO/IMD/IMD-POD-2/P/OW/2023/23603/1 dated June 08, 2023
126 SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/583 dated June 25, 2021
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this Master Circular the base shall be considered as Net assets
excluding the extent of minimum stipulated liquid assets i.e.
10%. Illustration is given below -
Name of Name of scheme Current Name of scheme
scheme Asset Current Asset
Current
Asset
Banking Minimum investment in Minimum 72%**
and PSU debt instruments of banks, allocation to
Bond Fund Public Sector Banking & PSU
Undertakings, Public Assets
Financial Institutions and
Municipal Bonds – 80% of
total assets
**80% of (100% reduced to the extent of minimum stipulated
liquid assets i.e. 10%), i.e. 80% of 90% of Net Assets.
4.6.3 In case, the exposure in such liquid assets / securities falls below the
threshold mandated at paragraph 4.6.1 above, the AMCs shall ensure
compliance with the above requirement before making any further
investments.
4.6.4 AMFI has prescribed a suitable framework, in consultation with SEBI,
for liquidity risk management for open ended debt schemes (except
Overnight Fund, Gilt Fund and Gilt Fund with 10-year constant
duration). The said framework has come into effect from December
01, 2021, for all existing open ended debt schemes (except Overnight
Fund, Gilt Fund and Gilt Fund with 10-year constant duration) and
schemes to be launched on or thereafter.
4.7 Cyber Security and Cyber Resilience Framework for Mutual Funds/
AMCs127
127 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/12 dated January 10, 2019, Refer
SEBI email dated February 17, 2021 & August 04, 2022. Refer SEBI letter No.
SEBI/HO/IMD/IMD-TPD-1/P/OW/2023/16538 dated April 19, 2023 & SEBI letter No.
SEBI/HO/IMD/IMD-SEC-3/P/OW/2023/22970/1 dated June 06, 2023.
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4.7.1 With rapid technological advancement in securities market, there is
greater need for maintaining robust cyber security and to have cyber
resilience framework to protect integrity of data and guard against
breaches of privacy.
4.7.2 As part of the operational risk management, the Mutual Funds / Asset
Management Companies (AMCs) need to have robust cyber security
and cyber resilience framework in order to provide essential facilities
and services and perform critical functions in securities market.
4.7.3 Based on the recommendation of SEBI’s High Powered Steering
Committee - Cyber Security, it has been decided that the framework
prescribed vide SEBI circular CIR/MRD/DP13/2015 dated July 06,
2015 on cyber security and cyber resilience also be made applicable
to all Mutual Funds / AMC. Accordingly, all Mutual Funds / AMCs
shall comply with the provisions of Cyber Security and Cyber
Resilience as placed at Annexure 6.
4.7.4 The information/ reports mentioned under Annexure 6 shall be
shared through the dedicated e-mail ids: vapt_reports@sebi.gov.in
and cybersecurity_amc@sebi.gov.in128
4.7.5 Further, the Mutual Funds/ AMCs are mandated to conduct
comprehensive cyber audit at least 2 times in a financial year. Along
with the cyber audit reports, henceforth, all Mutual Funds/ AMCs are
directed to submit a declaration from the Managing Director (MD)/
Chief Executive Officer (CEO) certifying compliance by the Mutual
Funds/ AMCs with all SEBI Circulars and advisories related to cyber
security from time to time. 129
128 SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF2/P/CIR/2022/81 dated June 09, 2022
129 SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF2/P/CIR/2022/81 dated June 09, 2022
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4.7.6 Mutual Funds/ AMCs have been advised to take necessary steps to
put in place systems for implementation of aforesaid requirement.
4.8 Technology Committee for Mutual Funds/ AMCs130
4.8.1 With rapid technological advancement in securities market,
technology is playing a very important role in asset management
business and have a major impact on the various processes and
controls designed and implemented by AMCs. The role of technology
related aspects has become even more critical in managing risks
related to asset management business.
4.8.2 In order to deal with various technology related issues, AMCs are
advised to constitute a Technology Committee comprising experts
proficient in technology. Such committee shall have at least one
independent external expert with adequate experience in the area of
technology in Mutual Fund industry / BFSI.
4.8.3 The aforementioned committee shall, inter alia, review the cyber
security and cyber resilience framework for Mutual Funds / AMCs in
terms of Paragraph 7 of Annexure 6 and
also review the system audit related aspects of AMCs in terms of
Paragraph 6.15.3 of this Master Circular on system audit framework
for mutual funds / AMCs.
4.9 Reporting for Artificial Intelligence (AI) and Machine Learning (ML)
applications and systems offered and used by Mutual Funds131
4.9.1 There is increasing usage of AI (Artificial Intelligence) and ML
(Machine Learning) as product offerings by market intermediaries and
130 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/058 dated April 11, 2019
131 SEBI Circular No. SEBI/HO/IMD/DF5/CIR/P/2019/63 dated May 09, 2019
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participants (e.g.: “robo advisors”) in investor and consumer facing
products.
4.9.2 As most AI / ML systems are black boxes and their behavior cannot
be easily quantified, it is imperative to ensure that any advertised
financial benefit owing to these technologies in investor facing
financial products offered by intermediaries should not constitute to
misrepresentation.
Scope definition
4.9.3 Any set of applications / software / programs / executable / systems
(computer systems) – cumulatively called application and systems,
a. that are offered to investors (individuals and institutions) or used
internally by Mutual Funds to facilitate investing and trading or
for any other purpose,
OR
b. to disseminate investments strategies and advice,
OR
c. to carry out compliance / operations / activities,
where AI / ML is portrayed as a part of the public product offering
or under usage for compliance or management purposes, is
included in the scope of this Chapter. Here, “AI” / “ML” refers to
the terms “Artificial Intelligence” and “Machine Learning” used as
a part of the product offerings. In order to make the scope of this
chapter inclusive of various AI and ML technologies in use, the
scope also covers Fin-Tech and Reg-Tech initiatives undertaken
by market participants that involves AI and ML.
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4.9.4 Technologies that are considered to be categorized as AI and ML
technologies in the scope of this chapter, are explained in Annexure
7.
Regulatory requirements
4.9.5 All registered Mutual Funds offering or using applications or systems
as defined in the Annexure 7, should participate in the reporting
process by completing the AI / ML reporting format132.
4.9.6 All the registered Mutual Funds using AI / ML based application or
system as defined in Annexure 7, are required to fill in the form as
per the format133 and make submissions on quarterly basis within 15
calendar days of the expiry of the quarter to AMFI.
4.9.7 AMFI shall consolidate the information on AI / ML applications and
systems reported by Mutual Funds on quarterly basis and submit to
SEBI at email id AIML_MF@sebi.gov.in within 30 calendar days of the
expiry of the quarter.
4.9.8 AMFI shall ensure that confidentiality is maintained regarding the
information received by them from Mutual Funds.
4.10 Swing pricing framework for mutual fund schemes134
4.10.1 Swing pricing framework has been introduced for open ended debt
mutual fund schemes (except overnight funds, Gilt funds and Gilt
with 10-year maturity funds).
132 Please see the formats section (SEBI Circular No. SEBI/HO/IMD/DF5/CIR/P/2019/63
dated May 09, 2019)
133 Please see the format no. 9 under the section on formats (SEBI Circular No.
SEBI/HO/IMD/DF5/CIR/P/2019/63 dated May 09, 2019)
134 SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/631 dated September 29,
2021 and SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/24 dated February
25, 2022, Refer SEBI letter No. SEBI/HO/ IMD-II/DOF3/ OW/P/2022/5274/1 dated
February 08, 2021
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4.10.2 Under this framework, to begin with, the swing pricing framework will
be made applicable only for scenarios related to net outflows from the
schemes. The framework shall be a hybrid framework with:
4.10.2.1 a partial swing during normal times and
4.10.2.2 a mandatory full swing during market dislocation times for high
risk open ended debt schemes.
4.10.3 Swing pricing for normal times
4.10.3.1 For normal times, the swing pricing framework is stipulated as
under:
i. AMFI shall prescribe broad parameters for determination of
thresholds for triggering swing pricing which shall be followed
by the AMCs. AMFI shall also prescribe an indicative range of
swing threshold to the industry for normal times.
ii. Additionally, AMC may be allowed to have other parameters, if
it desires so, considering the nature and characteristics of the
mutual fund scheme.
iii. For normal times, AMCs shall decide on the applicability of
swing pricing and the quantum of swing factor depending on
scheme specific issues.
iv. [Provision shall be disclosed by the AMC in Scheme
Information Document (SID) with detailed disclosures made in
Statement of Additional Information (SAI).]135
135 Substituted by SEBI Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/000175 dated
November 01, 2023. Prior to substitution, clause 4.10.3.1 (iv) read as under:
“All of the above shall be disclosed by the AMC in its Scheme Information Document (SID).”
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Master Circular for Mutual Funds as on March 31, 2024
4.10.3.2 AMCs may, if they desire so, implement the swing pricing
framework for normal period, after incorporating clauses
pertaining to the same in their SIDs and the same shall be
considered as a Fundamental Attribute Change of the scheme in
terms of regulation 18(15A) of SEBI (Mutual Fund) Regulations,
1996.
4.10.4 Swing pricing for market dislocation
4.10.4.1 For the purpose of determining market dislocation, AMFI shall
develop a set of guidelines/parameters/model for recommending
the same to SEBI. SEBI will determine ‘market dislocation’ either
based on AMFI’s recommendation or suo moto. Once market
dislocation is declared, it will be notified by SEBI that swing
pricing will be applicable for a specified period.
4.10.4.2 Subsequent to the announcement of market dislocation, the swing
pricing framework shall be mandated only for open ended debt
schemes (except overnight funds, Gilt funds and Gilt with 10-year
maturity funds) in terms of Part IV of Chapter 2 on ‘Categorization
and Rationalization of Mutual Fund schemes’, which:
i. have High or Very High risk on the risk-o-meter in terms of
Paragraph 17.4 of this Master Circular (as of the most recent
period at the time of declaration of market dislocation); and
ii. classify themselves in the cells A-III, B-II, B-III, C-I, C-II and
C-III of Potential Risk Class (PRC) Matrix in terms of Paragraph
17.5 of this Master Circular as tabulated below.
4.10.4.3 A minimum swing factor as under shall be made applicable to the
schemes mentioned at paragraph 4.10.4.2 above and the NAV will
be adjusted for swing factor.
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Table
Minimum swing factor for open ended debt schemes*
Max Credit Risk Class A (CRV** Class B (CRV Class C (CRV
of scheme→ <10)
>=12) >=10)
Max Interest
Rate Risk of the
scheme ↓
Class I: (MD<=1 Optional Optional 1.5%
year)
Class II: (MD<=3 Optional 1.25% 1.75%
years)
Class III: Any 1% 1.5% 2%
Macaulay
duration
*: Scheme can levy higher swing factor, based on pre-defined parameters,
redemption pressure and current portfolio of the scheme subject to a cap
on swing factor to be decided by AMC.
**CRV: Credit Risk Value
4.10.4.4 All the open ended debt schemes (except overnight funds, Gilt
funds and Gilt with 10-year maturity funds) mentioned at
paragraph 4.10.4.2 above were advised to incorporate the
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Master Circular for Mutual Funds as on March 31, 2024
provision pertaining to mandatory swing factor as stipulated at
Table above in their offer documents within a period of three
months starting from September 29, 2021, and the same was not
considered as a Fundamental Attribute Change of the scheme in
terms of regulation 18(15A) of SEBI (Mutual Fund) Regulations,
1996. However, optional swing factor or higher than as specified
in Table above shall be considered as Fundamental Attribute
Change of the scheme in terms of regulation 18(15A) of SEBI
(Mutual Fund) Regulations, 1996
4.10.5 Other aspects pertaining to swing pricing
4.10.5.1 When swing pricing framework is triggered and swing factor is
made applicable (for normal time or market dislocation, as the
case may be), both the incoming and outgoing investors shall get
NAV adjusted for swing factor.
4.10.5.2 All AMCs shall make clear disclosures along with illustrations in
the SIDs including information on how the swing pricing
framework works, under which circumstances it is triggered and
the effect on the NAV for incoming and outgoing investors.
4.10.5.3 Swing pricing shall be made applicable to all unitholders at PAN
level with an exemption for redemptions upto Rs. 2 lacs for each
mutual fund scheme for both normal times and market
dislocation.
4.10.5.4 AMCs shall have laid down policies and procedures pertaining to
swing pricing which are approved by board of AMC and Trustee.
4.10.5.5 The scheme performance shall be computed based on unswung
NAV.
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Master Circular for Mutual Funds as on March 31, 2024
4.10.5.6 Disclosures pertaining to NAV adjusted for swing factor along with
the performance impact shall be made by the AMCs in following
format in their SIDs and in scheme wise Annual Reports and
Abridged summary and the same may be disclosed on their
website prominently only if swing pricing framework has been
made applicable for the said mutual fund scheme:
Sr Period of Scheme Unswung Swing Whether
No. applicability of name NAV factor optional or
swing pricing applied Mandatory
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 5: DISCLOSURES & REPORTING NORMS
PART I – DISCLOSURES
5.1 Portfolio Disclosures136
5.1.1. Mutual Funds/ AMCs shall disclose portfolio (along with ISIN) as on
the last day of the month / half-year for all their schemes on their
respective website and on the website of AMFI within 10 days from the
close of each month/ half-year respectively in a user-friendly and
downloadable spreadsheet format. For debt schemes, such disclosure
shall be done on fortnightly basis within 5 days of every fortnight. In
addition to the current portfolio disclosure, yield of the instrument
shall also be disclosed.
5.1.2. In case of unit holders whose e-mail addresses are registered, the
Mutual Funds/ AMCs shall send via email both the monthly and half-
yearly statement of scheme portfolio within 10 days from the close of
each month/ half-year respectively.
5.1.3. Mutual Funds/ AMCs shall publish an advertisement every half-year
disclosing the hosting of the half-yearly statement of its schemes
portfolio on their respective website and on the website of AMFI and
the modes such as SMS, telephone, email or written request (letter)
through which a unit holder can submit a request for a physical or
electronic copy of the statement of scheme portfolio. Such
advertisement shall be published in the all India edition of at least two
daily newspapers, one each in English and Hindi.
136 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012,
SEBI/HO/IMD/DF2/CIR/P/2018/92 dated June 05, 2018 and SEBI Circular No.
SEBI/HO/IMD/DF3/CIR/P/2020/130 dated July 22, 2020, Refer SEBI email dated
September 30, 2020, Refer SEBI Email dated November 17, 2022
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Master Circular for Mutual Funds as on March 31, 2024
5.1.4. Mutual Funds/ AMCs shall provide a physical copy of the statement
of its scheme portfolio, without charging any cost, on specific request
received from a unit holder.
5.1.5. The format137 for disclosure of portfolio is placed at format section.
The format for monthly portfolio disclosure shall be same as that of
half yearly portfolio disclosures.
5.1.6. Mutual funds/AMCs may disclose additional information (such as
ratios, etc.) subject to compliance with the Advertisement Code.
5.2 Disclosure of derivatives in Half Yearly Portfolios138
5.2.1 A format139 for the purpose of uniform disclosure of investments in
derivative instruments by Mutual Funds in half yearly portfolio
disclosure, annual report or in any other disclosures is prescribed.
5.2.2 Further, while listing net assets, the margin amounts paid should be
reported separately under cash or bank balances.
5.3 Unaudited Half Yearly Financials140
5.3.1 The publication of the unaudited half-yearly results shall be made in
line with provisions of the Regulations141, in the format prescribed in
Twelfth Schedule. For the purpose of easy reference by the investors,
all mutual funds shall display unaudited half yearly results on the
website of AMFI before the expiry of 1 month before the close of each
half year.
137 For formats on portfolio disclosure, please refer format no. 3.C under the section on formats
138 SEBI Circular Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010
139 For formats on disclosure of derivatives, please refer to format no. 3.C under the section
on Formats
140 SEBI Circular MFD/CIR/1/200/2001 dated April 20, 2001 & SEBI Circular No.
IMD/CIR No.8/132968/2008 dated July 24, 2008
141 Regulation 59 of SEBI (Mutual Funds) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
5.3.2 The half yearly disclosures142 of the unaudited financial results
on respective website should be made in a user-friendly and
downloadable format (preferably in a spreadsheet).
5.4 Providing Annual Report or Abridged Summary143
For providing annual report144 or abridged summary thereof, the
following shall be adhered
5.4.1 The scheme wise annual report shall be hosted on the website of the
Mutual Funds/ AMCs and on the website of AMFI. The Mutual
Funds/ AMCs shall display the link prominently on their websites and
make the physical copies available to the unit holders, at their
registered offices at all times.
5.4.2 Mutual Funds/ AMCs shall e-mail the scheme annual reports or
abridged summary thereof to those unit holders, whose email
addresses are registered with the Mutual Fund. 145AMCs shall provide
a feature wherein a link is provided to investors to their registered
email to enable the investor to directly view/download only the
portfolio of schemes subscribed by the said investor.
5.4.3 In case of unit holders whose email addresses are not registered with
the Mutual Fund, the Mutual Funds/ AMCs shall undertake an
exercise of communicating to the unit holders, through a letter
enclosing self-addressed envelope enabling unit holders to 'opt-in'
142 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012
143 SEBI Circular No. IMD/CIR No.8/132968/2008 dated July 24, 2008, Circular No.
Cir/IMD/DF/16/2011 dated September 08, 2011 and SEBI/HO/IMD/DF2/CIR/P/2018/92
dated June 05, 2018, Refer SEBI letter No. SEBI/HO/IMD-II/DoF8/OW/P/05031/2022-
dated February 07, 2022
144 For format of abridged scheme wise report, please refer format no. 3.B under the section
on formats
145 SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/621 dated August 31, 2021
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Master Circular for Mutual Funds as on March 31, 2024
within 30 days, to continue receiving a physical copy of the scheme-
wise annual report or abridged summary thereof.
5.4.4 To ensure that unit holders get sufficient opportunity to communicate
their preference of ‘opt-in’ or ‘opt-out’ with respect to receiving the
annual report or abridged summary thereof in physical copy, Mutual
Funds/ AMCs shall conduct one more round of similar exercise for
those unit holders who have not responded to the ‘opt-in’
communication as stated at paragraph 5.4.3 above, after a period of
not less than 30 days from the date of issuance of the first
communication. Further, a period of 15 days from the date of
issuances of the second communication may be given to unit holders
to exercise their option of ‘opt-in’ or ‘opt-out’.
5.4.5 Mutual Funds/ AMCs shall publish an advertisement every year
disclosing the hosting of the scheme wise annual report on their
respective website and on the website of AMFI and the modes such as
SMS, telephone, email or written request (letter), etc. through which
unit holders can submit a request for a physical or electronic copy of
the scheme wise annual report or abridged summary thereof. Such
advertisement shall be published in the all India edition of at least two
daily newspapers, one each in English and Hindi.
5.4.6 Mutual Funds/ AMCs shall provide a physical copy of the abridged
summary of the Annual Report, without charging any cost, on specific
request received from a unit holder.
5.4.7 The ‘opt-in’ facility to receive physical copy of the scheme-wise annual
report or abridged summary thereof shall be provided in the
application form for new subscribers.
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Master Circular for Mutual Funds as on March 31, 2024
5.4.8 These websites should also be linked with AMFI website so that the
investors and analyst(s) can access the annual reports of all mutual
funds at one place146.
5.5 Disclosure of large unit holdings147
5.5.1 The number of investors holding over 25 % of the NAV148 in a scheme
and their total holdings in percentage terms shall be disclosed in the
Statement of Accounts issued after the NFO and also in the Half Yearly
and Annual Results149.
5.6 Asset Under Management (AUM) disclosure150
5.6.1 Wherever the AMCs discloses the AUM figures for the fund, disclosure
on bifurcation of the AUM into debt/equity/ balanced etc, and
percentage of AUM by geography (i.e. top 5 cities, next 10 cities, next
20 cities, next 75 cities and others) shall be made. The AMCs shall
disclose the aforesaid data on their respective websites & to AMFI and
AMFI shall disclose industry wide figures on its website.
5.6.2 AMCs shall disclose the following on monthly basis on their website
and also share the same with Association of Mutual Funds in
India (AMFI)151:
a. Monthly AAUM152 from different categories of schemes such
as equity schemes, debt schemes, etc.
146 SEBI Cir No – MFD/CIR/15/041/2002 dated March 14,2002
147 SEBI Circular No. MFD/CIR No.3/211/2001 dated April 30, 2001.
, 1 48 For further details, refer Part II – Scheme Governance in the Chapter 6 on ‘Governance
Norms’
, 1 49 Please refer format no. 3.A & 3.B under the section on Formats
150 SEBI Circular No. Cir/IMD/DF/13/2011 dated August 22, 2011
151 SEBI Circular No. CIR/IMD/DF/05/2014 dated March 24, 2014
152 SEBI Circular No. CIR/IMD/DF/07/2014 dated April 2, 2014
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Master Circular for Mutual Funds as on March 31, 2024
b. Contribution to Monthly AAUM from B-30153 cities (i.e. other
than top 30 cities as identified by AMFI) and T-30 cities (Top
30 cities).
c. Contribution to Monthly AAUM from sponsor and its
associates.
d. Contribution to Monthly AAUM from entities other than
sponsor and its associates.
e. Contribution to Monthly AAUM from investors type (retail,
corporate, etc.) in different scheme type (equity, debt, ETF,
etc.).
f. Monthly AAUM garnered through sponsor group/ non-
sponsor group distributors.
g. State-wise/Union Territory-wise contribution to Monthly
AAUM.
5.6.3 In order to have a holistic picture, Mutual Fund wise and consolidated
data on the above parameters shall also be disclosed on AMFI website.
The above shall be disclosed as per the format154.
5.6.4 AMCs shall disclose the above on their website (in spreadsheet format)
and forward to AMFI within 7 working days from the end of the month.
AMFI in turn shall disclose the consolidated data in this regard on its
website (in spreadsheet format).
5.7 Commission disclosure155
5.7.1 Mutual Funds / AMCs shall disclose on their respective websites the
total commission and expenses paid to distributors who satisfy one or
153 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/16 dated February 02, 2018, Refer
SEBI letter No. SEBI/HO/IMD/DF2/OW/P/2019/26551/1 dated October 09, 2019.
154 For formats, please refer to format 3.D under the section on Formats
155 SEBI Circular No. Cir/IMD/DF/13/2011 dated August 22, 2011
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Master Circular for Mutual Funds as on March 31, 2024
more of the following conditions with respect to non-institutional
(retail and HNI) investors: -
5.7.1.1 Multiple point of presence (More than 20 locations)
5.7.1.2 AUM raised over Rs.100 crores across industry in the non-
institutional category but including high net worth individuals
(HNIs).
5.7.1.3 Commission received of over Rs.1 crore p.a. across industry
5.7.1.4 Commission received of over Rs.50 lakhs from a single Mutual
Fund/AMC.
5.7.2 Mutual Fund / AMCs shall, in addition to the total commission and
expenses paid to distributors, make additional disclosures156
regarding distributor-wise gross inflows (indicating whether the
distributor is an associate or group company of the sponsor(s) of the
mutual fund), net inflows, average assets under management and
ratio of AUM to gross inflows on their respective website on an
yearly basis.
In case the data mentioned above suggests that a distributor has an
excessive portfolio turnover ratio, i.e. more than two times the
industry average, AMCs shall conduct additional due-diligence of
such distributors.
5.7.3 Mutual Funds / AMCs shall also submit the data mentioned in 5.7.1
and 5.7.2 to AMFI and the consolidated data in this regard shall be
disclosed on AMFI website.
5.8 Scheme Related Disclosures157
156 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012.
157 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016
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Master Circular for Mutual Funds as on March 31, 2024
In order to improve transparency as well as ease of access to Mutual
Fund (MF) scheme related information:
5.8.1 AMCs shall provide the following additional disclosures in the offer
documents (Scheme Information Document (SID) / Key Information
Memorandum (KIM)) of Mutual Fund scheme (for existing scheme /
new scheme, as applicable):
5.8.1.1 The tenure for which the fund manager has been managing the
scheme shall be disclosed, along with the name of scheme’s fund
manager(s);
5.8.1.2 [Scheme’s portfolio holdings (top 10 holdings by issuer and fund
allocation towards various sectors) shall be disclosed by way of a
functional web link where the said data shall be hosted;]158
5.8.1.3 In case of FoF schemes, expense ratio of underlying scheme(s);
5.8.1.4 Scheme’s portfolio turnover ratio.
5.8.2 Further, the following additional disclosures shall be provided in SID
of the MF scheme:
5.8.2.1 [The aggregate investment in the scheme by Concerned Scheme’s
Fund Manager(s)
5.8.2.1A The following disclosures shall be provided in SAI of the MF
scheme:
158 Substituted vide SEBI Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/000175
November 01, 2023. Prior to substitution, clause 5.8.1.2 read as under:
“Scheme’s portfolio holdings (top 10 holdings by issuer and fund allocation towards various sectors), along with
a website link to obtain scheme’s latest monthly portfolio holding;”
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Master Circular for Mutual Funds as on March 31, 2024
1. The aggregate investment in the scheme under the following
categories:
a) AMC’s Board of Directors and
b) Other key personnel]159
5.8.2.2 Illustration of impact of expense ratio on scheme’s returns (by
providing simple example).
5.8.3 Separate SID / KIM for each MF scheme managed by AMC shall also
be made available on MFs / AMCs website.
5.8.4 Each AMC is required to have a dashboard on their website providing
performance and key disclosures pertaining to each scheme managed
by AMC. The information should include scheme’s AUM, investment
objective, expense ratios, portfolio details, scheme’s past performance,
among others. Such information shall be provided in a comparable,
downloadable (spreadsheet) and machine readable format.
5.9 Disclosure of scheme performance160
AMCs shall disclose the performance of all schemes on the website of
AMFI. AMFI shall facilitate the disclosure in the following manner:
5.9.1 In case of all schemes, the scheme returns vis-à-vis the benchmark
return (Total Return Index) shall be disclosed in terms of CAGR for
various periods viz. 1 year, 3 year, 5 year, 10 year and since inception.
159 Substituted by SEBI Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/000175 dated
November 01, 2023. Prior to substitution, clause 5.8.2.1 read as under:
“The aggregate investment in the scheme under the following categories:
a) AMC’s Board of Directors
b) Concerned scheme’s Fund Manager(s) and
c) Other key personnel”
160 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/137 dated October 22, 2018
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Master Circular for Mutual Funds as on March 31, 2024
Such disclosure of performance (since inception) shall be made since
the date of allotment of the units in the scheme161.
Provided162 that all schemes that are in existence for less than one
year, other than overnight fund, liquid fund, ultrashort duration fund,
low duration fund, and money market fund as defined in Part IV of
Chapter 2 on ‘Categorization and Rationalization of Mutual Fund
Schemes’, shall be exempted from the aforesaid disclosure.
5.9.2 In addition to the above, in case of schemes falling in categories such
as overnight fund, liquid fund, ultrashort duration fund, low duration
fund, and Money Market Fund as defined in Part IV of Chapter 2 on
‘Categorization and Rationalization of Mutual Fund Schemes’, scheme
performance is also to be disclosed for a period of 7 days, 15 days, 1
month, 3 months and 6 months.
5.9.3 The said disclosure should be made for all plans and shall be updated
daily based on previous day NAV.
5.9.4 The said disclosure should be in investor friendly format with filtering
feature based on scheme-type, plan-type, etc. and sorting feature
based on return periods.
5.9.5 163The disclosure should include other important fields such as
scheme AUM (excluding overnight and liquid scheme) and previous
day NAV. In case of AUM of overnight and liquid schemes, the closing
AUM and the AAUM of the previous month has to be disclosed on
AMFI website on daily basis.
161 SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
162 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019
163 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019
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Master Circular for Mutual Funds as on March 31, 2024
However, the day the AUM movement (both upward and downward) of
both overnight and liquid scheme is more than 10% cumulatively from
the previous disclosed AUM, the AUM of that day has to be disclosed.
Such disclosed AUM becomes the reference AUM for future disclosure
of AUM for the month.
Further, it has been decided that an appropriate disclosure regarding
the AUM of overnight and liquid schemes disclosed on AMFI website
on monthly basis including the trigger limit of 10% is to be made as
an explanation through footnote.
5.9.6 Trustees and AMCs shall ensure compliance of the provisions
mentioned at paragraph 5.9 above and trustees shall confirm the
same to SEBI in the half yearly trustee report.
5.10 Annual report of the AMC164
5.10.1 The annual report containing accounts of the AMC should be
displayed on the websites of the mutual funds immediately after
approval in Annual General Meetings within a period of four months,
from the date of closing of the financial year. It should also be
mentioned in the annual report of mutual fund schemes that the
unitholders, if they so desire, may request for the annual report of the
AMC. Further, the annual report of AMCs shall be displayed on their
websites in machine readable format.
5.11 Submission of bio data of key personnel165
164MFD/CIR/9/120/2000 dated November 24, 2000 and SEBI Circular No.
SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
165 IIMARP/CIR /08/845/97 dated May 7,1997, IIMARP/MF/CIR/05/788/97 date April
28,1997
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Master Circular for Mutual Funds as on March 31, 2024
5.11.1 AMCs are required to submit the bio data of all key personnel to
Trustees and the Board166.
5.11.2 167 The term “Key Personnel” is defined as under:
“Chief Executive Officer (CEO), Chief Investment Officer (CIO), Chief
Risk Officer (CRO), Chief Information Security Officer (CISO), Chief
Operation Officer (COO), Fund Manager(s), Compliance Officer, Sales
Head, Investor Relation Officer(s) (IRO), heads of other departments,
Dealer(s) of the AMC and such other persons as deemed fit and
identified as such by the AMC and the Trustees.”
5.12 Disclosure Of Executive Remuneration168
With the underlying objective to promote transparency in remuneration
policies so that executive remuneration is aligned with the interest of
investors, MFs /AMCs shall make the following disclosures pertaining
to a financial year on the MF/AMC website under a separate head –
'Remuneration':
5.12.1 Name, designation and remuneration of Chief Executive Officer (CEO),
Chief Investment Officer (CIO) and Chief Operations Officer (COO) or
their corresponding equivalent by whatever name called.
5.12.2 Name, designation and remuneration received by top ten employees
in terms of remuneration drawn for that financial year.
5.12.3 Name, designation and remuneration of every employee of MF/AMC
whose:
166 For format of bio-data of key personnel, please refer format no. 1 under the section on
Formats
167 SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
168 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016 and
SEBI/HO/IMD/DF2/CIR/P/2017/35 dated April 28, 2017
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Master Circular for Mutual Funds as on March 31, 2024
5.12.3.1 Annual remuneration was equal to or above one crore and two
lakh rupees for that financial year;
5.12.3.2 Monthly remuneration in the aggregate was not less than eight
lakh and fifty thousand rupees per month, if the employee is
employed for a part of that financial year.
5.12.4 The ratio of CEO’s remuneration to median remuneration of MF/AMC
employees.
5.12.5 MF's total AAUM, debt AAUM and equity AAUM and rate of growth
over last three years.
For this purpose, remuneration shall mean remuneration as defined
in clause (78) of section 2 of the Companies Act, 2013. The AMCs/MFs
shall disclose this information within one month from the end of the
respective financial year (effective from FY 2016-17).
5.13 Disclosure of investor complaints with respect to Mutual Funds169
5.13.1 Mutual Funds shall disclose170 on their websites, on the AMFI website
as well as in their Annual Reports, details of investor complaints
received by them from all sources. The said details in the annual
report should be vetted and signed off by the Trustees of the
concerned Mutual Fund. 171 Mutual Funds shall disclose the details
of investor complaints on their respective websites as well as on AMFI
website on a monthly basis, as per the format. The information shall
be made available within 7th of succeeding month.
169 SEBI Circular No. Cir /IMD/DF/2/2010 dated May 13, 2010. Refer SEBI letter No.
SEBI/HO/OW/IMD/IMD-SEC1/P/2024/10975/1 dated March 19, 2024
170 For disclosure format please refer format no. 7.D under the section on Formats.
171 SEBI Circular No. SEBI/HO/IMD-II/IMD-II_DOF10/P/CIR/2021/00677 dated December
10,2021
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Master Circular for Mutual Funds as on March 31, 2024
5.13.2 The AMCs are advised to:
5.13.2.1 Include the report in their annual reports, as part of the Report of
the Trustees.
5.13.3 Further, in order to facilitate awareness of investors about various
activities which an investor deals with, SEBI has prepared an Investor
Charter for Mutual Funds172, inter-alia, detailing the services provided
to Investors, Rights of Investors, various activities of Mutual Funds
with timelines, DOs and DON’Ts for Investors and Grievance
Redressal Mechanism.
5.13.4 In this regard, Mutual Funds are advised to bring the Investor Charter
for Mutual Funds to the notice of their unit holders (existing as well
as new unit holders) through disclosing the Investor Charter on their
websites, making them available at prominent places in the office, etc.
5.13.5 Further, Mutual Funds are advised to display link/option to lodge
complaint with them directly on their websites and mobile apps.
Additionally, link to SCORES website/ link to download mobile app
(SEBI SCORES) shall also be provided on their website.
5.14 Brokerage and commission paid to associates173
5.14.1 Regulations174 govern payment of brokerage or commission if any, to
the sponsor or any of its associates, employees or their relatives.
5.14.2 Disclosures on brokerage and commission paid to associates/related
parties/group companies of sponsor/Asset Management Company in
172 For Investor Charter for Mutual Funds, please refer format no. 12 under the section on
formats
173 SEBI Circular No. SEBI/IMD/CIR No 18/198647/2010 dated March 15, 2010
174 Regulation 25 (8) of SEBI (Mutual Funds) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
the unaudited half yearly financial results, the abridged scheme wise
annual report and the SAI, shall be made in the format as
prescribed175.
5.15 Updating contact details
5.15.1 AMCs shall make continuous efforts to update email ID and mobile
number of all unit holders. The said contact details shall be used for
sending e-mails and SMS.176
5.16 Risk-O-Meter related disclosures
5.16.1 177Mutual Funds/AMCs shall disclose the following in all disclosures,
including promotional material or that stipulated by SEBI:
5.16.1.1 risk-o-meter of the scheme wherever the performance of the
scheme is disclosed
5.16.1.2 risk-o-meter of the scheme and benchmark wherever the
performance of the scheme vis-à-vis that of the benchmark is
disclosed.
[5.16.1A AMCs shall disclose risk-o-meter of the Benchmark on:
a. Front page of initial offering application form, Scheme
Information Document (SID) and Key Information Memorandum
(KIM); and
b. Common application form – along with the information about the
scheme.]178
175 Please refer format no. 7.B on Brokerage and Commission Paid to Associates under section
on Formats
176 SEBI/HO/IMD/DF2/CIR/P/2018/92 dated June 05, 2018
177 SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/621 dated August 31, 2021
178 Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-RAC-2/P/CIR/2023/000175 dated
November 01, 2023
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Master Circular for Mutual Funds as on March 31, 2024
5.16.2 The disclosure requirement of the risk-o-meter of benchmark is
applicable for primary benchmark which is specified in the Scheme
Information Document.
5.16.3 For international benchmarks, risk-o-meter score may be assigned in
line with risk-o-meter score assigned to foreign securities as specified
in Paragraph 16.4 of this Master Circular.
5.16.4 AMCs shall enter into arrangements with their selected Index
providers to provide the risk-o-meter for their benchmarks to the
AMCs latest by the fifth day subsequent to the end of the month.
5.17 Details of Portfolio
5.17.1 Mutual Funds/ AMCs shall send the details of the scheme portfolio
while communicating the fortnightly, monthly and half-yearly
statement of scheme portfolio via email only for the schemes in which
the unitholders are invested. 179Further the portfolio disclosure shall
also include the scheme risk-o-meter, name of benchmark and risk-
o-meter of benchmark.
179 SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/621 dated August 31, 2021
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Master Circular for Mutual Funds as on March 31, 2024
PART II – REPORTS
5.18 Monthly Cumulative Report (MCR)180
5.18.1 Date and Mode of Submission:
5.18.1.1 MCR shall be submitted to the Board by 3rd working day of each
month by way of an email (to Email ID: mfdata@sebi.gov.in).
5.18.1.2 In line with Part IV of Chapter 2 on “Categorization and
Rationalization of Mutual Fund Schemes”, the format of MCR181
has been revised.
5.18.1.3 As per the existing provision, a Mutual Fund scheme is permitted
to invest certain percentage of its AUM in schemes of same Mutual
Fund or other Mutual Funds. In order to avoid such investments
being considered by both the investee and investing scheme, it is
clarified that the investing scheme shall exclude the same while
reporting the data on AUM in the MCR182.
5.18.2 Other Guidelines:
5.18.2.1 Details of the new schemes launched shall be reported in the MCR
for the month in which the allotment is done. For example, if an
NFO closes in the month of July and the allotment is done in the
month of August, then, the details of the new scheme shall be
180 SEBI circular MFD/CIR/07/206/2001 dated July 19, 2001, SEBI circular No IMD/Cir
No.15/87045/2007 dated February 22, 2007, SEBI circular SEBI/IMD/CIR No 3/124444/08
dated April 30, 2008, SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March
18, 2016, SEBI/HO/IMD/DF3/CIR/P/2019/020 dated January 22, 2019 and SEBI Circular
No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
181 For format of Monthly Cumulative Report, please refer to format no. 2.D under the section
on formats
182 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2019/020 dated January 22, 2019
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Master Circular for Mutual Funds as on March 31, 2024
reported in the MCR for the month of August that will reach SEBI
by 3rd of September.
5.18.2.2 Further, additional report on overseas investment183 by Mutual
Funds in ADRs/GDRs, foreign securities and overseas exchange
traded funds (ETFs) shall also be provided as per the prescribed
format184.
5.18.2.3 Compliance officers of all the Mutual Funds are advised to take
due care while forwarding the MCR data to SEBI. Compliance
Officers shall confirm that the data forwarded is correct and does
not require any revision.
5.19 New Scheme Report (NSR)185
5.19.1 All Mutual Funds shall submit the NSR to SEBI complete in all
respects within 10 working days from the date of allotment in the
prescribed format186. Mutual funds should confirm compliance with
the provisions of Regulation 28(3) of SEBI (Mutual Funds)
Regulations, 1996 while filing the New Scheme Report187.
5.20 Quarterly Compliance Test Reports188
183 SEBI Circular No. SEBI/IMD/CIR NO 15/87045/07 dated February 22,2007
184 Please refer to format no. 2.D under the section on formats
185 SEBI Circular No. SEBI/IMD/CIR NO 13/118899/08 dated February 29, 2008, SEBI
Circular No MFD/CIR/12/16588/2002 dated August 28, 2002, SEBI Circular No.
MFD/CIR/09/247/2002 dated July 23, 2002, SEBI Circular No. IIMARP/10772/93 dated
July 14,1993,
186 Please refer to format no. 2.A under the section on formats
187 SEBI Circular No. SEBI/IMD/CIR No.9/74364/06 dated August 14, 2006
188 SEBI Circular No. SEBI/IMD/CIR NO 6/98057/07 dated July 5, 2007, SEBI Circular No
MFD/CIR/11/36222/2005 dated March 16, 2005, SEBI Circular No
IIMARP/MF/CIR/10/1076/97 dated June 05,1997 & SEBI Circular
No.MFD/CIR/5/360/2000 dated July 4, 2000, Refer SEBI email dated July 09, 2021
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Master Circular for Mutual Funds as on March 31, 2024
5.20.1 The CTRs189 should be submitted by the AMC to the Board on a
quarterly basis, by 21st calendar day of succeeding month for the
quarters ending March, June, September and December. As a
compliance of SEBI Regulations is a continuous process, AMCs are
advised to incorporate the modifications/additions under the relevant
sections of the format, based on amendments to the
Regulations/guidelines issued in the future from time to time.
5.21 Half Yearly Trustee Report by Trustees to SEBI (HYTR)190
5.21.1 The Trustees shall submit HYTR to SEBI, containing the broad
coverage of report as prescribed in the format. The Trustees shall
submit corrective steps taken with respect to the non-compliance
reported in the HYTR. Trustees shall submit the report for Half year
ending September and March within two months from the end of the
half year.
5.22 Quarterly Report by AMC to Trustees (QR)191
5.22.1 The AMC shall submit QR to the trustees, as required in sub-
regulation (4) of Regulation 25 of MF Regulations, on its activities and
the compliance with MF Regulations and various circulars issued
thereunder. The format of QR is prescribed at the format section. The
same shall be submitted by AMC to Trustees by 21st calendar day of
succeeding month for the quarters ending March, June, September
and December.
189 Please refer to format no. 2.B under the section on Formats
190 SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/550 dated April 12, 2021 & For HYTR format,
please refer to format no. 2.C under the section on Formats
191 SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/550 dated April 12, 2021 & For QR format,
please refer to format no. 2.G under the section on Formats
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Master Circular for Mutual Funds as on March 31, 2024
5.23 Annual Statistical Report (ASR)192
5.23.1 AMC should submit the annual statistical report to SEBI in the
prescribed format193 by 30th of April each year. The ASR shall be
submitted to the Board through email only (to email ID:
mfdata@sebi.gov.in)194.
5.24 Daily Transaction Report195
5.24.1 All Mutual Funds shall submit details of transactions in secondary
market on daily basis in the prescribed format196. Accordingly, AMCs
are advised to make necessary arrangements with their custodians for
the submission of reports on a daily basis. As it is clear in the format,
the information is required of total repurchases/ sales of equity/ debt
and not of each scrip. Further, the information on total
purchases/sales of sensitive index scrips need not be sent.
5.24.2 It must be ensured by the compliance officers of the custodians as
well as that of Mutual Funds that the information submitted is correct
and reaches the Board by 3.00 p.m. on the following working day
(T+1).
5.25 Responsibilities of AMC(s) and Trustees197
5.25.1 All information and documents relating to the compliance process
shall be authenticated and/or adopted by the Board of the AMC(s) to
strengthen the compliance mechanism.
192 IIMARP/CIR /08/845/97 dated May 7,1997, MFD/CIR/02/110/02 dated April 26,2002
193 For format of ASR, please refer to format no. 2.E under the section on Formats
194 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
195 SEBI Circular No. MFD/CIR/07/384/99 dated December 17, 1999 and
MFD/CIR/08/23026/99 dated December 23, 1999
196 For format of daily transaction report, please refer to format no. 2.F under the section on
formats
197 SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000
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Master Circular for Mutual Funds as on March 31, 2024
5.25.2 The Trustee(s) shall also review all information and documents
received from the AMC(s) as required under the compliance process.
5.25.3 AMC(s) shall develop a suitable Management Information System for
reporting to the Trustees. The report shall contain specific comments
on all issues related to the operation of the Mutual Fund as
undertaken by the AMC including those provided in the format for
reporting by AMC to Trustees198.
5.25.4 The half-yearly report on the activities of the mutual fund to be
submitted by the trustees to the Board under the Mutual Funds
Regulations199 shall cover all issues mentioned in the prescribed
format as well as any other issue relevant to the operation of the
Mutual Fund200. The Trustees may mention in their report, if they so
desire, that they have relied on the reports obtained from the
independent auditor or internal/ statutory auditors or the Compliance
Officer as the case may be. The report shall mention that the Trustees
have satisfied themselves about the adequacy of compliance systems
in the Mutual Fund.
5.25.5 AMC(s) and the Trustees shall update the reporting formats including
relevant provisions of amendments made to the Mutual Funds
Regulations and/or guidelines and/or circulars issued by the Board
and shall specifically comment on their compliance.
5.25.6 To comply with the requirement of sub-regulation (16) of regulation
18 of the SEBI (Mutual Funds) Regulations, 1996, the trustees shall
call for the details of transactions in securities by the key personnel
198 Please refer to format no. 2.G under the section on formats
199 Regulation 18(23)(a) of SEBI (MF) Regulations, 1996
200 For format of Trustee Report, please refer format no. 2.C under the section on formats.
<<
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Master Circular for Mutual Funds as on March 31, 2024
of the asset management company in their own name or on behalf of
the AMC on a quarterly basis201.
5.26 Filing of Annual Information Return by Mutual Funds202
5.26.1 Mutual funds are required to submit the Annual Information Return
(AIR) under section 285 BA of the Income Tax Act, and various
guidelines notified by Central Board of Direct Taxes (CBDT). As per
this requirement, Trustees of Mutual Funds or such other person
managing the affairs of the Mutual Funds (as may be duly authorized
by the trustees in this behalf) have to report specified financial
transactions through electronic medium to Income Tax Department
giving PAN of the transacting parties in an Annual Information Return
(AIR).
5.27 Reporting of offsite inspection data to SEBI203
5.27.1 As a part of off-site inspection and surveillance of Mutual Funds and
to monitor the compliance of the SEBI (Mutual Funds) Regulations,
1996 and circulars issued therein, SEBI has framed the data
structure and all the Mutual Funds along with RTAs associated with
them are required to furnish the data to SEBI. The standard format
for submission of data by Mutual Funds is given under formats
section of this Master Circular.
201 SEBI Circular No- IIMARP/MF/CIR/01/294/98 dated February 4, 1998, SEBI Circular No-
SEBI/HO/IMD/IMD-1 DOF2/P/CIR/2021/550 dated April 12, 2021
202 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
203 For formats on reporting of off-site inspection, please refer to format no. 13 under the
section on formats
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Master Circular for Mutual Funds as on March 31, 2024
5.27.2 Mutual Funds shall submit the daily data in monthly file as per the
specified formats on quarterly basis within 10 calendar days from end
of the quarter. RTAs shall submit the said data on an ongoing basis.
5.27.3 Details of the requirements prescribed under various paragraphs of
this Master Circular which are covered through the reporting formats,
as mentioned in the paragraph 5.27.1 above, are specified under
formats section of this Master Circular204.
5.27.4 Any change in the prescribed formats shall be communicated by the
Board from time to time.
204 Refer to section D of format no. 13 under the section on formats
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 6: GOVERNANCE NORMS
PART I - FUND GOVERNANCE
6.1 Formation of Audit and Valuation Committees by the Trustees
and/or AMC205
6.1.1 Audit Committee of Trustees
6.1.1.1 Trustees shall constitute an audit committee, comprising of the
Trustees and chaired by an Independent Trustee to review the
internal audit systems and recommendations of the internal and
statutory audit reports and ensure that the rectifications as
suggested by internal and external auditors are acted upon.
6.1.2 Audit Committee of Asset Management Companies206
AMCs of mutual funds shall be required to constitute an Audit
Committee. The role, responsibility, membership and other features
of the Audit Committee of AMC are –
6.1.2.1 Role: The Audit Committee of the AMC shall be responsible for
oversight of financial reporting process, audit process, company’s
system of internal controls, compliance to laws and regulations
and other related process, with specific reference to operation of
its Mutual Fund business. In this regard, the Audit Committee
shall, inter-alia, have the following mandates:
a) To review the financial reporting processes, the system
of internal controls and the audit processes for the
Mutual Fund operations of the AMC;
205 SEBI Circular No. MFD/CIR No.010/024/2000 dated January 17, 2000.
<2 06 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/17 dated February 09, 2022
which is applicable from August 1, 2022.
<
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b) To ensure that the rectifications, if any, suggested by
internal and external auditors, etc. are acted upon.
6.1.2.2 Membership:
a. The Audit Committee of AMC shall have minimum three
directors as members.
b. At least two-third members of the Audit Committee shall be
independent directors of AMC. If two-third of the total strength
results into fraction, then higher number after rounding up
shall be considered.
c. The members of the Audit Committee will be appointed by the
Board of Directors of AMC.
d. All members of Audit Committee shall be persons with ability to
read and understand the financial statement and at least one
member shall have experience and background in finance and
accounts.
e. The Chairperson of the Committee shall be an independent
director, with adequate experience in the areas of finance and
financial services.
6.1.2.3 Meetings:
a. The Chairperson of the Audit Committee shall call the meeting
as and when required. However, atleast four meetings shall be
called in a financial year and not more than one hundred and
twenty days shall elapse between two meetings.
b. The quorum for meeting shall either be two members or one
third of the members of the Audit Committee, whichever is
greater, with at least two independent directors.
If one-third of the total strength results into fraction, then higher
number after rounding up shall be considered for the quorum.
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6.1.2.4 Reporting:
a. The internal auditor shall submit its report to the Audit
Committees of AMC and the Board of AMC;
The Audit Committee of AMC shall forward their observations
on internal audit report, if any, to the Trustees.
6.1.2.5 Powers and Responsibility:
I. Financial Reporting
a. Oversight of the Mutual Fund Schemes’ and AMC’s financial
reporting process.
b. Considering and recommending for approval of AMC Board, all
accounting policy issues for the Schemes and the AMC,
including any proposed changes to the accounting policies and
practices for transactions with related parties, etc.
c. Review of audit opinion issued by the statutory auditors.
d. Considering and recommending to the AMC Board, adoption of
financial statements including half yearly unaudited financial
results prepared for the Scheme and the financial statements of
the AMC.
e. Any other relevant matters.
II. Audit (Internal and Statutory) and Internal Controls
a. Considering and recommending for approval, the appointment,
re-appointment and, if required, the replacement or removal of
the Statutory Auditor of the Mutual Fund, Internal Auditor of
the Mutual Fund, etc. and the fixation of fees for audit and any
other services rendered by the Statutory Auditors with respect
to the Mutual Fund.
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b. Reviewing the scope of Internal Auditors and recommending for
approval of the Board of AMC.
c. Reviewing the Internal Audit Reports of the Schemes of Mutual
Fund (Including Internal Audit Report of critical activities
outsourced by the AMC such as Custodian, Fund Accounting,
the Registrar and Transfer Agent activity, etc.).
d. Discussions with internal and statutory auditors on any
significant findings and follow up there on.
e. Reviewing the findings of any internal investigations by the AMC
/ internal auditors into matters where there is suspected fraud
or irregularity or a failure of internal control systems of a
material nature or issues highlighted or referred through
whistle blower complaints, etc.
f. Reviewing Regulatory Inspection Reports.
g. Reviewing implementation status of all outstanding action
points arising out of Internal Audit Reports, Statutory Audit
Reports, Systems Audit Reports, Inspection Reports etc.
h. Reviewing the adequacy of the internal control systems,
including defining metrics for measuring internal controls,
seeking comments of the internal auditors about Internal
Control Systems, etc. and the steps taken towards improving
the effectiveness of internal control system including through
automation.
i. Interacting with the statutory and internal auditors of the
Mutual Fund, at least once annually without engagement of
management of the AMC. Besides the mandatory requirement
specified, such interactions may be held whenever felt
necessary by the independent directors of the Audit Committee.
j. The Audit Committee of the AMC should interact with the Audit
Committee of the Trustees at least once annually.
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III. Regulatory Compliance and other Functions
a. Evaluating various internal control measures in terms of
applicable SEBI (Mutual Funds) Regulations and various
circulars issued thereunder.
b. Reviewing periodic report on compliance with applicable laws
and regulations, including the details of non-compliance along
with the corrective actions, as applicable.
c. Reviewing the Annual Compliance Report in relation to the
“Policy on Prohibition of Insider Trading” of the AMC.
d. Assess that the AMC has been managing the mutual fund
schemes independently of other activities and have taken
adequate steps to ensure that the interest of investors of one
scheme are not being compromised with those of any other
scheme or of other activities of the asset management company.
IV. In addition to the above responsibilities, AMC Board from time to
time may also assign such other responsibilities to the Audit
Committee, as deemed fit.
6.1.2.6 The Audit Committee of AMC shall comply with these guidelines
in addition to the requirements of The Companies Act, 2013 and
SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015, as applicable.
6.1.3 Valuation Committee
6.1.3.1 The AMC shall constitute an in-house valuation committee
consisting of senior executives including personnel from accounts,
fund management and compliance departments. This committee
shall, on a regular basis review the systems and practices of
valuation of securities.
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6.2 Review and Reporting of Transactions207
6.2.1 Reporting of transactions
6.2.1.1 Transaction(s) by directors of the AMC
a. Directors of the AMC shall file with the trustees on a quarterly
basis details of transactions in securities exceeding Rs.1 lac208.
6.2.1.2 Trustee(s) Directors
a. Trustees are required to report to Mutual Funds only those
transactions in securities that exceed 209INR Five lakhs in
value210. The same shall be filed by the trustees within one
month from the end of respective quarters (March, June,
September and December).
6.2.2 Review of transactions
6.2.2.1 Trustees shall review all transactions of the Mutual Fund with the
associates on a regular basis and ensure that Regulations211 are
complied with.
6.3 Role of Independent Director on the Board of the AMC and
Independent Trustees212
6.3.1 An Independent Trustee shall not be associated in any manner with
the Sponsor(s)213. The independent directors on the Board of the AMC
207 SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000, SEBI Circular No.
MFD/CIR No.010/024/2000 dated January 17, 2000, SEBI Circular No.
SEBI/MFD/CIR/10/039/2001 dated February 9, 2001.
2 08 SEBI Circular No. SEBI/MFD/CIR/10/039/2001 dated February 9, 2001.
2 09 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021.
2 10 Regulation 18(11) of SEBI (MF) Regulations, 1996 and SEBI Circular No.
M FD/C IR/09/014/2000 dated January 5, 2000.
211 Regulations 18(6) and 18(7) of SEBI (Mutual Funds), Regulations, 1996
, 2 , 12 SEBI Circular No. MFD/CIR/11/354/2001 dated December 20, 2001, SEBI Circular No.
MFD/CIR/13/16799/2002 dated August 29, 2002, SEBI Circular No.
MFD/CIR/17/21105/2002 dated October 28, 2002.
213 Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996.
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Master Circular for Mutual Funds as on March 31, 2024
shall not be associate of, or associated in any manner with, the
sponsor or any of its subsidiaries or the trustees214.
6.3.2 An ‘associate’ shall be defined as:
6.3.2.1 Relatives215 of Sponsor(s) or directors of the Sponsor Company or
relatives of Associate Directors of the AMC(s) and Trustee.
6.3.2.2 Persons providing any type of professional service to the Mutual
Funds, the AMC and the Trustees and the Sponsor(s). Also,
persons having a material pecuniary relationship with the above
mentioned entities that may, in the judgment of the Trustees,
affect their independence.
6.3.2.3 Nominees of the companies who are stakeholders in the Sponsor
company or AMC(s) (even if they are not deemed sponsors by virtue
of holding less than 40% of net worth of AMC(s)).
6.3.3 Cooling off Period
6.3.3.1 An “Associate”216 as defined above cannot be appointed as
Independent Director even after he/she ceases to be an “Associate”
unless a cooling off period of three years has elapsed from the date
of his disassociation.
6.3.3.2 For the sake of clarity and to avoid any ambiguity, an example is
given here. Supposing an employee of the sponsor or their
associate companies or AMC or trustee company resigns on
December 1, 2021, then he cannot be appointed as an
independent director till December 1, 2024. During this
intervening period, he can be appointed only as associate director.
However, once he is taken as an associate director, say on
December 2, 2021, he cannot be considered as "independent" from
214 Regulation 21(d) of the SEBI (Mutual Funds) Regulations, 1996
215 As defined under Section 2(77) of the Companies Act 2013
216 Regulation 2(c) of the SEBI (Mutual Funds) Regulations, 1996
<
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December 2, 2024. There must be a cooling off period of 3 years
from the date he ceases to be an associate director.
6.3.4 The clarifications at Paragraphs 6.3.1, 6.3.2 and 6.3.3.1 shall be
followed in case of directors of trustee companies and AMCs.
6.3.5 Mutual Funds are required to have a minimum of 50 per cent and
two-third independent directors on the Board of the AMC(s) and
Trustees respectively217. In case the composition of the directors does
not meet these requirements, Mutual Funds are required to inform
the Board along with the steps proposed to ensure compliance.
6.3.6 AMC(s) or Trustees shall appoint Independent Directors in place of the
resigning director(s) within a period of 3 months from the date of
resignation. Where Mutual Funds are unable to meet this time limit,
they shall report to the Board explaining the reasons for non-
compliance. Mutual Funds may maintain a panel of eligible persons
who can be appointed as Independent Directors218 as and when
required. They may also consider appointing more than the required
minimum number of Independent Directors to enhance the standards
of corporate governance and also to meet the regulatory requirements
in case of resignation of an independent director.
6.3.7 On appointment of new directors of the AMC or Trustee, their bio-
data219 shall be filed with the Board for information or approval
respectively.
217 Regulation 21(d) and Regulation 16(5) of the SEBI (Mutual Funds) Regulations, 1996
218 For bio data of directors (AMC and Trustee), please refer to format no. 1 under the section
on Formats
219 For bio data of directors (AMC and Trustee), please refer to format no. 1 under the section
on Formats
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Master Circular for Mutual Funds as on March 31, 2024
6.4 Tenure of independent trustees and independent directors220
6.4.1 Regulation 16 (5) and Regulation 21 (1) (d) of SEBI (Mutual Funds)
Regulations, 1996 mandate appointment of independent trustees of
MFs (“independent trustees”) and independent directors of
AMCs (“independent directors”) respectively. With respect to
tenure of independent trustees and independent directors, it has
been decided that:
6.4.1.1 An independent trustee and independent director shall hold office
for a maximum of 2 terms with each term not exceeding a period
of 5 consecutive years.
6.4.1.2 No independent trustee or independent director shall hold office
for more than two consecutive terms, however such individuals
shall be eligible for re-appointment after a cooling-off period of 3
years. During the cooling-off period, such individuals should not
be associated with the concerned MF, AMC & its subsidiaries and
/ or sponsor of AMC in any manner whatsoever.
6.4.1.3 Existing independent trustees and independent directors shall
hold office for a maximum of 10 years (including all preceding
years for which such individual has held office). In this respect,
the following may be noted:
a. Individuals who have held office for less than 9 years (as on
November 30, 2017) may continue for the residual period of
service.
b. Individuals who have held office for 9 years or more (as on
November 30, 2017) to continue in their respective position for
a maximum of 2 additional years.221
220 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/125 dated November 30, 2017.
221 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/19 dated February 07, 2018.
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Master Circular for Mutual Funds as on March 31, 2024
c. Such individuals shall subsequently be eligible for re-
appointment after a cooling-off period of 3 years, in terms of
Paragraph 6.4.1.1 and Paragraph 6.4.1.2 above.
6.5 Auditors of Mutual Funds222:
6.5.1 The auditor of a mutual fund, appointed in terms of Regulation 55 (1)
of MF Regulations shall be a firm, including a limited liability
partnership, constituted under the LLP Act, 2008223.
6.5.2 Period of appointment: With respect to appointment of auditors in
terms of Regulation 55 (1) of SEBI (MFs) Regulation, 1996, it has been
decided that:
6.5.2.1 No MF shall appoint an auditor for more than 2 terms of maximum
five consecutive years. Such auditor may be re-appointed after
cooling off period of 5 years.
6.5.2.2 Further, during the cooling-off period of five years, the incoming
auditor may not include:
a. Any firm that has common partner(s) with the outgoing audit
firm
b. Any associate224 firm(s) of the outgoing audit firm which
are under the same network of audit firms wherein the
term “same network” includes the firms operating or
functioning, hitherto or in future, under the same brand name,
trade name or common control.
6.5.2.3 Existing auditors may be appointed for a maximum of 10 years
(including all preceding years for which an auditor has been
appointed in terms of Regulation 55 (1) of SEBI (Mutual Funds)
Regulation, 1996). In this respect, the following may be noted:
222 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/125 dated November 30, 2017.
223 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
224 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
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Master Circular for Mutual Funds as on March 31, 2024
a. Auditors who have conducted audit of the Mutual Fund for less
than 9 years (as on November 30, 2017) may continue for the
residual period of service.
b. Auditors who have conducted audit of the Mutual Fund
for 9 years or more (as on November 30, 2017) may continue
till the end of F.Y. 2018-19225.
c. Such auditors shall subsequently be eligible for re-
appointment after a cooling-off period of 5 years, in terms of
Paragraph 6.5.2.1 and Paragraph 6.5.2.2.
6.6 Investment and/or for / Trading in Securities by the employees of
the AMC(s) and Trustee(s)226
The guidelines enumerated below specify the minimum requirements
that have to be followed. The AMC(s) and Trustees are free to set more
stringent norms for investment and/or trading in securities by their
employees. The Board of the AMC and Trustees shall ensure compliance
with these Guidelines on a continuous basis and shall report any
violations and remedial action taken by them in the periodical reports
submitted to the Board227.
6.6.1 Guidelines for Investment and/or Trading in Securities by Employees
of AMC(s) and Trustees:
6.6.1.1 Applicability
225 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/19 dated February 07, 2018.
226 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2021/654 dated October 28, 2021
modified provisions of SEBI Circular No. MFD/CIR No.4/216/2001 dated May 8, 2001, SEBI
Cir MFD/CIR/05/432/2002 June 20, 2002, SEBI Circular No. SEBI/IMD/CIR
No.7/13391/03 dated July 11, 2003, SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/
2009 dated December 15,2009, SEBI/IMD/DF/10/2014 dated May 22, 2014, SEBI Circular
No. SEBI/HO/IMD/DF2/CIR/P/2016/124 dated November 17, 2016 and SEBI Circular No.
SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021. SEBI Circular No.
SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/654 dated October 28, 2021
227 Regulation 25(9) of SEBI (Mutual Funds) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
a. These Guidelines shall be applicable to all employees of AMC(s)
and Trustees and shall form a part of the Code of Conduct for
employees adopted by the AMC(s) and/or Trustees. New
employees shall be bound by these Guidelines from the date of
joining the AMC(s) and/or Trustees.
b. These Guidelines shall cover transactions for sale or purchase
of securities made:
i. In the name of employees, either individually or jointly,
ii. In the name of the employees’ spouse,
iii. As a member of HUF,
iv. In the name of parent, sibling or child of the employee or
of the spouse of such employee, any of whom is either
dependent financially on such employee or spouse of
employee, or consults such employee or spouse of
employee in taking decisions relating to trading in
securities.
6.6.1.2 The objectives and principles of these Guidelines are:
a. To ensure that all securities transactions made by employees in
their personal capacity are conducted in consonance with these
Guidelines and in such manner as to avoid any actual or
potential conflict of interest or any abuse of an individual’s
position of trust and responsibility.
b. To ensure that the employees of AMC(s), Board members of
AMC(s) and Board members of Trustees, including Access
Persons shall not take undue advantage of any sensitive
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Master Circular for Mutual Funds as on March 31, 2024
information that they may have about any company or its
securities or about the AMC’s schemes or its units.
Explanation: Access Person for the purpose of these Guidelines
shall mean the Head of the AMC (designated as CEO/Managing
Director/President or by any other name), Executive Directors,
Chief Investment Officer, Chief Risk Officer, Chief Operation
Officer, Chief Information Security Officer, Fund Managers,
Dealers, Research Analysts, all employees in the Fund
Operations Department, Compliance Officer and Heads of all
divisions and/or departments or any other employee as decided
by the AMC(s) and/or Trustees. Non-Executive Directors of the
AMC/trustee company or trustees who are in possession of /
have access to any non-public information which could
materially impact the price of the securities, NAV of the schemes
or interest of the unitholders shall also be deemed as Access
Persons
c. To guide employees of AMC(s) and Trustees in maintaining a
high standard of probity that one would expect from an
employee in a position of responsibility.
6.6.2 General
6.6.2.1 Investments Covered:
a. These Guidelines cover transactions for purchase or sale of any
securities such as shares, debentures, bonds, warrants,
derivatives and units of schemes floated by Mutual Funds /
AMCs where the concerned persons (in terms of the applicability
stated at 6.6.1.1.a above) are employed.
b. These Guidelines do not apply to the following investments by
the employees:
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Master Circular for Mutual Funds as on March 31, 2024
1. Investments in fixed deposits with banks/financial
institutions/companies, life insurance policies, provident
funds (including public provident fund) or Investment
in savings schemes such as National Savings
Certificates, National Savings Schemes, Kisan Vikas
Patra, or any other similar investment.
2. Investments of a non-financial nature such as gold etc.,
where there is no likely conflict between the Mutual Fund’s
interest and the employees’ interest.
3. Investments in government securities, overnight schemes
and schemes floated by other Mutual Funds.
6.6.2.2 No employee shall pass on information to anybody inducing him
to buy/sell securities which are being bought and/or sold by the
Mutual Fund of which the AMC is the investment manager.
6.6.2.3 Prior approval of personal investment transactions:
a. All access persons except Compliance Officer shall apply in
the form prescribed by the AMC(s) and/or Trustees to the
Compliance Officer for prior approval of transactions for
sale or purchase of securities other than those expressly
stated to be exempt under these guidelines. The
Compliance Officer shall apply to the Head of the AMC(s).
The decision of the Compliance Officer shall be final and
binding on the employee.
b. In these Guidelines, in the case of the Compliance Officer’s
own transactions for purchase or sale of securities or
disclosure or any other related matter, the term
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Master Circular for Mutual Funds as on March 31, 2024
"Compliance Officer" wherever it appears, shall be read as
"Head of the AMC."
c. The Compliance Officer may coordinate with the Fund
Management Department of the Mutual Fund, wherever
necessary, to clear requests of investment and/or trading
in securities by the employees.
d. The approval of Compliance Officer for carrying out a
transaction of sale or purchase of a security by the access
person shall not be valid for more than 7 trading days from
the date of approval.
e. If a transaction approved by Compliance Officer has not
been effected within seven trading days from the date of its
approval, the access person shall be required to obtain
approval once again from Compliance Officer prior to
effecting the transaction.
f. All employees shall refrain from profiting from the
purchase and sale or sale and purchase of any security
within a period of 30 calendar days from the date of their
personal transaction. However, in cases where it is done,
the employee shall provide a suitable explanation to the
Compliance Officer, which shall be reported to the Board
of the AMC and the Trustees at the time of review.
This clause shall not be applicable in case of investments
and redemptions made in Mutual Fund units as per the
provisions Paragraph 6.10 of this Master Circular.
6.6.3 Investments in Shares and/or Debentures and/or Bonds and/or
Warrants and/or Derivatives
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Master Circular for Mutual Funds as on March 31, 2024
Investments in securities shall broadly be classified into investments
through (a) primary markets and (b) secondary markets.
6.6.3.1 Investments through the primary markets:
a. An employee including access person is permitted to apply to
a public issue of shares and/or debentures and/or bonds
and/or warrants of any company, as long as the application is
made in the normal course of the public issue. Such an
application may be made without seeking the clearance from
the Compliance Officer. Employees of AMC(s) and Trustees are
prohibited from applying in any reserved quota such as
promoters’ quota, employees’ quota etc. Employees may
participate in private placement of equity by any company
subject to there being no conflict with the interest of investors
of the mutual fund and disclosure of such investments to the
Compliance Officer immediately.
b. Notwithstanding anything stated in 6.6.3.1.a above, an
employee of an AMC(s) and/or Trustees may apply for shares
and/or debentures and/or bonds and/or warrants in a
preferential offer, in cases where such a preferential offer is
being made by a company that belongs to the same industrial
group as the company in which the employee already has an
investment, provided that such a preferential offer is made to
all shareholders and/or debenture holders of such companies.
Details of such applications made shall be intimated to the
Compliance Officer.
c. The employees of the AMC(s) and/or Trustees including access
person may apply for any rights offer of any company in which
they are already shareholders. Applications for additional
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Master Circular for Mutual Funds as on March 31, 2024
rights (over and above the normal rights entitlement) shares
may be made by the employees including access person
without getting the clearance from the Compliance Officer. An
employee including access person may also sell and/or
renounce his rights entitlement without getting the clearance
from the Compliance Officer. However, if an access person
wishes to purchase the “Rights renunciations” he shall get the
clearance of the Compliance Officer for the same. Such
purchases shall be done only at market prices. Details of any
applications made in any rights issue, whether in the normal
course, or through purchase of rights renunciations, shall be
intimated to the Compliance Officer.
d. The employees of AMC and Trustees may avail discretionary
Portfolio Management Services (PMS) subject to compliance
with all applicable SEBI Regulations and circulars. AMCs and
Trustees shall adhere to the guidelines issued by AMFI in this
regard.
6.6.3.2 Investments through the secondary markets:
a. An access person who wishes to make a secondary market
transaction shall submit a written application to that effect to
the Compliance Officer. Such an application shall specify the
name of the company whose securities the employee wishes to
buy and/or sell, type of security, and the number of shares
and/or debentures and/or bonds and/or warrants and/or
derivatives that the access person wishes to buy/sell.
b. The Compliance Officer shall clear these requests if the
following conditions are met:
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Master Circular for Mutual Funds as on March 31, 2024
1. If the shares and/or debentures and/or bonds and/or
warrants of the company or derivatives specified by the
access person are not held by any scheme of the Mutual
Fund of which the AMC is the investment manager;
2. If the shares and/or debentures and/or bonds and/or
warrants of the company or derivatives specified by the
employee are held by any Scheme of the Mutual Fund of
which the AMC is the investment manager, there should
be a "cooling off" period of 15 calendar days. The
Compliance Officer shall ensure that the last transaction
in that particular security was done by the Mutual Fund at
least 15 calendar days prior to the date of the written
application by the access person. In other words, an
application for a purchase /sale transaction on a personal
basis would be cleared only if the Mutual Fund has not
transacted in that particular security for at least 15
calendar days.
3. However, trades executed pursuant to a trading plan
submitted by the employees in terms of SEBI (PIT)
Regulations, 2015, shall be exempt from the requirement
of a “cooling off” period, provided that such trading plan:
i. Is in compliance with the norms prescribed in SEBI
(PIT) Regulations, 2015.
ii. Is publicly disclosed on the website of the concerned
Mutual Fund
The Compliance Officer shall also properly monitor trades
of the MF scheme and that of the access person, as per the
trading plan, in order to ensure that such trading plan does
not entail trading in securities for market abuse.
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Master Circular for Mutual Funds as on March 31, 2024
4. Provisions of the “cooling off” period may be relaxed for
Access Persons, subject to the following:
i. Such relaxation shall be given by Compliance Officer
for not more than 2 times in a financial year per Access
Person.
ii. Such relaxation shall be applicable only for sale of
securities.
iii. Such relaxation shall be applicable only for securities
held by the Access Person for not less than a period of
one year.
iv. Access Person may apply anytime during the financial
year for such relaxation to the Compliance Officer.
Compliance Officer shall decide on the said application
within 5 days of receipt of such application.
v. Access Person may sell the securities within 10 trading
days from the date of clearance by the Compliance
Officer.
vi. Roll over of unexecuted portion, if any, shall not be
allowed. However, a second request can be made within
the financial year as stated at (i) above.
vii. The Access Person shall ensure that from the time of
making an application under clause (iv) till the
conclusion of the sale of the concerned securities,
he/she is not in possession of / does not have access
to any non-public information which could materially
impact the price of the concerned securities.
Compliance Officer shall not grant clearance for such
transaction, where the Asset Management Company is
in possession of / has access to any non-public
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Master Circular for Mutual Funds as on March 31, 2024
information which could materially impact the price of
the concerned securities.
viii. The Compliance Officer shall maintain all other
regulatory checks and obtain necessary undertakings
from the Access Person.
5. In case of pre-existing pledges / encumbered
arrangements (i.e., securities pledged prior to becoming
an Access Person), the provisions of “cooling off” period
shall not be applicable in the event of sale of securities
by lenders due to shortfall of margin, subject to the
following:
i. Access person shall, on the date of applicability of these
provisions or on the date of joining the AMC or on the
date of being designated as such, declare to the
Compliance Officer (i) details of all the pre-existing
pledges / encumbered arrangements in which the
securities held by him/her are pledged or encumbered
and (ii) details of ESOPs bought with borrowed funds,
along with the agreement with such lender.
ii. Any instances of sale of securities by lender shall be
promptly intimated to the Compliance Officer. The
Access Person shall ensure the following and submit a
self-declaration to the following effect:
a. that the Access Person has not engaged directly or
indirectly in front-running, self-dealing, trading
while in possession of non-public information
which could materially impact the price of the
concerned securities or any other prohibited
activities.
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Master Circular for Mutual Funds as on March 31, 2024
b. that the sale by the lender was due to shortfall of
margin as per the terms of agreement with the
lender and he had not entered into any other
arrangement with the lender in this regard.
iii. Access Person shall also submit the margin notice
received for the said shortfall of margin to the
compliance officer.
c. The Compliance Officer shall keep a track of the transactions of
the employees and transactions of the Mutual Fund to ensure
that there is no conflict of interest between them i.e. the
Compliance Officer should track whether the Mutual Fund has
transacted in the same securities either before or after the
employee’s transaction(s).
d. The Compliance Officer shall maintain a record of all requests for
pre clearance regarding the purchase or sale of a security,
including the date of the request, the name of the access person,
the details of the proposed transaction and whether the request
was approved or denied and waivers given, if any, and its reasons.
e. No employee shall purchase any security (including derivatives)
on a “Carry Forward” basis or indulge in “Short Sale” of any
security (including derivatives) i.e. employees who effect any
purchase transaction(s) shall ensure that they take delivery of the
securities purchased, before selling them.
f. Any transaction of Front Running by any employee directly or
indirectly is strictly prohibited. For this purpose, “Front Running”
means any transaction of purchase and/or sale of a security
carried by any employee whether for self or for any other person,
knowing fully well that the AMC also intends to purchase and/or
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sell the same security for its Mutual Fund operations. To
ascertain that the employee had no prior knowledge of the Mutual
Fund's intended transactions, the Compliance Officer may take a
declaration in this regard from the employee. Such declaration
may be included in the application form itself.
g. Any transaction of self-dealing by any employee either directly or
indirectly, whether alone or in concert with another person is
prohibited. For this purpose, “Self Dealing’ means trading in the
securities based on price sensitive information to which the
employee has access by virtue of his office. Declaration to this
effect may be taken from the employee while clearing the
proposals for investment.
h. The employees shall not insist or suggest to the concerned
brokers to charge reduced brokerage, or accept any contract with
a clause on reduced brokerage charge.
6.6.4 Investments in units of Mutual Fund Schemes
6.6.4.1 Access persons as well as other employees do not require prior
clearance of the Compliance Officer for purchase or sale of units
of Mutual Fund schemes. However, details of each such
transaction, excluding transactions in overnight schemes shall be
reported by them to the Compliance Officer within 7 calendar days
from the date of transaction.
This clause shall not be applicable in case of investments and
redemptions made in Mutual Fund units as per provisions of
Paragraph 6.10 of this Master Circular.
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6.6.4.2 In case of investments in SIP of any Mutual Fund scheme, the
employees may report only at the time of making the first
installment of the SIP.
6.6.4.3 Notwithstanding anything mentioned earlier, employees of
AMC(s), Board members of AMC(s) and Board members of
Trustees, including Access Persons shall not purchase or sell or
repurchase or redeem units of any scheme, including overnight
scheme of their Mutual Fund, where any information available to
the Mutual Fund is not yet communicated to the unitholders and
which could materially impact the NAV or interest of unitholders,
including scenarios where there is a likelihood of:
a. a change in the investment objectives of the concerned
Mutual Fund Scheme(s);
b. a change in the accounting policy;
c. a material change in the valuation of any asset, or class
of assets;
d. conversion of a close ended scheme to an open-ended
scheme or an open-ended scheme to a close ended
scheme;
e. restrictions on redemptions, winding up of scheme(s);
f. creation of segregated portfolio;
g. material change in the liquidity position of the concerned
Mutual Fund Scheme(s);
h. default in the underlying securities which is material to
the concerned Mutual Fund Scheme(s) etc.
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6.6.5 Periodic Disclosures
6.6.5.1 All access persons shall submit, in the form prescribed by the
Mutual Fund of which the AMC is the investment manager, details
of their personal transactions of purchase or sale of securities to
the Compliance Officer. The details to be submitted are as follows:
a. Details of transactions effected for purchase and/or sale of
securities including transactions in rights entitlements
through the secondary market within 7 calendar days from
the date of transaction;
b. Details of allotment received against application for public
and rights issues within 7 calendar days from the date of
receipt of the allotment advice;
c. A statement of holding in securities as on March 31 within
30 calendar days from the end of every financial year ending
March 31.
6.6.5.2 All employees other than access persons shall submit, in the form
prescribed by the Mutual Fund, to the Compliance Officer:
a. Details of each of their transactions for purchase or sale of
securities including allotment in public and rights issues
within 7 calendar days.
b. A statement of holding in securities as on March 31 within
30 calendar days from the end of every financial year
ending March 31.
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c. A declaration shall also be included in the reporting form
on the lines of Paragraph 6.6.3.2.(f) and 6.6.3.2.(g)
regarding Front Running and Self-Dealing.
6.6.6 Review by the Board of Directors of AMC and the Trustee(s)
6.6.6.1 The Board of the AMC and the Trustees shall review the
compliance of these Guidelines in their periodic meetings. They
shall review the existing procedures and recommend changes in
procedures based on the AMCs experience, industry practices
and/or developments in applicable laws and regulations. They
shall report compliance and any violations and remedial action
taken by them in their reports submitted to the Board.
6.6.7 Applicability of Insider Trading Regulations
6.6.7.1 Securities and Exchange Board of India (Prohibition of Insider
Trading) Regulations, 2015 shall be followed strictly by the
Trustees, Asset Management Companies and their employees and
directors.
6.7 Responsibilities of AMC & Trustees228
6.7.1 For effective discharge of their responsibilities under the Mutual
Funds Regulations, the AMC(s) shall provide infrastructure and
administrative support to the Trustees. The Trustees of Mutual Funds
may decide to appoint independent auditors and/or may have
separate full-fledged administrative set up for the Trustees. However,
the expenditure incurred in this regard shall be within the limits as
specified in Regulation 52(6) of the Mutual Funds Regulations. AMC(s)
shall place correspondence and reports submitted to SEBI before the
Trustees.
228 MFD/CIR/09/014/2000 dated January 5, 2000
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6.7A Core responsibilities of the Trustees229
6.7A.1 As per the extant regulatory framework, the Trustees hold the property
of the Mutual Fund in trust for the benefit of the unit holders and their
primary role is to ensure that AMCs appointed by them act in the best
interests of the unitholders. Accordingly, any conflict between interests
of unitholder and that of AMCs’ stakeholders needs to be addressed by
the Trustees. While MF Regulations provide for restrictions to address
certain scenarios of conflict of interest, there are other areas of conflict
which require specific attention from the Trustees.
6.7A.2 At the same time, as an AMC is responsible for managing the funds of
the schemes, the board of directors of the AMC is also accountable to
ensure that the interests of the unitholders are protected.
6.7A.3 SEBI had constituted a Working Group with a view to streamline the
responsibilities at the level of the Trustees and AMCs, to deliberate and
make recommendations for ensuring that Trustees can devote their
attention to the fiduciary obligations and supervisory role cast upon
them. Based on the recommendations of the Working Group and
deliberations in the MFAC, it has been decided to specify the “core”
responsibilities for the Trustees of a Mutual Fund. Accordingly,
amendments were carried out in MF Regulations. The amendments
were notified on June 27, 2023 (link).
6.7A.4 As per Regulation 18(25)(C) of MF Regulations, the Trustees shall
exercise due diligence on such matters as may be specified by the SEBI
from time to time. In terms of the said Regulation 18 (25)(C), the
229 Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/117 dated July 07,
2023
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Trustees shall exercise independent due diligence on certain “core
responsibilities”, which are specified as under:
a) The Trustees shall ensure the fairness of the fees and expenses
charged by the AMCs.
b) The Trustees shall review the performance of AMC in its schemes vis-
a-vis performance of peers or the appropriate benchmarks.
c) The Trustees shall ensure that the AMCs have put in place adequate
systems to prevent mis-selling to increase assets under their
management and valuation of the AMCs.
d) The Trustees shall ensure that operations of AMCs are not unduly
influenced by the AMCs Sponsor, its associates and other stakeholders
of AMCs.
e) The Trustees shall ensure that undue or unfair advantage is not given
by AMCs to any of their associates/group entities.
f) The Trustees shall be responsible to address conflicts of interest, if
any, between the shareholders/stakeholders/associates of the AMCs
and unitholders.
g) The Trustees shall ensure that the AMC has put in place adequate
systems to prevent misconduct including market abuse/misuse of
information by the employees, AMC and connected entities of the AMCs.
6.7A.5 The Trustees shall take steps to ensure that there are system level
checks in place at AMCs’ end to prevent fraudulent transactions
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including front running by employees, form splitting/ mis-selling by
distributors etc. The Trustees shall review such checks periodically.
6.7A.6 The Trustees and their resource persons shall independently evaluate
the extent of compliance by AMCs vis-à-vis the identified key areas and
not merely rely on AMCs’ submissions /external assurances.
6.7A.7 AMCs shall put in place suitable mechanisms/systems to generate
system based information/data/reports for evaluation and effective due
diligence by the Trustees. AMCs shall provide alerts based automated
reports to the Trustees as may be required by the Trustees.
6.7A.8 The Trustees shall ensure that suitable mechanisms/systems are put
in place by the AMCs to generate system based
information/data/reports for evaluation and effective due diligence by
the Trustees. The Trustees shall also ensure that the AMCs periodically
review such systems.
6.7A.9 AMCs shall submit exception reports/analytical information to the
Trustees, that add value to the process of exercising their oversight role.
The Trustees shall evaluate the nature and adequacy of the alerts and
the manner of dealing with such alerts by AMCs.
6.7A.10 The Trustees shall require the AMCs to furnish, in a true and fair
manner, reports and alerts based on pre-decided parameters including
but not limited to the areas specified as core responsibilities at para
6.7A.4 above, for taking appropriate action.
6.7A.11 The Trustees shall periodically review the steps taken by AMCs for folios
which do not contain all the Know Your Client (KYC) attributes /
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updated KYC attributes and ensure that the AMCs take remedial steps
necessary for updating the KYC attributes especially pertaining to bank
details, PAN, mobile phone number.
6.7B Third Party Assurances230
In order to enable Trustees to focus on the core responsibilities, for
responsibilities other than the core responsibilities mentioned at para
6.7A, the Trustees may rely on professional firms such as Audit Firms,
Legal Firms, Merchant Bankers, etc (collectively referred to as “third
party fiduciaries”) for carrying out due diligence on behalf of the
Trustees.
6.7B.1 The responsibilities other than core responsibilities, for which the
Trustees may avail services of third party fiduciaries, include the
following:
a) Overseeing that AMCs manage the operations of Mutual Fund
schemes independently from other activities.
b) Discharging their role as a custodian of assets on behalf of
unitholders in accordance with MF Regulations and the trust deed.
c) Reviewing the networth of the AMC on a periodic basis to ensure
compliance with prescribed threshold.
d) Ensuring that the transactions of the Mutual Funds are in
accordance with the provisions of the trust deed.
230 Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/117 dated July 07,
2023
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6.7C Unit Holder Protection Committee231
6.7C.1 As per Regulation 25(24) of MF Regulations, the AMC is required to
constitute a Unit Holder Protection Committee (“UHPC”) in the form and
manner and with a mandate, as may be specified by SEBI.
6.7C.2 In this regard, it is decided that the UHPC shall be responsible for:
a) protection of interest of unit holders of Mutual Fund schemes vis-a-
vis all products and services provided by the AMC.
b) ensuring adoption of sound and healthy market practices in terms of
investments, sales, marketing, advertisement, management of conflict
of interests, redressal of unit holder’s grievances, investor awareness.
c) compliance with laws and regulations and other related processes
with specific reference to operation of the Mutual Fund business.
6.7C.3 The UHPC shall, inter-alia, have the following mandates:
a) To review the various compliance issues relating to protection of the
interests of the unit holders.
b) To keep the unit holders well informed of and educated about mutual
fund products, investor charter and compliant handling procedures.
6.7C.4 The UHPC shall report its findings to the board of directors of AMC
along with recommendations for action.
231 Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/117 dated July 07,
2023
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6.7C.5 The UHPC shall make recommendations relating to protection of
interest of investors as well as monitor its implementation.
6.7C.6 The detailed guidelines regarding UHPC are specified at Annexure 15
to this master circular. AMC shall ensure that UHPC is constituted and
operates in compliance with the said guidelines.
6.7C.7 In addition to the above functions and responsibilities, the board of
directors of AMCs, from time to time may also assign such other
responsibilities to the UHPC, as deemed fit.
6.7D Appointment of the Trustee Company232
6.7D.1 As per Regulation 16 (7) of MF Regulations, in case a company is
appointed as the Trustee of a Mutual Fund, the Chairperson of the
board of directors of that Trustee company shall be an independent
director. Further, a Trustee company, which has already been
appointed as the Trustee of a Mutual Fund shall comply with this
requirement within a period as may be specified by SEBI from time to
time.
6.7D.2 Accordingly, it is decided that the Trustee company, which has already
been appointed as the Trustee of a Mutual Fund, shall ensure
compliance with the requirement of appointment of independent
director as Chairperson of the board of directors of Trustee company,
within a period of six months from January 01, 2024.
6.7E Meetings between the Trustee Company and the AMC233
232 Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/117 dated July 07,
2023
233 Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/117 dated July 07,
2023
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6.7E.1 As per Regulation 25A of MF Regulations, the board of directors of the
Trustee company and the board of directors of the AMC, including any
of their committees, shall meet at such frequency as may be specified
by SEBI from time to time.
6.7E.2 Accordingly, the board of directors of the AMCs and the board of
directors of the Trustee Company shall meet at least once a year to
discuss the issues concerning the Mutual Fund, if any, and future
course of action, wherever required.
6.8 Resources for Trustees of Mutual Funds: 234
6.8.1 Trustees shall appoint a dedicated officer having professional
qualification and minimum 5 years of experience in finance and
financial services related field.
6.8.1.1 The officer so appointed shall be employee of Trustees and directly
report to Trustees.
6.8.1.2 The scope of the work of the said officer shall be specified by the
Trustee from time to time to support the role and responsibilities
of the Trustees. The officer shall accordingly assist the Trustees
and discharge the activities assigned to him.
6.8.1.3 The said officer shall be treated as access person in terms of
Paragraph 6.6.1.2.b of this Master Circular.
6.8.2 Further, Trustees shall have standing arrangements with independent
firms for special purpose audit and/or to seek legal advice in case of
any requirement as identified and whenever considered necessary;
234 SEBI Cir. No. SEBI/HO/IMD/DF4/CIR/P/2020/151 dated August 10, 2020, SEBI
Circular no. SEBI/HO/IMD/DF4/CIR/P/2020/178 dated September 23, 2020.
<<
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6.8.3 The expenditure incurred for the above shall be charged under the
clause 52(b)(iv) “fees and expenses of trustees” of SEBI (Mutual Funds)
Regulations, 1996.
6.8.4 Notwithstanding the above, the Trustees shall however continue to be
liable for discharge of various fiduciary responsibilities as cast upon
them in the SEBI (Mutual Funds) Regulations, 1996.
6.9 235 236Alignment of interest of Asset Management Companies (AMCs)
with the Unitholders of the Mutual Fund Schemes
6.9.1 In terms of sub-regulation 16(A) in Regulation 25 of SEBI (Mutual
Funds) Regulations,1996 (‘MF Regulations’), asset management
companies (‘AMCs’) are required to invest such amount in such
scheme(s) of the mutual fund, based on the risk associated with the
scheme.
6.9.2 Accordingly, based on the risk value assigned to the scheme(s), in
terms of Paragraph 17.4 of this Master Circular, AMCs shall invest
minimum amount as a percentage of assets under management
(‘AUM’) in their scheme(s) as provided below –
Risk Value Risk Level as Per Minimum percentage
Risk-O-Meter of AUM to be invested
in scheme
≤ 1 Low 0.03
> 1 to ≤ 2 Low to Moderate 0.05
> 2 to ≤ 3 Moderate 0.07
> 3 to ≤ 4 Moderately High 0.09
> 4 to ≤ 5 High 0.11
> 5 Very High 0.13
235 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2020/100 Dated June 12, 2020 –
provisions stand rescinded in terms of SEBI Circular SEBI/HO/IMD/IMD-
IDOF5/P/CIR/2021/624 dated September 2, 2021, Refer SEBI letter No.
SEBI/HO/IMD/DF5/OW/P/2021/24745/1 dated September 20, 2021
236 SEBI Circular SEBI/HO/IMD/IMD-IDOF5/P/CIR/2021/624 dated September 2, 2021.
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6.9.3 For the above purpose,
6.9.3.1 The risk value of the scheme as per the risk-o-meter of the
immediate preceding month shall be considered.
6.9.3.2 The investment shall be maintained at all points of time till the
completion of tenure of the scheme or till the scheme is wound up.
6.9.3.3 AMCs shall, except in case of close ended scheme(s), conduct a
quarterly review to ensure compliance with the requirement of
investment of minimum amount in the scheme(s) which may
change either due to change in value of the AUM or in the risk value
assigned to the scheme. Further, based on review of quarterly
average AUM, shortfall in value of the investment in scheme(s), if
any, shall be made good within 7 days of such review. AMC shall
have the option to withdraw any excess investment than what is
required pursuant to such review.
6.9.3.4 AMCs may invest from their net worth or the sponsor may fund the
AMC to fulfil the aforesaid obligations, if required. However, the
AMCs shall be required to make good the shortfall in the minimum
networth to comply with the requirement of the MF Regulations in
case of sustenance of temporary Mark to Market loss for two
consecutive quarters. AMC shall ensure that such temporariness of
the Mark to Market loss is certified by the statutory auditor.
6.9.3.5 AMCs shall not be required to invest in ETFs, Index Funds,
Overnight Funds, Funds of Funds scheme(s) and in case of close
ended funds wherein the subscription period has closed as on date
of coming into force of MF Amendment Regulations.
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6.9.4 The mandatory contribution already made by the AMCs in compliance
with the applicable MF Regulations shall not be withdrawn. However,
such contribution can be adjusted against the investment required by
the AMC as per Paragraph 6.9 of this Master Circular.
6.9.5 The compliance of the Paragraph 6.9 of this Master Circular shall be
ensured by the AMCs and monitored by the Trustees. Any non-
compliance in this regard, shall be reported in the Quarterly CTR and
half-yearly Trustee Report.
6.9.6 Details of investment by AMCs in each of their mutual fund scheme(s)
shall be disclosed on the website of AMCs and AMFI.
6.10 237Alignment of interest of 238Designated Employees of Asset
Management Companies (AMCs) with the Unitholders of the Mutual
Fund Schemes:
6.10.1 In order to align the interest of the Designated Employees of the AMCs
with the unitholders of the mutual fund schemes, it has been decided
that, a part of compensation of the Designated employees of the AMCs
shall be mandatorily invested in units of the scheme(s), as under:
6.10.1.1 A minimum of 20% of the salary/ perks/ bonus/ non-cash
compensation (gross annual CTC) net of income tax and any
statutory contributions (i.e. PF and NPS) of the Designated
Employees of the AMCs shall be mandatorily invested in units of
Mutual Fund schemes in which they have a role/oversight.
However, for junior employees, the above provision shall be
237 SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/553 Dated April 28, 2021,
Refer SEBI Letter No. SEBI/HO/IMD/DF5/OW/P/2021/24745/1 dated September 20, 2021,
Refer SEBI letter No. SEBI/HO/IMD/DF5/OW/P/2021/30715/1 dated October 29, 2021
238 SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/629 Dated September 20,
2021 read with SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/582 dated June
25, 2021.
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implemented in phased manner, i.e. 10% during October 01, 2021
to September 30, 2022 and 15% during October 01, 2022 to
September 30, 2023. Thus from October 01, 2023 all junior
employees shall mandatorily invest 20% while other designated
employees shall comply with the provision from October 01, 2021.
The phased implementation for junior employees shall cease to
apply from the date such employee attains the age of 35 years. For
this purpose, a designated employee of the AMC below the age of
35 years (excluding CEO, head of any department and Fund
Managers), shall be deemed as “junior employee”.
6.10.1.2 The contribution of the Designated Employees in close ended
schemes launched on or after October 1, 2021 shall be made in
the units of any open ended schemes having (a) risk value
equivalent to or higher than and (b) underlying portfolio of similar
nature as, the mandated close ended schemes.
6.10.1.3 Similarly, for interval schemes, schemes having restrictions on
individual investments or lump-sum investments or having
temporary suspensions on subscription or solution oriented
schemes (retirement fund, children’s fund etc.) or schemes having
lock-in period of more than 3 years, investments required under
the relevant provisions of Paragraph 6.10 above shall be made in
the units of any open ended schemes having (a) risk value
equivalent to or higher than and (b) underlying portfolio of similar
nature as, the aforesaid schemes
6.10.1.4 The compensation mandatorily invested in units, as mentioned
above, shall be:
a. proportionate to the AUM of the schemes in which the
Designated Employee has a role/oversight. For this purpose,
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Exchange Traded Funds (ETFs), Index Funds, Overnight Funds
and existing (i.e. as on September 30, 2021) close ended
schemes shall be excluded.
b. paid proportionately over 12 months on the date of payment
of such salary/ perks/ bonus/ non-cash compensation. In all
cases of deferred compensation including Employee Stock
Options, the AMC shall decide whether the deduction of 20% of
such deferred compensation (perquisite value less taxes),
should be on the date of grant or exercise. However, the policy
should be same for all Designated Employees of the AMC, in a
given financial year.
c. locked-in for a minimum period of 3 years or tenure of the
scheme whichever is less.
d. invested in ‘Growth option’ of the mutual fund schemes. For
schemes where growth option is not available, the investment
shall be made in the ‘Reinvestment of Income Distribution cum
capital withdrawal option’. For schemes where both the above
options are not available, investment shall be made in the
‘Payout of Income Distribution cum capital withdrawal option’
6.10.1.5 Further, with a view to allow the Designated Employees to diversify
their unit holdings, in case of dedicated fund managers managing
only a single scheme / single category of schemes, 50% of the
aforementioned compensation shall be by way of units of the
scheme/category managed by the fund manager and the
remaining 50% can, if they so desire, be by way of units of those
schemes whose (a) risk value as per the risk-o-meter is equivalent
or higher than and (b) whose underlying portfolio is of similar
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Master Circular for Mutual Funds as on March 31, 2024
nature as, the scheme managed by the fund manager. This is also
applicable to dedicated fund managers of overseas funds.
6.10.1.6 Investment in units of the scheme, shall be made on the day of
payment of salary.
6.10.1.7 The previous month’s closing AUM shall be taken for apportioning
the investment across eligible schemes.
6.10.1.8 All non-cash benefits and perks shall be accounted for in CTC at
the perquisite value as per the Form 16 under Income Tax Act,
1961. However, superannuation benefits and Gratuity paid at the
time of death/retirement, shall not be included in the CTC.239
6.10.1.9 The perquisite value of interest on loan availed by the Designated
Employees against the units from the AMC as specified in
Paragraph 6.10.2.1 of this Master Circular shall not be included
in the CTC.
6.10.1.10 Any unconditional compensation in any form which was granted
before April 28, 2021, but is unpaid as on April 28, 2021 shall not
be included in the CTC.
6.10.1.11 Designated Employees may set off their existing investments as
on July 01, 2021, if any, against the fresh investments as
required in the same schemes.
6.10.1.12 Designated Employees may set off their units, for which the
required lock-in period of 3 years is expired, against the fresh
investments required to be made in the same schemes as per
Paragraph 6.10 of this Master Circular. In such cases, AMC shall
239 Refer SEBI Letter No. SEBI/HO/IMD/DF5/OW/ P/2021/ 30715/1 dated October 29, 2021
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Master Circular for Mutual Funds as on March 31, 2024
ensure that such units are locked in for the further period of 3
years or tenure of the scheme, whichever is less.
6.10.2 Redemption of units:
6.10.2.1 No redemptions of the said units shall be allowed during the lock-
in period. However, AMC may decide to have a provision of
borrowing from the AMC by Designated Employees against such
units in exigencies such as medical emergencies or on
humanitarian grounds, as per the policy laid down by the AMC.
6.10.2.2 No redemption of such units shall be allowed within the lock-in
period in case of resignation or retirement before attaining the
age of superannuation as defined in the AMC service rules.
However, in case of retirement on attaining the superannuation
age, such units shall be released from the lock-in and the
Designated Employee shall be free to redeem the units, except for
the units in close ended schemes where the units shall remain
locked in till the tenure of the scheme is over.
6.10.2.3 Liquid Schemes: Units of Designated Employee invested in terms
of the above would get automatically redeemed on expiry of the
mandatory lock-in period.
6.10.2.4 Open Ended Schemes: After the expiry of the mandatory lock-in
period, designated employee can redeem their units in open
ended schemes twice in a financial year, with the prior approval
of the Compliance Officer by following the procedure prescribed
below:
a. Any time after the expiry of the mandatory lock-in period, the
designated employee may make application to the
Compliance Officer for redemption of the units. The
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Compliance Officer shall decide on the said application within
5 days of receipt of such application;
b. If approved, the designated employee may submit request for
redemption of such units within 10 trading days from the
date of grant of such approval;
c. The unexecuted portion, if any, shall not be rolled over on the
expiry of the period mentioned at (b) above. However, a
second application can be made within the year as stated
above. The Compliance Officer shall maintain all other
regulatory checks and obtain necessary confirmation from
the concerned designated employee;
d. Where the concerned Designated Employee is in possession
of any material information, which is not yet communicated
to investors and which could materially impact the NAV /
interest of unitholders, such Designated Employee shall not
make application for redemption or submit redemption
request during such period; and
e. Where the Asset Management Company is in possession of
any material information, which is not yet communicated to
investors and which could materially impact the NAV /
interest of unitholders, Compliance Officer shall not grant
approval for such application.
6.10.2.5 In case of request for redemptions made by the Compliance
Officer, the competent person to approve the same shall be “Chief
Executive Officer”.
6.10.3 In the Fund of Funds schemes, only Fund Managers of such schemes
shall be required to invest.
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Master Circular for Mutual Funds as on March 31, 2024
6.10.4 Fund of Funds schemes investing only in a single ETF shall also be
covered in the exclusions mentioned in the paragraph 6.10.1.4 (a) of
this Master Circular.
6.10.5 Units, allotted in terms of the Paragraph 6.10 of this Master Circular,
shall be released from the mandatory lock-in period in case of death
of the Designated Employee.
6.10.6 AMC shall ensure that necessary audit trail is maintained to verify
compliance with the provisions of Paragraph 6.10 of this Master
Circular.
6.10.7 Clawback:
6.10.7.1 Units allotted to the Designated Employees shall be subject to
clawback in the event of violation of Code of Conduct, fraud,
gross negligence by them, as determined by SEBI. Upon
clawback, the units shall be redeemed and amount shall be
credited to the scheme.
6.10.8 Oversight:
6.10.8.1 The compliance with Paragraph 6.10 of this Master Circular shall
be ensured by the AMCs and monitored by the Trustees. Any
non-compliance in this regard, shall be reported in the quarterly
CTR and half yearly trustee report.
6.10.8.2 For the purpose of Paragraphs 6.10.1.2, 6.10.1.3 and 6.10.1.5,
the risk value based on the risk-o-meter of the immediate
preceding month shall be considered. Further, AMCs and
Trustees shall have a policy in place to ensure that such open
ended schemes are similar to the mandated scheme in terms of
the nature of the underlying portfolio
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Master Circular for Mutual Funds as on March 31, 2024
6.10.8.3 Every scheme shall disclose the ‘compensation, in aggregate,
mandatorily invested in units to the Designated Employees’,
under the provisions of this Master Circular, on the website of
the AMC. The disclosure shall be at monthly aggregate level
showing the total investment across all relevant employees in
that specific scheme.
6.10.9 Designated employees
Designated Employees of the AMCs shall include:
6.10.9.1 Chief Executive Officer (CEO), Chief Investment Officer (CIO),
Chief Risk Officer (CRO), Chief Information Security Officer (CISO),
Chief Operation Officer (COO), Fund Manager(s), Compliance Officer,
Sales Head, Investor Relation Officer(s) (IRO), heads of other
departments, Dealer(s) of the AMC;
6.10.9.2 Direct reportees to the CEO (excluding Personal
Assistant/Secretary);
6.10.9.3 Fund Management Team and Research team;
6.10.9.4 Other employees as identified & included by AMCs and Trustees
6.10.10 These provisions shall not be applicable to Designated Employees
having role/ oversight only over ETFs, Index Funds, Fund of Funds
schemes investing only in a single ETF, Overnight Funds and
existing (i.e. as on September 30, 2021) close ended schemes.
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Master Circular for Mutual Funds as on March 31, 2024
PART II -SCHEME GOVERNANCE
6.11 Minimum Number of investors240
6.11.1 Applicability for an open-ended scheme
6.11.1.1 The Scheme/Plan shall have:
a. a minimum of 20 investors and
b. no single investor shall account for more than 25% of the
corpus of the Scheme/Plan(s).
6.11.1.2 If either/both of such limit(s) is breached during the NFO of the
Scheme, it shall be ensured that within a period of three months
or the end of the succeeding calendar quarter from the close of the
NFO of the Scheme, whichever is earlier, the Scheme complies
with these two conditions.
6.11.1.3 In case the Scheme / Plan(s) does not have a minimum of 20
investors in the stipulated period, the provisions of Regulation241
would become applicable automatically without any reference
from SEBI and accordingly the Scheme / Plan(s) shall be wound
up and the units would be redeemed at applicable NAV.
6.11.1.4 The average net assets of the scheme would be calculated daily
and any breach of the 25 % holding limit by an investor would be
determined. At the end of the quarter, the average of daily holding
by each such investor is computed to determine whether that
investor has breached the 25 % limit over the quarter. If there is a
breach of the 25% limit by any investor over the quarter, a
rebalancing period of one month would be allowed and thereafter
240 SEBI Circular No. SEBI/IMD/CIR No.10/22701/03 dated December 12, 2003, SEBI
Circular No. SEBI/IMD/CIR No.1/42529/05 dated June 14, 2005.
< 2 <, 41 Regulation 39(2)(c) of the SEBI (MF) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
the investor who is in breach of the rule shall be given 15 days’
notice to redeem his exposure over the 25 % limit. Failure on the
part of the said investor to redeem his exposure over the 25 % limit
within the aforesaid 15 days would lead to automatic redemption
by the Mutual Fund on the applicable Net Asset Value on the 15th
day of the notice period.
6.11.1.5 The two conditions mentioned above shall also be complied within
each subsequent calendar quarter thereafter, on an average basis,
as specified by SEBI.
6.11.1.6 The Fund shall adhere to the requirements prescribed by SEBI
from time to time in this regard.
6.11.2 Applicability for a Close ended scheme/Interval scheme
6.11.2.1 The Scheme(s) and individual Plan(s) under the Scheme(s) shall
have:
a. A minimum of 20 investors and
b. No single investor shall account for more than 25% of the
corpus of the Scheme(s)/Plan(s).
6.11.2.2 These conditions will be complied with immediately after the close
of the NFO itself i.e. at the time of allotment.
6.11.2.3 In case of non-fulfillment with the condition of minimum 20
investors, the Scheme(s)/Plan(s) shall be wound up in accordance
with Regulation242 automatically without any reference from SEBI.
6.11.2.4 In case of non-fulfillment with the condition of 25% holding by a
single investor on the date of allotment, the application to the
extent of exposure in excess of the stipulated 25% limit would be
242 Reg. 39 (2) (c) of SEBI (MF) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
liable to be rejected and the allotment would be effective only to
the extent of 25% of the corpus collected. Consequently, such
exposure over 25% limits will lead to refund within 6 weeks of the
date of closure of the New Fund Offer.
6.11.2.5 For interval scheme the aforesaid provision will be applicable at
the end of NFO and specified transaction period.
6.11.2.6 Requisite disclosure in this regard shall be made in the SID.
6.11.3 Determination of breach:
6.11.3.1 The average shall be calculated, at the end of each quarter, on the
basis of number of investors at the end of the business hours of
the scheme on a daily basis.
6.11.3.2 To determine breach of 25% holding limit by an investor, net
assets under the scheme shall be calculated daily and the daily
holding limit shall be determined accordingly. At the end of the
quarter, average daily holding by each investor shall be calculated
and any breach of the 25% holding limit will be accordingly
determined.
6.11.4 Applicability
6.11.4.1 These Guidelines are applicable at the Portfolio level.
6.11.4.2 These Guidelines are not applicable to Exchange Traded Funds
(ETFs).
6.11.5 Redemptions
6.11.5.1 Redemptions effected pursuant to these Guidelines shall be
completed within 10 days from the day of winding up of the
scheme(s) and/or plan(s).
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Master Circular for Mutual Funds as on March 31, 2024
6.11.6 Reporting to the Board
6.11.6.1 Compliance with these Guidelines shall be reported in Compliance
Test Reports (CTRs) and Half Yearly Trustee Reports (HYTRs).
6.12 Minimum Assets under Management (AUM) of Debt Oriented
Schemes 243
6.12.1 It has been observed that many debt oriented schemes are operating
with a very low AUM. In the interest of investors, it is important that
debt oriented schemes have an adequate corpus to ensure adherence
to the investment objectives as stated in Scheme Information
Document and compliance with investment restrictions specified
under SEBI (Mutual Funds) Regulations, 1996.
6.12.2 In this regard, it has been decided that:
6.12.2.1 The minimum subscription amount of debt oriented and balanced
schemes at the time of new fund offer shall be at least 20 crore
and that of other schemes shall be at least 10 crore, except for
following:
i. Minimum subscription amount at the time of New Fund Offer
(NFO) for Debt ETFs/ Index Funds and other ETFs/ Index
Funds shall be INR 10 Cr. and INR 5 Cr. respectively.244
6.12.2.2 An average AUM of 20 crore on half yearly rolling basis shall be
maintained for open ended debt oriented schemes.
243 SEBI Circular No. Cir/IMD/DF/15/2014 dated June 20, 2014
244 SEBI Circular No. SEBI/HO/IMD/DOF2/P/CIR/2022/69 dated May 23, 2022
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Master Circular for Mutual Funds as on March 31, 2024
6.12.2.2A [In case of breach of para 6.12.2.2 above, the AMC shall scale up
the AUM of such scheme within a period of six months so as to
comply with para 6.12.2.2 above, failing which the provisions of
Regulation 39(2)(c) of MF Regulations would become applicable.]245
6.12.2.3 The confirmation on compliance of the above shall be reported to
SEBI in the Half Yearly Trustee Reports.
6.12.2.4 Alternative to launch of NFO for ETFs, the AMC may contribute
the initial fund for unit creation. Subsequently, the AMC can
transfer the units of such ETFs to Market Makers or other
investors, subject to compliance with all applicable provisions for
launch of ETFs. 246
6.13 Scheme Performance Review
6.13.1 AMCs and Trustees shall review the performance of their schemes
on periodic basis247. Such review can take place by comparing the
performance of the schemes with benchmark indices as well as in
light of the performance of the entire Mutual Funds industry by
relying on data published from time to time by independent research
agencies and financial newspapers and journals. Corrective action
if required may be taken in case of unsatisfactory performance. Its
compliance should be reported in the quarterly248 CTRs of AMCs and
half-yearly reports of the Trustees to SEBI (while reporting
compliance of Regulation 25(2) on exercise of due diligence in
investment decisions).
245 SEBI Circular No. SEBI Circular No. Cir/IMD/DF/15/2014 dated June 20, 2014
246 SEBI Circular No. SEBI/HO/IMD/DOF2/P/CIR/2022/69 dated May 23, 2022
247 SEBI Circular No. dated July 27, 2000 & SEBI Cir 16/400/02 dated March 26, 2002.
248 SEBI Circular SEBI/HO/IMD/DF3/CIR/P/2018/04 dated January 04, 2018. Also refer
Paragraph 1.9 of this Master Circular
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Master Circular for Mutual Funds as on March 31, 2024
6.14 Benchmarking of Scheme's performance to Total Return Index249
6.14.1 Total Return variant of an Index (TRI) takes into account all
dividends/ interest payments that are generated from the basket of
constituents that make up the index in addition to the capital gains.
Hence, TRI is more appropriate as a benchmark to compare the
performance of mutual fund schemes.
6.14.2 With an objective to enable the investors to compare the performance
of a scheme vis-a-vis an appropriate benchmark, it has been decided
that -
6.14.2.1 Selection of a benchmark for the scheme of a mutual fund shall
be in alignment with the investment objective, asset allocation
pattern and investment strategy of the scheme.
6.14.2.2 The performance of the schemes of a mutual fund shall be
benchmarked to the Total Return variant of the Index chosen as a
benchmark as stated in paragraph 6.14.2.1 above.
6.14.2.3 (i) Mutual funds shall use a composite CAGR figure of the
performance of the PRI benchmark (till the date from which TRI is
available) and the TRI (subsequently) to compare the performance
of their scheme in case TRI is not available for that particular
period(s).
(ii) The calculation of composite CAGR is elaborated with an
example in the following paragraph.
249 SEBI circular no. HO/IMD/IMD-I DOF2/P/CIR/2021/550 dated April 12, 2021
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Master Circular for Mutual Funds as on March 31, 2024
For instance, ABC scheme had been launched on August 2, 1995. The
benchmark PRI values are available from the date of inception of the fund. The
benchmark TRI values are available from June 30, 1999. The calculation of a
composite benchmark performance return in CAGR terms would be as given
below:
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Master Circular for Mutual Funds as on March 31, 2024
1
(Time period from
the last day of the
month preceding
the date of
advertisement –
date of inception
of the scheme)
Benchmark PRI value as Benchmark TRI value as on last -1
on date of introduction of day of the month preceding the
TRI value . X date of advertisement
Benchmark PRI value as Benchmark TRI value as on date
on date of inception of the of introduction of TRI value
scheme
The aforesaid is explained with an example:
Example: Consolidated Benchmark CAGR (PRI and TRI)
Date Benchmark PRI values Benchmark TRI values
02/08/1995 1007.57
30/06/1999 1187.70 1256.38
30/11/2017 10226.55 13966.58
CAGR 12.20%
Thus, in the above example (for advertisements in the month of December,
2017 the last of the preceding month would be November 30, 2017),
CAGR= [(1187.70/1007.57)*(13966.58/1256.38) ^ (1/22.3452)]-1
[1 year= 365 days]
CAGR= 12.20%
(iii) Mutual funds shall use the composite CAGR as explained above,
subject to making the following disclosure:
*As TRI data is not available since inception of the scheme, benchmark
performance is calculated using composite CAGR of XYZ (name of the
benchmark index) PRI values from date.... to date... and TRI values
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Master Circular for Mutual Funds as on March 31, 2024
since date...."
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Master Circular for Mutual Funds as on March 31, 2024
PART III -SYSTEMS AUDIT FRAMEWORK FOR MUTUAL FUNDS / AMCs250
6.15 Systems audit framework for Mutual Funds/ AMCs
6.15.1 Considering the importance of systems audit in technology driven
asset management activity and to enhance and standardize the
systems audit, guidelines in this regard are placed at Annexure 8.
These guidelines are indicative and not exhaustive in nature.
6.15.2 The aforementioned audit should be encompassing audit of systems
and processes, inter alia, related to examination of integration of
front office system with the back office system, fund accounting
system for calculation of net asset values, financial accounting
and reporting system for the AMC, Unit-holder administration and
servicing systems for customer service, funds flow process, system
processes for meeting regulatory requirements, prudential
investment limits and access rights to systems interface.
6.15.3 Trustees of Mutual Fund / AMCs are advised to conduct systems
audit on an annual basis by an independent CISA / CISM qualified
or equivalent auditor to check compliance of provisions of Paragraph
6.15 of this Master Circular.
6.15.4 AMCs are further advised to take necessary steps to put in place
systems for implementation of these provisions. The exception report
as per the format251 provided should be placed before the Technology
Committee for review. The Technology Committee after review shall
place the same before the AMC & Trustee Board. Thereafter,
exception observation report along with trustee comments starting
from the financial year April 2019 – March 2020 should be
communicated to SEBI within six months of the respective financial
250 SEBI Circular No SEBI/HO/IMD/DF2/CIR/P/2019/57dated April 11, 2019
251 For format, please refer to format no. 10 under the section on formats
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Master Circular for Mutual Funds as on March 31, 2024
year. Further, System Audit Reports shall be made available for
inspection.
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Master Circular for Mutual Funds as on March 31, 2024
PART IV – ROLE OF MUTUAL FUNDS IN CORPORATE GOVERNANCE OF
PUBLIC LISTED COMPANIES252
6.16 Role of Mutual Funds in Corporate Governance of Public Listed
Companies:
6.16.1 MFs should play an active role in ensuring better corporate
governance of listed companies.
6.16.2 AMCs shall disclose their general policies and procedures for
exercising the voting rights in respect of shares held by them on the
website of the respective AMC as well as in the annual report
distributed to the unit holders from the financial year 2010-11253.
6.16.3 AMCs are required to disclose on the website of the respective AMC
as well as in the annual report distributed to the unit holders from
the financial year 2010-11, the actual exercise of their proxy votes in
the AGMs/EGMs of the investee companies in respect of the
following matters.
 Corporate governance matters, including changes in the state
of incorporation, merger and other corporate restructuring, and
anti-takeover provisions
 Changes to capital structure, including increases and decreases
of capital and preferred stock issuances.
 Stock option plans and other management compensation
issues;
 Social and corporate responsibility issues.
 Appointment and Removal of Directors.
252 SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010, Refer
SEBI Letter No. SEBI/HO/IMD-II/IMD-II_DOF11/P/OW/2022/52316/1 dated October 14,
2022
253 Refer SEBI emails dated June 23, 2011
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Master Circular for Mutual Funds as on March 31, 2024
 Any other issue that may affect the interest of the shareholders
in general and interest of the unit-holders in particular.
6.16.4 AMCs shall be required to record and disclose specific rationale
supporting their voting decision (for, against or abstain) with
respect to each vote proposal254.
6.16.5 AMCs shall additionally be required to publish summary of the votes
cast across all its investee company and its break-up in terms of total
number of votes cast in favor, against or abstained from.
6.16.6 255AMCs shall be required to make disclosure of votes cast on their
website (in machine readable spreadsheet format) on a quarterly
basis, within 10 working days from the end of the quarter as per the
format enclosed256. A detailed report in this regard along with
summary thereof shall also be disclosed on their website. The format
for disclosure of vote cast by Mutual Funds in respect of resolutions
passed in general meetings of the investee companies and the format
for presenting summary of votes cast by Mutual Funds is as per
format enclosed257. Further, AMCs shall provide the web link in their
annual reports regarding the disclosure of voting details.
6.16.7 Further, on an annual basis, AMCs shall be required to obtain
certification on the voting reports being disclosed by them. Such
certification shall be obtained from a “scrutinizer” in terms of Rule
20 (3) (ix) of Companies (Management and Administration) Rules,
2014 and any future amendment/s to the said Rules thereof. The
254 SEBI Circular No. CIR/IMD/DF/05/2014 dated March 24, 2014
255 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2021/024 dated March 04, 2021
256 Refer format no. 7.C under the section on Formats.
257 Refer format no. 7.C under the section on Formats.
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Master Circular for Mutual Funds as on March 31, 2024
same shall be submitted to the trustees and also disclosed in the
relevant portion of the Mutual Funds' annual report & website. 258
6.16.8 Board of AMCs and Trustees of Mutual Funds shall be required to
review and ensure that AMCs have voted on important decisions that
may affect the interest of investors and the rationale recorded for
vote decision is prudent and adequate. The confirmation to the
same, along with any adverse comments made by auditors, shall
have to be reported to SEBI in the half yearly trustee reports.
6.16.9 The format259 for disclosure of voting by mutual funds in general
meetings of listed companies is provided.
6.16.10 260Mutual Funds including their passive investment schemes like
Index Funds, Exchange Traded Funds etc. shall be required to cast
votes compulsorily in respect of the following resolutions with effect
from April 1, 2021:
i. Matters mentioned at Paragraph 6.16.3 of this Master Circular
i.e.:
a) Corporate governance matters, including changes in the state
of incorporation. merger and other corporate restructuring,
and anti-takeover provisions.
b) Changes to capital structure, including increases and
decreases of capital and preferred stock issuances.
c) Stock option plans and other management compensation
issues.
d) Social and corporate responsibility issues.
e) Appointment and Removal of Directors.
258 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/68 dated August 10, 2016
259 For disclosure of voting by mutual funds in general meetings of listed companies, please
refer to the section on formats
260 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2021/29 dated March 05, 2021
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Master Circular for Mutual Funds as on March 31, 2024
f) Any other issue that may affect the interest of the
shareholders in general and interest of the unit-holders in
particular.
ii. Related party transactions of the investee companies (excluding
own group companies). For this purpose, “Related Party
Transactions” shall have same meaning as assigned to them in
clause (zc) of Sub-Regulation (1) of Regulation (2) of the SEBI
(Listing Obligation and Disclosure Requirements) Regulations,
2015.
6.16.11 Further, for all remaining resolutions which are not covered above,
Mutual Funds shall also compulsorily be required to cast their votes
with effect from April 01, 2022.
6.16.12 In case of the Mutual Funds having no economic interest on the day
of voting, it may be exempted from compulsorily casting of votes.
6.16.13 The vote shall be cast at Mutual Fund Level. However, in case Fund
Manager/(s) of any specific scheme has strong view against the views
of Fund Manager/(s) of the other schemes, the voting at scheme level
shall be allowed subject to recording of detailed rationale for the
same.
6.16.14 Fund Managers/Decision makers shall submit a declaration on
quarterly basis to the Trustees that the votes cast by them have not
been influenced by any factor other than the best interest of the unit
holders. Further, Trustees in their Half Yearly Trustee Report to
SEBI, shall confirm the same.
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Master Circular for Mutual Funds as on March 31, 2024
6.16.15 All Mutual Funds shall mandatorily follow the Stewardship Code as
placed at Annexure 10, in relation to their investment in listed
equities. 261
261 SEBI Circular No. CIR/CFD/CMD1/ 168 /2019 dated December 24, 2019 and SEBI
Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/55 dated March 30, 2020.
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 7: SECONDARY MARKET ISSUES
7.1 Non Applicability of Listing Deposit262
7.1.1 The requirement of collecting listing deposit as specified under
Circular No. SE/2936 dated April 6, 1992 shall not be applicable to
Mutual Funds in respect of the schemes floated by them for public
subscription which are sought to be listed on the stock exchanges.
7.2 Listing of Mutual Fund Schemes under process of winding up263:
7.2.1 As per MF Regulations, there are several steps envisaged with respect
to winding up of Mutual Fund schemes before the scheme ceases to
exist. During this process, such units can be listed and traded on a
recognized stock exchange, which may provide an exit to investors;
7.2.2 The units of Mutual Fund schemes which are in the process of
winding-up in terms of Regulation 39(2)(a) of MF Regulations, shall be
listed on recognized stock exchange, subject to compliance with listing
formalities as stipulated by the stock exchange;
7.2.3 Trading on stock exchange mechanism will not be mandatory for
investors, rather, if they so desire, may avail an optional channel to
exit provided to them.
7.2.4 Initially, trading in units of such a listed scheme that is under the
process of winding up, shall be in dematerialised form;
7.2.5 AMCs shall enable transfer of such units which are held in form of
Statement of Account (SoA) / unit certificates.
262 SEBI Circular No. SMD-II(N)/2113/94 dated April 12, 1994. Further, in this regard,
circulars issued by SEBI from time to time may be considered.
< 2 63 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/086 dated May 20, 2020
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Master Circular for Mutual Funds as on March 31, 2024
7.2.6 The AMC, its sponsor, employees of AMC and Trustee shall not be
permitted to transact (buy or sell) in the units of such schemes that
are under the process of being wound up. The compliance of the same
shall be monitored both by the Board of AMC and Trustee.
7.2.7 Detailed operational modalities for trading and settlement of units of
MF schemes that are under the process of winding up, shall be
finalized by the stock exchanges where units of such schemes are
being listed, in consultation with SEBI. The operational modalities
shall include the following:
a) Mechanism for order placement, execution, payment and
settlement;
b) Enabling bulk orders to be placed for trading in units;
c) Issue related to suspension of trading, declaration of date for
determining the eligibility of unitholders etc. in respect of
payments to be made by the AMC as part of the winding up
process;
d) Disclosures to be made by AMCs including disclosure of NAV
on daily basis and scheme portfolio periodically etc.
7.2.8 The stock exchange shall develop a mechanism along with RTA for
trading and settlement of such units held in the form of SoA/ Unit
Certificate.
7.3 Payment of Margins264
7.3.1 The applicable margins shall be paid as per the guidelines issued by
SEBI and as directed by stock exchanges from time to time.
264 SEBI Circular No. MFD/CIR/9/230/2001 dated August 14, 2001
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Master Circular for Mutual Funds as on March 31, 2024
7.4 Unique Client Codes265
7.4.1 Mutual Funds are not permitted to operate in the securities market
without furnishing a valid Unique Client Code (UCC).266 Mutual Funds
are required to obtain UCC from the Bombay Stock Exchange Ltd.
(BSE) or The National Stock Exchange Ltd. (NSE) whenever a new
scheme(s) or plan(s) (wherever the portfolio of the plans is different) is
launched267. Such UCC should be obtained before commencing the
trading on behalf of the scheme(s)/plan(s). At the time of entering an
order, the UCC pertaining to the parent Mutual Fund shall be
provided and the allocation to individual schemes shall be done in the
post closing session.268 The UCC can be shared with the unit holders
to facilitate tax benefits linked to payment of Securities Transaction
Tax (STT).
7.5 Trading in Exchange Traded Derivatives Contracts269
7.5.1 For trading in Exchange Traded Derivatives Contracts, following
should be observed:
7.5.1.1 Mutual Fund schemes can participate in derivatives market as per
the guidelines issued by SEBI in this regard from time to time.
265 SEBI Circular No. MFD/CIR No.8/290/01 dated July 30, 2001, SEBI Circular No.
SEBI/SMD/SE/11/2003/31/03 dated March 31, 2003, SEBI Circular No. SEBI/IMD/CIR
No.01/1756/04 dated January 27, 2004, SEBI Circular No. MRD/DoP/SE/Cir-35/2004
dated October 26, 2004, SEBI Circular No. SEBI/IMD/CIR No.2/46603/05 dated August 10,
2005. Further, in this regard, circulars issued by SEBI from time to time may be considered
266 SEB I Circular No. SMDRP/Policy/Cir-39/2001 dated July 18, 2001.
267 SEBI Circular No. SEBI/IMD/CIR No.01/1756/04 dated January 27, 2004.
268 SEBI Circular No. MRD/DoP/SE/Cir-35/2004 dated October 26, 2004.
269 SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005; SEBI Circular No.
DNPD/Cir-30/2006 dated January 20, 2006, SEBI Circular No. SEBI/DNPD/Cir-31/2006
dated September 22, 2006.
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Master Circular for Mutual Funds as on March 31, 2024
7.5.1.2 The Mutual Funds shall be treated at par with a registered FII in
respect of position limits in index futures, index options, stock
options and stock futures contracts. The Mutual Funds will be
considered as trading members like registered FIIs and the schemes
of Mutual Funds will be treated as clients like sub-accounts of
FIIs270.
7.5.1.3 Appropriate disclosures shall be made in the offer document
regarding the extent and manner of participation of the schemes of
the Mutual Funds in derivatives and the risk factors, which should
be explained by suitable numerical examples.
7.5.1.4 The combined futures and options position limit of Mutual
Funds for stock derivatives contracts shall be 20% of the
applicable Market Wide Position Limit (MWPL). 271
7.5.1.5 Existing schemes of Mutual Funds, whose SIDs do not envisage
investments in derivatives, may participate in derivatives market
subject to the following conditions272:
a) The extent and the manner of the proposed participation in
derivatives shall be disclosed to the unit holders.
b) The risks associated with such participation shall be disclosed
and explained by suitable numerical examples.
c) Prior to commencing participation in derivatives, the scheme
shall comply with the provisions of Regulation 18 (15A) of SEBI
(Mutual Funds) Regulations, 1996 and all unit holders shall
270 SEBI Circular No. DNPD/Cir-29/2005 dated September 14, 2005.
271 SEBI Circular No. SEBI/HO/MRD/DP/CIR/P/2016/143 dated December 27, 2016.
272 Please refer SEBI Circular No SEBI/HO/IMD/DF2/CIR/P/2017/13 dated February 20,
2017 ‘Participation in derivatives market by Mutual Funds.’
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Master Circular for Mutual Funds as on March 31, 2024
be given at least 30 days to exercise option to exit at prevailing
NAV without charging of exit load.
7.5.1.6 Positions limits as specified by SEBI for Mutual Funds and its
schemes from time to time shall be applicable273.
7.6 Trading in Interest Rate Derivatives274
7.6.1 Mutual Fund schemes are permitted to undertake transactions in
Forward Rate Agreements and Interest Rate Swaps with banks, PDs
& FIs as per applicable RBI Guidelines275, mutual funds can also trade
in interest rate derivatives through the Stock Exchanges subject to
requisite disclosures in the SID276.
7.6.2 The following position limits277 in IRF shall be applicable for Mutual
Fund level and scheme level:
a. Mutual Funds shall have position limits as applicable to trading
members presently.
b. Schemes of Mutual Funds shall have position limits as applicable
to clients presently.
7.7 Transactions of mutual funds in Government Securities in
dematerialised form278
7.7.1 According to Regulation279, the Mutual Funds having an aggregate of
securities worth Rs.10 crore or more are required to settle their
273 Please refer SEBI Circular No DNPD/Cir – 29/2005 Dated September 14, 2005 for position
limits and subsequent circulars issued in this regard from time to time.
274 SEBI Circular No. SEBI/MFD/CIR No.03/158/03 dated June 10, 2003.
275 RBI Circular dated November 1, 1999.
276 SEBI Circular No. SEBI/MFD/CIR No.03/158/03 dated June 10, 2003.
277 SEBI Circular No. CIR/MRD/DRMNP/26/2014 dated September 15, 2014
278 SEBI Circular No. MFD/CIR/05/432/2002 dated June 20, 2002
279 Regulation 44(1A) of SEBI (Mutual Funds) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
transactions only through dematerialised securities. All Mutual
Funds should enter into transactions relating to government
securities only in dematerialised form.
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 8: NET ASSET VALUE280
8.1 Disclosure of Net Asset Value281
8.1.1 Mutual Funds/ AMCs shall prominently disclose the NAVs of all
schemes under a separate head on their respective website and on the
website of Association of Mutual Funds in India (AMFI). Further,
Mutual Funds/ AMCs shall extend facility of sending latest available
NAVs to unit holders through SMS, upon receiving a specific request
in this regard.
8.1.2 NAV of all Mutual Fund schemes except for Fund of Fund Schemes
shall be updated on AMFI’s website and the Mutual Funds’ websites
by 11:00 p.m. of the same day282.
8.1.3 Fund of Fund Schemes shall have an extended time up to 10 a.m. the
following business day in this regard283.
8.1.4 Delay beyond 10 a.m. of the following business day in case of Fund of
Fund schemes and 11:00 p.m. on the same day for all other schemes
shall be explained in writing to AMFI. Mutual Funds shall report in
the quarterly Compliance Test Reports (CTRs)284 the number of days
when mutual funds were not able to adhere to the above mentioned
time limit for uploading their NAVs on the AMFI website with reasons
280 Regulation 48 of SEBI (Mutual Funds) Regulations, 1996
281 SEBI Circular No. IIMARP/MF/CIR/07/844/97 dated May 5, 1997, SEBI Circular No.
MFD/CIR No.11/171/01 dated February 9, 2001, SEBI Circular No. MFD/CIR/13/087/2001
dated March 28, 2001; SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29,
2006, SEBI Circular No. SEBI/IMD/CIR No.5/96576/2007 dated June 25, 2007, SEBI Cir
No. SEBI/IMD/Cir No.12/147132/08 dated December 11,2008 and
SEBI/HO/IMD/DF2/CIR/P/2018/92 dated June 05, 2018
< 2 82 SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006 and SEBI
Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019.
283 SEBI Circular No. SEBI/IMD/CIR No.5/96576/2007 dated June 25, 2007.
284 For format of CTR, please refer to format no. 2.B. under the section on formats
,,,
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Master Circular for Mutual Funds as on March 31, 2024
thereof and the corrective action taken by the AMC to reduce the
number of such occurrences285.
8.1.5 286 Mutual Funds/ AMCs shall explain the methodology of calculating
the sale and repurchase price of unit with the help of a simple
numerical example at all relevant places such as on their respective
website, AMFI website and Scheme Information Documents, etc.
8.1.6 In case the NAVs are not available before the commencement of
business hours on the following day due to any reason, Mutual Funds
shall issue a press release giving reasons for the delay and explain
when they would be able to publish the NAVs287.
8.2 Review of time limit for disclosure of NAV of Mutual Fund schemes
investing overseas288
8.2.1 To address the difficulties being faced in calculation of NAV for
schemes investing overseas due to differences in time zones and
market hours, partial modification with regard to timelines for
declaration of NAV is prescribed depending on investment objective
and asset allocation of schemes, which is tabulated below:
(Timelines in Business days)
SR Existing New
Scheme type
timeline timeline
All schemes other than
1 11 PM on T day
those mentioned below
For schemes having
2 9 AM on T+1 day
exposure to ETCDs
Fund of Funds (FoFs)
3 10 AM on T+1 day
schemes
285 SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006.
, 2 , 86 SEBI/HO/IMD/DF2/CIR/P/2018/92 dated June 05, 2018
287 SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006.
, 2 88 SEBI Circular No. SEBI/HO/IMD/IMD-I POD2/P/CIR/2023/48 dated March 29, 2023
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Master Circular for Mutual Funds as on March 31, 2024
Schemes investing atleast
80% of total assets in
4
permissible overseas
investments 10 AM on
11 PM on T day
Index funds and ETFs T+1 day
investing atleast 80% of
5
total assets in permissible
overseas investments
Such time as
Schemes unable to disclose per
NAV as per timeline 11 PM on T day disclosure
mentioned above due to Or made in SID
6
inability in capturing same 10 AM on T+1 along with
day valuation of underlying day reasons for
investments such delayed
disclosure
8.2.2 While complying with the new timelines for declaration of NAV, AMCs
as a principle shall ensure that NAV of schemes is disclosed based on
the value of underlying securities/ Funds as on the T day (i.e. date of
investment in MF units in India).
8.2.3 Provisions regarding revised timelines for disclosure of NAV as
mentioned at Paragraph 8.2.1 & Paragraph 8.2.2 above shall come
into force with effect from July 01, 2023. Pursuant to applicability of
revised timelines for disclosure of NAV (i.e. from July 01, 2023),
relevant provisions regarding disclosure of NAV as mentioned in this
Master Circular shall stand modified to that extent.
8.3 Rounding of NAVs289
8.3.1 To ensure uniformity, AMCs shall round off NAV up to four decimal
places for index funds and all types of debt oriented schemes.
289 SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002, SEBI Circular No.
MFD/CIR/11/16159/2002 dated August 22, 2002
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Master Circular for Mutual Funds as on March 31, 2024
8.3.2 For all equity oriented and balanced fund schemes, AMCs shall round
off NAVs up to two decimal places. However, Mutual Funds can round
off the NAVs up to more than two decimal places in case of equity
oriented and balanced fund schemes also, if they so desire290.
Relevant disclosure in this regard shall be made in the SID/SAI291.
8.4 Uniform Cut off Timings for applicability of Net Asset Value of
Mutual Fund scheme(s) and/ or plan(s)292
8.4.1 AMCs should follow the Guidelines enumerated below with respect to
uniform Cut -off Timings:
8.4.2 Definitions:
8.4.2.1 In these Guidelines, unless the context otherwise requires:
a. ‘Cut-off Timing’, in relation to an investor making an application
to a Mutual Fund for purchase or sale of units, shall mean, the
outer limit of timing within a particular day which is relevant
for determination of the NAV applicable for his transaction;
b. ‘International scheme’ means a Mutual Fund scheme having
substantial investments in foreign securities valued as per time
zones other than Indian Standard Time zone;
c. ‘Liquid fund & Overnight fund schemes and plans’ shall mean
the schemes and plans of a Mutual Fund as specified in the
guidelines issued by SEBI in this regard293.
8.4.3 Applicability
290 SEBI Circular No. MFD/CIR/11/16159/2002 dated August 22, 2002.
, 2 91 SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002.
292 SEBI Circular No. SEBI/IMD/CIR No. 11/78450/06 dated October 11, 2006.
, 2 93 SEBI Circular No.SEBI/IMD/CIR No.13/150975/09 dated January 19, 2009 & SEBI
Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 06, 2017
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Master Circular for Mutual Funds as on March 31, 2024
8.4.3.1 The Guidelines on Cut off Timings for applicability of Net Asset
Value of Mutual Fund scheme(s) and/ or plan(s) shall be applicable
to all schemes and plans of Mutual Funds except:
a. International schemes and
b. Transactions in Mutual Fund units undertaken on a recognized
Stock Exchange.
8.4.4 Fixation of uniform Cut-off Timings
8.4.4.1 AMCs shall reckon the Cut-off Timings for their schemes and plans
in compliance with these Guidelines and the same shall be
uniformly implemented for all investors.
8.4.4.2 AMCs shall ensure that each payment instrument for subscription
or purchase of units is deposited in a bank expeditiously by
utilization of the appropriate banking facility, so as to comply with
the requirement in Paragraph 8.4.4.1 above.
8.4.4.3 AMCs shall compensate any loss occasioned to any investor or to
the scheme and/or plan on account of non-compliance with
Paragraph 8.4.4.2 above.
8.4.5 Cut-off Timings for liquid fund & overnight fund schemes and plans
For determining the applicable NAV294:
8.4.5.1 The following cut-off timings shall be observed by an AMC in respect
of purchase of units in liquid fund & overnight fund schemes and
their plans, and the following NAVs shall be applied for such
purchase:
294 SEBI Circular No SEBI/IMD/DF/19/2010 dated November 26, 2010, SEBI Circular No
SEBI/HO/IMD/DF2/CIR/P/2019/101 dated September 20, 2019
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Master Circular for Mutual Funds as on March 31, 2024
a. where the application is received up to 1.30 p.m. on a day and
funds are available for utilization before the cut-off time without
availing any credit facility, whether, intra-day or otherwise – the
closing NAV of the day immediately preceding the day of receipt
of application;
b. where the application is received after 1.30 p.m. on a day and
funds are available for utilization on the same day without
availing any credit facility, whether, intra-day or otherwise – the
closing NAV of the day immediately preceding the next business
day; and
c. irrespective of the time of receipt of application, where the funds
are not available for utilization before the cut-off time without
availing any credit facility, whether, intra-day or otherwise – the
closing NAV of the day immediately preceding the day on which
the funds are available for utilization.
8.4.5.2 For allotment of units in respect of purchase in liquid fund &
overnight fund schemes, it shall be ensured that:
a. Application is received before the applicable cut-off time.
b. Funds for the entire amount of subscription/purchase as per
the application are credited to the bank account of the
respective liquid & overnight schemes before the cut-off time.
c. The funds are available for utilization before the cut-off time
without availing any credit facility whether intra-day or
otherwise, by the respective liquid & overnight schemes.
8.4.5.3 For allotment of units in respect of switch-in to liquid fund &
overnight fund schemes from other schemes, it shall be ensured
that:
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Master Circular for Mutual Funds as on March 31, 2024
a. Application for switch-in is received before the applicable cut-
off time.
b. Funds for the entire amount of subscription/purchase as per
the switch-in request are credited to the bank account of the
respective switch-in liquid schemes before the cut-off time.
c. The funds are available for utilization before the cut-off time
without availing any credit facility whether intra-day or
otherwise, by the respective switch-in schemes.
8.4.5.4 The following Cut-off Timings shall be observed by AMCs with
respect to repurchase of units in liquid fund & overnight fund
schemes and plans and the following NAVs shall be applied for such
repurchase:
a. Where the application is received up to 3.00 pm – the closing
NAV of day immediately preceding the next business day; and
b. Where the application is received after 3.00 pm – the closing
NAV of the next business day.
Explanation: “Business Day” does not include a day on which the
Money Markets are closed or otherwise not accessible.
8.4.5.5 295AMCs shall calculate NAV for each calendar day for their liquid
fund & overnight fund schemes and plans.
8.4.6 Cut-off Timings for schemes and plans other than liquid fund &
overnight fund schemes and plans
295 SEBI Circular No. SEBI/IMD/CIR No. 11/78450/06 dated October 11, 2006
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Master Circular for Mutual Funds as on March 31, 2024
8.4.6.1 An AMC shall reckon only prospective NAV, in accordance with this
clause, in respect of all their schemes and plans i.e. for other than
liquid fund & overnight fund schemes and plans
8.4.6.2 In respect of purchase of units of mutual fund schemes (except
liquid and overnight schemes), closing NAV of the day on which the
funds are available for utilization shall be applicable irrespective of
the size and time of receipt of such application296.
8.4.6.3 For allotment of units in respect of purchase in income/debt
oriented mutual fund schemes/plans other than liquid & overnight
schemes, it shall be ensured that297:
8.4.6.3.1 Application is received before the applicable cut-off time (i.e.
3.00 pm).
8.4.6.3.2 Funds for the entire amount of subscription/purchase as per
the application are credited to the bank account of the
respective schemes before the cut-off time (i.e. 3.00 pm).
8.4.6.3.3 The funds are available for utilization before the cut-off time (i.e.
3.00 pm) without availing any credit facility whether intra-day
or otherwise, by the respective scheme.
8.4.6.4 For allotment of units in respect of switch-in to income/debt
oriented mutual fund schemes/plans other than liquid fund and
overnight fund schemes from other schemes, it shall be ensured
that:
8.4.6.4.1 Application for switch-in is received before the applicable cut-
off time.
296 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 and SEBI Circular
No. SEBI/HO/IMD/DF2/CIR/2020/175 dated September 17, 2020
297 SEBI Circular No. SEBI/IMD/DF/19/2010 dated November 26, 2010
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Master Circular for Mutual Funds as on March 31, 2024
8.4.6.4.2 Funds for the entire amount of subscription/purchase as per
the switch-in request are credited to the bank account of the
respective switch-in income/debt oriented mutual fund
schemes/plans before the cut-off time.
8.4.6.4.3 The funds are available for utilization before the cut-off time
without availing any credit facility whether intra-day or
otherwise, by the respective switch-in income/debt oriented
mutual fund schemes/plans.
8.4.6.5 The following Cut-off Timings shall be observed by AMCs in respect
of repurchase of units in its other schemes and their plans, and the
following NAVs shall be applied for such repurchase:
8.4.6.5.1 Where the application is received up to 3.00 pm – closing NAV
of the day on which the application is received; and
8.4.6.5.2 An application received after 3.00 pm – closing NAV of the next
business day.
8.4.7 Switch and Sweep Transactions
8.4.7.1 Paragraphs 8.4.5 and 8.4.6 of this Master Circular shall apply to
‘switch in’ transactions as if they were purchase transactions and
to ‘switch out’ transactions as if they were repurchase transactions.
8.4.7.2 Paragraphs 8.4.5 and 8.4.6 of this Master Circular shall apply to
‘sweep’ transactions as if they were purchase transactions and to
‘reverse sweep’ transactions as if they were repurchase
transactions.
8.4.7.3 In case of ‘switch’ transactions from one scheme to another, the
allocation shall be in line with redemption payouts.
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Master Circular for Mutual Funds as on March 31, 2024
8.4.8 Time Stamping
8.4.8.1 Application from investors shall be received by Mutual Funds only
at official points of acceptance, addresses of which shall be
disclosed in the SID and on Mutual Funds’ websites.
8.4.8.2 Cut off timings as prescribed under Paragraphs 8.4.5 and 8.4.6 of
this Master Circular shall apply with reference to the point of time
at which the applications are received at such official points of
acceptance.
8.4.8.3 Time stamping machines at all official points of acceptance shall be
in compliance with the requirements mentioned in Paragraph 8.5
of this Master Circular.
8.4.9 Compliance Reporting
8.4.9.1 Status of compliance with these Guidelines shall be reported to the
Board in the CTR(s)298 of the AMC(s) and the Half Yearly Trustee
Reports299.
8.4.9.2 The Half Yearly Trustee Reports shall contain a declaration on
whether the Trustees are satisfied with the systems and procedures
of the Mutual Fund designed for the purpose of compliance with
these Guidelines.
8.4.9.3 Further, the substance of these Guidelines shall be disclosed to
investors in the SID or in any addendum thereto.
8.4.9.4 Encumbrance of the scheme property300
298 For CTR format, please refer format no. 2.B. under the section on formats
, 2 ,,,, 99 For Trustee report, please refer format no. 2.C under the section on formats
,
3 00 SEBI Circular No. SEBI/IMD/DF/19/2010 dated November 26, 2010
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Master Circular for Mutual Funds as on March 31, 2024
Regulations301 provides that the AMC shall not acquire any of the
assets out of the scheme property which involves the assumption
of any liability which is unlimited or which may result in
encumbrance of the scheme property in any way. AMC’s are advised
to strictly adhere to the said provision.
8.5 Requirements with respect to time stamping machines [pursuant
to Paragraph 8(4)]302
8.5.1 For every machine, running serial number shall be stamped from the
first number to the last number as per its capacity before repetition of
the cycle.
8.5.2 Every application for purchase shall be stamped on the face and the
corresponding payment instrument shall be stamped on the back
indicating the date and time of receipt and running serial number.
The application and the payment instrument shall contain the same
serial number.
8.5.3 Every application for redemption shall be stamped on the face thereof
and on the investor’s acknowledgment copy (or twice on the
application if no acknowledgment is issued) indicating the date and
time of receipt and running serial number.
8.5.4 Different applications shall not be bunched together with the same
serial number.
8.5.5 Blank papers shall not be time stamped. Genuine errors, if any, shall
be recorded with reasons and the corresponding applications requests
shall also be preserved.
301 Fourth Schedule of Securities and Exchange Board of India (Mutual Funds) Regulations,
1996
302 SEBI Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006
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Master Circular for Mutual Funds as on March 31, 2024
8.5.6 The time stamping machine shall have a tamper proof seal and the
ability to open the seal for maintenance or repairs must be limited to
vendors or nominated persons of the AMCs, to be entered in a proper
record.
8.5.7 Breakage of seal and/or breakdown of the time stamping process shall
be duly recorded and reported to the Trustees.
8.5.8 Every effort should be made to ensure uninterrupted functioning of
the time stamping machine. In case of breakdown, the AMCs shall
take prompt action to rectify the situation. During the breakdown
period, AMCs shall adopt an alternative time stamping method that
has already been approved by the Board of the AMC and the
Trustee(s). An audit trail shall be available to check and ensure the
accuracy of the time stamping process during the said period.
8.5.9 Any alternate mode of application that does not have any physical or
electronic trail shall be converted into a physical piece of information
and time stamped in accordance with these Guidelines.
8.5.10 AMCs shall maintain and preserve all applications/ requests, duly
time stamped as aforesaid, at least for a period of eight years303 to be
able to produce them as and when required by the Board or auditors
appointed by the Board.
8.6 Uniformity in calculation of sale and repurchase price304
8.6.1 The following method is being prescribed
303 Regulation 50(2) of SEBI (Mutual Funds) Regulations, 1996
304 SEBI Circular No. MFD/CIR/08/514/2002 dated July 22, 2002 & SEBI Circular No.
SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009
,,
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Master Circular for Mutual Funds as on March 31, 2024
8.6.1.1 To streamline the calculation of sale and repurchase price of
mutual fund units305,
8.6.1.2 To avoid variation in the amounts payable to investors and/or
number of units allotted to them, and
8.6.1.3 To make the calculations more comprehensible to the investors.
8.6.2 306Exit loads shall be charged as a percentage of the NAV i.e.
applicable load as a percentage of NAV will be subtracted from the
NAV to calculate the repurchase price. 307The provisions of Regulation
49(3) of MF Regulations applies on all open ended mutual fund
schemes wherever exit load is applicable.
8.6.3 The formula for the same is as follows:
8.6.3.1 Sale Price = Applicable NAV
8.6.3.2 Repurchase Price = Applicable NAV *(1 – Exit Load, if any)
8.7 Intra-day NAV for transacting in units of Exchange Traded Funds
directly with AMCs 308
8.7.1 For transactions in units of Exchange Traded Funds (ETFs) by
Authorized Participants / large investors directly with the AMCs intra-
day NAV, based on the executed price at which the securities
representing the underlying index or underlying commodity(ies) are
purchased / sold, shall be applicable.
305 Regulation 49(3) of the SEBI (Mutual Funds) Regulations, 1996.
306 Refer SEBI email dated July 07, 2010
307 SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021.
308 SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/0606 dated July 30, 2021
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Master Circular for Mutual Funds as on March 31, 2024
8.7.2 Appropriate disclosure in this regard shall be provided in the Scheme
Information Document, Key Information Memorandum and Common
application form.
215
Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 9: VALUATION309
9.1 Definitions310
9.1.1 Non Traded Securities311
9.1.1.1 When a security (other than Government Securities, money market
and debt securities) is not traded on any Stock Exchange for a
period of thirty days prior to the valuation date, the scrip shall be
treated as a non-traded security.
9.1.1.2 A money market or debt security shall be considered as non-traded
when, on the date of valuation, there are no trades (in marketable
lots) in such security on any recognized Stock Exchange or no
trades (in marketable lots) have been reported on trade reporting
platform of recognized stock exchanges or the Clearing Corporation
of India Ltd. (CCIL).
9.1.2 Thinly Traded Securities
9.1.2.1 Thinly traded equity/ equity related securities:312
a. When trading in an equity and/or equity related security (such
as convertible debentures, equity warrants etc.) in a month is
both less than Rs.5 lacs and the total volume is less than
309 Refer SEBI letter No. SEBI/HO/OW/IMD-II/DOF3/P/2020/12151/1 dated July 31, 2020
read with Email dated August 12, 2020
310 SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000, SEBI Circular No.
MFD/CIR/14/088/2001 dated March 28, 2001, SEBI Circular No. MFD/CIR/14/442/2002
dated February 20, 2002 and SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated
September 24, 2019.
311 SEB<,I Circular No. MFD/CIR/8/92/2000 dated September 18, 2000 & SEBI Circular No.
SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019.
, 3 12 SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001.
216
Master Circular for Mutual Funds as on March 31, 2024
50,000 shares, the security shall be considered as thinly
traded security and valued accordingly.
b. In order to determine whether a security is thinly traded or
not, the volumes traded in all recognized Stock Exchanges in
India may be taken into account.
c. For example, if the volume of trade is 1,00,000 and value is
Rs.4,00,000, the shares do not qualify as thinly traded. Also if
the volume traded is 40,000, but the value of trades is
Rs.6,00,000, the shares do not qualify as thinly traded.
d. Where a Stock Exchange identifies the thinly traded securities
by applying the above parameters for the preceding calendar
month and publishes or provides the required information
along with the daily quotations, the same can be used by the
Mutual Funds.
e. If the shares are not listed on the Stock Exchanges which
provide such information, then AMCs shall make their own
analysis in line with the above criteria to check whether such
securities are thinly traded or not and then value them
accordingly.
9.1.3 Traded money market / debt security313:
9.1.3.1 A money market or debt security shall be considered as traded
when, on the date of valuation, there are trades (in marketable lots)
in that security on any recognized Stock Exchange or there are
trades reported (in marketable lots) on the trade reporting platform
313 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
217
Master Circular for Mutual Funds as on March 31, 2024
of recognized stock exchanges or The Clearing Corporation of India
Ltd. (CCIL). In this regard, the marketable lots shall be defined by
AMFI, in consultation with SEBI.
9.1.4 Below investment grade and default314:
9.1.4.1 A money market or debt security shall be classified as “below
investment grade” if the long term rating of the security issued by
a SEBI registered Credit Rating Agency (CRA) is below BBB- or if
the short term rating of the security is below A3.
9.1.4.2 A money market or debt security shall be classified as “Default” if
the interest and / or principal amount has not been received, on
the day such amount was due or when such security has been
downgraded to “Default” grade by a CRA. In this respect, AMCs
shall promptly inform to the valuation agencies and the CRAs, any
instance of non-receipt of payment of interest and / or principal
amount (part or full) in any security.
9.2 Valuation of Securities
9.2.1 Traded Securities (other than money market and debt securities):315
9.2.1.1 When a security (other than Government security, money market
and debt securities) is not traded on any Stock Exchange on a
particular valuation day, the value at which it was traded on the
selected Stock Exchange, as the case may be, on the earliest
previous day may be used provided such date is not more than
thirty days prior to valuation date.
314 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
315 SEBI Circular No. MFD/CIR/14/442/2002 dated February 20, 2002 and SEBI Circular
No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
9.2.2 Non-Traded /and/or Thinly Traded Equity Securities:316
9.2.2.1 AMCs shall value non traded and/or thinly traded securities “in
good faith” based on the Valuation norms prescribed below:
9.2.2.2 Based on the latest available Balance Sheet, Net Worth shall be
calculated as follows:
a. Net Worth per share = [Share Capital+ Reserves (excluding
Revaluation Reserves) – Miscellaneous expenditure and Debit
Balance in Profit and Loss Account] / Number of Paid up Shares.
b. Average Capitalization rate (P/E ratio) for the industry based
upon either BSE or NSE data (which shall be followed
consistently and changes, if any, noted with proper justification
thereof) shall be taken and discounted by 75 per cent i.e. only 25
per cent. Of the industry average P/E shall be taken as
Capitalization rate (P/E ratio). Earnings per share (EPS) of the
latest audited annual accounts shall be considered for this
purpose.
c. The value as per the Net Worth value per share and the capital
earning value calculated as above shall be averaged and further
discounted by 10 per cent for illiquidity so as to arrive at the fair
value per share.
d. In case the EPS is negative, EPS value for that year shall be taken
as zero for arriving at capitalised earning.
316 SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000 and SEBI Circular No.
SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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e. In case where the latest Balance Sheet of the company is not
available within nine months from the close of the year, unless
the accounting year is changed, the shares of such companies
shall be valued at zero.
f. In case an individual security accounts for more than 5 per cent
of the total assets of the scheme, an independent valuer shall be
appointed for the valuation of the said security. To determine if a
security accounts for more than 5 per cent. of the total assets of
the scheme, it shall be valued by the procedure above and the
proportion which it bears to the total net assets of the scheme to
which it belongs will be compared on the date of valuation317.
g. In case trading in an equity security is suspended up to thirty
days, then the last traded price shall be considered for valuation
of that security. If an equity security is suspended for more than
thirty days, then the AMC(s) or Trustees shall decide the
valuation norms to be followed and such norms shall be
documented and recorded.
9.2.3 Debt and Money Market Securities318
a. Valuation of money market and debt securities with residual
maturity of upto 30319 days:
1. Amortization based valuation is permitted for money market
and debt securities including floating rate securities, with
317 SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001
318 Refer SEBI letter No. SEBI/HO/IMD/DF4/OW/P/2019/24760 dated September 20, 2019
319 SEBI Circular No. SEBI/IMD/CIR No.16/ 193388/2010 dated February 02, 2010
Cir/IMD/DF/4/2010 dated June 21, 2010, SEBI Circular No. Cir/IMD/DF/6/2012 dated
February 28, 2012, SEBI/HO/IMD/DF4/CIR/P/2019/41 dated March 22, 2019 and SEBI
Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
residual maturity of upto 30 days. Further, the amortized
price shall be compared with the reference price which shall
be the average of the security level price of such security as
provided by the agency(ies) appointed by AMFI for said
purpose (hereinafter referred to as “valuation agencies”). The
amortized price shall be used for valuation only if it is within
a threshold of ±0.025% of the reference price. In case of
deviation beyond this threshold, the price shall be adjusted
to bring it within the threshold of ±0.025% of the reference
price.
2. It is further clarified that in case of floating rate securities
with floor and caps on coupon rate and residual maturity of
upto 30 days then those shall be valued on amortization basis
taking the coupon rate as floor.
3. In case security level prices given by valuation agencies are
not available for a new security (which is currently not held
by any Mutual Fund), then such security may be valued on
amortization basis on the date of allotment / purchase.
4. Further, with effect from April 01, 2020 onwards,
amortization based valuation shall be dispensed with and
irrespective of residual maturity, all money market and debt
securities shall be valued in terms of paragraph b below.
b. Valuation of money market and debt securities with residual
maturity of over 30320 days:
320 SEBI Circular No. SEBI/IMD/CIR No.16/ 193388/2010 dated February 02, 2010,
Cir/IMD/DF/4/2010 dated June 21, 2010, SEBI Circular No. Cir/IMD/DF/6/2012 dated
February 28, 2012, SEBI/HO/IMD/DF4/CIR/P/2019/41 dated March 22, 2019 and SEBI
Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
1. All money market and debt securities including floating rate
securities, with residual maturity of over 30 days shall be
valued at average of security level prices obtained from
valuation agencies.
2. In case security level prices given by valuation agencies are
not available for a new security (which is currently not held
by any Mutual Fund), then such security may be valued at
purchase yield on the date of allotment / purchase.
c. Methodology: 321
For arriving at security level pricing, a waterfall approach shall
be followed for the valuation of money market and debt
securities.
1. AMFI shall ensure that valuation agencies have a
documented waterfall approach for valuation of money
market and debt securities. The said waterfall approach shall
be documented in consultation with SEBI.
2. The following broad principles should be adopted as part of
the aforesaid waterfall approach, for arriving at the security
level prices:
321 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019, Refer
SEBI letter No. SEBI/HO/IMD/DF4/OW/P/2019/29520 dated November 07, 2019
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Master Circular for Mutual Funds as on March 31, 2024
i. All traded securities shall be valued on the basis of
traded yields, subject to identification of outlier trades
by the valuation agencies.
ii. Volume Weighted Average Yield (VWAY) for trades in the
last one hour of trading shall be used as the basis for
valuation of Government Securities (including T-bills).
Valuation of all other money market and debt securities
(including Government securities not traded in last one
hour) shall be done on the basis of VWAY of all trades
during the day.
iii. An indicative list of exceptional events shall form part of
the documented waterfall approach mentioned above. In
case of any exceptional events on a day, only VWAY of
trades post such event may be considered for valuation.
Further, all exceptional events along-with valuation
carried out on such dates shall be documented with
adequate justification.
iv. All trades on stock exchanges and trades reported on
trade reporting platforms till end of the trade reporting
time (excluding Inter-scheme transfers), should be
considered for valuation on that day. Towards this end,
the timing for disclosure of Net Asset Value (NAV) on
website of respective AMCs and AMFI, stands extended
as per paragraph 8.1.2 (paragraph 8.2 from July 01,
2023) of this Master Circular.
v. Considering the importance of polling in the valuation
process322, guidelines shall be issued by AMFI on polling
322 Refer SEBI letter No. SEBI/HO/IMD/IMD-I PoD-1/P/ON/2022 dated September 27, 2022
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Master Circular for Mutual Funds as on March 31, 2024
by valuation agencies and on the responsibilities of
Mutual Funds in the polling process, as part of the
aforesaid waterfall approach. These guidelines shall
inter-alia include the following:
(a) Valuation agencies shall identify the Mutual Funds
who shall participate in the polling process on a
particular day, taking into account factors such as
diversification of poll submitters and portfolio
holding of the Mutual Funds. Mutual Funds who are
identified by the valuation agencies shall necessarily
participate in the polling process. However, in case
any Mutual Fund does not participate in the polling
process, detailed reason for the same shall be
recorded and made available during SEBI
inspections.
(b) The minimum number of polls to be considered for
valuation along-with the operational modalities of
polling, shall be specified.
(c) AMCs shall have a written policy, approved by the
Board of AMC and Trustees, on governance of the
polling process. The aforesaid policy shall include
measures for mitigation of potential conflicts of
interest in the polling process and shall identify
senior officials responsible for polling.
(d) AMCs shall ensure that participation in the polling
process is not mis-used to inappropriately influence
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Master Circular for Mutual Funds as on March 31, 2024
the valuation of securities. The officials of the AMC
who are responsible for polling in terms of
paragraph (c) above, shall also be personally liable
for any mis-use of the polling process.
(e) AMCs shall maintain an audit trail for all polls
submitted to valuation agencies.
3. The aforesaid waterfall approach shall form part of the
valuation policy of individual AMCs which is uploaded on
their respective websites. AMFI shall ensure that the said
waterfall approach is also available on the website of the
valuation agencies.
d. Deviation from valuation guidelines:323
1. As per the Principles of Fair Valuation specified in Eighth
Schedule of SEBI (Mutual Funds) Regulations, 1996, AMCs
are responsible for true and fairness of valuation and correct
NAV. Considering the same, in case an AMC decides to
deviate from the valuation price given by the valuation
agencies, the detailed rationale for each instance of deviation
shall be recorded by the AMC.
2. The rationale for deviation along-with details such as
information about the security (ISIN, issuer name, rating
etc.), price at which the security was valued vis-a-vis the price
as per the valuation agencies and the impact of such
deviation on scheme NAV (in amount and percentage terms)
shall be reported to the Board of AMC and Trustees.
323 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
3. The rationale for deviation along-with details as mentioned
under paragraph 9.2.3.d.2 above shall be disclosed
immediately and prominently, under a separate head on the
website of AMC.
4. Further, while disclosing the total number of instances of
deviation in the monthly and half-yearly portfolio statements,
AMCs shall also provide the exact link to their website for
accessing the information mentioned at paragraph 9.2.3.d.3
above.
e. Valuation of money market and debt securities which are rated
below investment grade324:
1. In order to have uniformity and consistency across the
Mutual Fund industry on valuation of money market and
debt securities rated below investment grade, the following
has been decided:
i. All money market and debt securities which are rated below
investment grade shall be valued at the price provided by
valuation agencies.
ii. Till such time the valuation agencies compute the valuation
of money market and debt securities classified as below
investment grade, such securities shall be valued on the
basis of indicative haircuts provided by these agencies.
These indicative haircuts shall be applied on the date of
credit event i.e. migration of the security to sub-investment
324 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/41 dated March 22, 2019 and SEBI
Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
grade and shall continue till the valuation agencies compute
the valuation price of such securities. Further, these
haircuts shall be updated and refined, as and when there is
availability of material information which impacts the
haircuts.
iii. Consideration of traded price for valuation:
(a) In case of trades during the interim period between date of
credit event and receipt of valuation price from valuation
agencies, AMCs shall consider such traded price for
valuation if it is lower than the price post standard haircut.
The said traded price shall be considered for valuation till
the valuation price is determined by the valuation agencies.
(b) In case of trades after the valuation price is computed by
the valuation agencies as referred above and where the
traded price is lower than such computed price, such traded
price shall be considered for the purpose of valuation and
the valuation price may be revised accordingly.
(c) The trades referred above shall be of a minimum size as
determined by valuation agencies.
iv. AMCs may deviate from the indicative haircuts and/or the
valuation price for money market and debt securities rated
below investment grade provided by the valuation agencies
subject to the following:
(a) The detailed rationale for deviation from the price post
haircuts or the price provided by the valuation agencies
shall be recorded by the AMC.
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Master Circular for Mutual Funds as on March 31, 2024
(b) The rationale for deviation along-with details such as
information about the security (ISIN, issuer name, rating
etc.), price at which the security was valued vis-a-vis the
price post haircuts or the average of the price provided by
the valuation agencies (as applicable) and the impact of
such deviation on scheme NAV (in amount and percentage
terms) shall be reported to the Board of AMC and Trustees.
(c) The rationale for deviation along-with details as mentioned
at Paragraph (b) above shall also be disclosed to investors.
In this regard, all AMCs shall immediately disclose
instances of deviations under a separate head on their
website. Further, the total number of such instances shall
also be disclosed in the monthly and half-yearly portfolio
statements for the relevant period along-with an exact link
to the website wherein the details of all such instances of
deviation are available.
v. Treatment of accrued interest, future interest accrual and
future recovery325:
(a) The treatment of accrued interest and future accrual of
interest, in case of money market and debt securities
classified as below investment grade or default, is detailed
below:
325 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019.
Further, the Guidelines for Identification and Provisioning for Non-Performing Assets (Debt
Securities) have been deleted vide SEBI Circular No. SEBI/HO/IMD/DF4/ CIR/P/2019/102
dated September 24, 2019.
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Master Circular for Mutual Funds as on March 31, 2024
1. The indicative haircut that has been applied to the
principal should be applied to any accrued interest.
2. In case of securities classified as below investment
grade but not default, interest accrual may continue
with the same haircut applied to the principal. In case
of securities classified as default, no further interest
accrual shall be made.
(b) The following shall be the treatment of how any future
recovery should be accounted for in terms of principal or
interest:
1. Any recovery shall first be adjusted against the
outstanding interest recognized in the NAV and any
balance shall be adjusted against the value of principal
recognized in the NAV.
2. Any recovery in excess of the carried value (i.e. the value
recognized in NAV) should then be applied first towards
amount of interest written off and then towards amount
of principal written off.
9.3 Valuation of securities with Put/Call Options:326
9.3.1 The option embedded securities would be valued as follows:
9.3.1.1 Securities with call option
a. The securities with call option shall be valued at the lower of the
value as obtained by valuing the security to final maturity and
326 SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000 and SEBI Circular No.
SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
valuing the security to call option. In case there are multiple call
options, the lowest value obtained by valuing to the various call
dates and valuing to the maturity date is to be taken as the value
of the instrument.
9.3.1.2 Securities with Put option
a. The securities with put option shall be valued at the higher of the
value as obtained by valuing the security to final maturity and
valuing the security to put option. In case there are multiple put
options, the highest value obtained by valuing to the various put
dates and valuing to the maturity date is to be taken as the value
of the instruments.
9.3.1.3 Securities with both Put and Call option on the same day
a. Only securities with put / call options on the same day and
having the same put and call option price, shall be deemed to
mature on such put / call date and shall be valued accordingly.
In all other cases, the cash flow of each put / call option shall be
evaluated and the security shall be valued on the following basis:
1. Identify a ‘Put Trigger Date’, a date on which ‘price to put
option’ is the highest when compared with price to other put
options and maturity price.
2. Identify a ‘Call Trigger Date’, a date on which ‘price to call
option’ is the lowest when compared with price to other call
options and maturity price.
3. In case no Put Trigger Date or Call Trigger Date (‘Trigger Date”)
is available, then valuation would be done to maturity price. In
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Master Circular for Mutual Funds as on March 31, 2024
case one Trigger Date is available, then valuation would be
done as to the said Trigger Date. In case both Trigger Dates are
available, then valuation would be done to the earliest date.
9.3.2 If a put option is not exercised by a Mutual Fund when exercising
such put option would have been in favour of the scheme, in such
cases the justification for not exercising the put option shall be
provided to the Board of AMC and Trustees.
9.3.3 327In respect of valuation of securities with multiple put options
present ab-initio wherein put option is factored into valuation of the
security by the valuation agency, If the put option is not exercised by
a Mutual Fund, while exercising the put option would have been in
favour of the scheme;
1. A justification for not exercising the put option shall be
provided by the Mutual Fund to the Valuation Agencies, Board
of AMC and Trustees on or before the last date of the notice
period.
2. The Valuation Agencies shall not take into account the
remaining put options for the purpose of valuation of the
security.
9.3.4 The put option shall be considered as ‘in favour of the scheme’ if the
yield of the valuation price ignoring the put option under evaluation
is more than the contractual yield/coupon rate by 30 basis points.
327 SEBI Circular No. SEBI/HO/IMD/DF4/P/CIR/2021/593 dated July 9, 2021 effective from
October 1, 2021
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Master Circular for Mutual Funds as on March 31, 2024
9.4 Valuation of Perpetual Bonds: 328
9.4.1 Valuation of bonds with call and/or put options shall be in line with
Paragraph 9.3. above irrespective of the nature of issuer.
9.4.2 The maturity of all perpetual bonds shall be treated as 100 years from
the date of issuance of the bond for the purpose of valuation.
9.4.3 The deemed residual maturity for the purpose of valuation of existing
as well as new bonds issued under Basel III framework shall be as
below:
Deemed Deemed
Time Period Residual Residual
Maturity of Maturity of Basel
Basel III AT-1 III Tier 2 Bonds
bonds (Years) (Years)
10 10 years or
Till March 31, Contractual
2022 Maturity
whichever is
earlier
20 Contractual
April 01, 2022 – Maturity
September 30,
2022
30 Contractual
October 01, 2022 Maturity
– March 31, 2023
100* Contractual
April 01, 2023 Maturity
onwards
*100 years from the date of issuance of the bond.
328 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2021/032 dated March 10, 2021 and SEBI
Circular No. SEBI/HO/IMD/DF4/CIR/P/2021/034 dated March 22, 2021, Refer SEBI letter
No. IMD/DoF4/OW/P/6697/1 dated March 22, 2021
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Master Circular for Mutual Funds as on March 31, 2024
9.4.4 Macaulay Duration for bonds issued under Basel III framework shall
be calculated based on the deemed residual maturity as mentioned in
the above table.
9.4.5 If the issuer does not exercise call option for any ISIN then the
valuation and calculation of Macaulay Duration shall be done
considering maturity of 100 years from the date of issuance for AT-1
Bonds and Contractual Maturity for Tier 2 bonds, for all ISINs of the
issuer. In addition to the above, if the non-exercise of call option is
due to the financial stress of the issuer or if there is any adverse news,
the same shall be reflected in the valuation.
9.4.6 AMFI to issue detailed guidelines with respect to valuation of bonds
issued under Basel III framework.
9.5 Valuation of Government Securities329
9.5.1 Irrespective of the residual maturity, Government Securities
(including T-bills) shall be valued on the basis of security level prices
obtained from valuation agencies.
9.6 Valuation of other money market / debt securities, short-term
deposits with banks (pending deployment) and OTC derivatives: 330
9.6.1 The valuation of bills purchased under rediscounting scheme shall be
as per the guidelines mentioned for valuation of money market
instruments, at paragraphs 9.2.3.a and 9.2.3.b, as the case may be.
9.6.2 Investments in short-term deposits with banks (pending deployment)
and repurchase (repo) transactions (including tri-party repo i.e.
329 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated February 20, 2002, SEBI
Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
330 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
TREPS) with tenor of upto 30 days, shall be valued on cost plus
accrual basis.
9.6.3 In order to have uniformity in valuation methodology, prices for all
OTC derivatives and market linked debentures shall be obtained from
valuation agencies.
9.7 Illiquid Securities331
9.7.1 Aggregate value of “illiquid securities” under a scheme, which are
defined as non-traded, thinly traded and unlisted equity shares, shall
not exceed 15 per cent of the total assets of the scheme and any
illiquid securities held above 15 per cent of the total assets shall be
assigned zero value.
9.7.2 All AMCs shall disclose as on March 31 and September 30 the scheme
wise total illiquid securities in value and percentage of the net assets
while disclosing Half Yearly Portfolios to the unit holders. In the list of
investments, an asterisk mark shall be given against all such
investments which are recognised as illiquid securities.
331 SEBI Circular No. MFD/CIR/8/92/2000 dated September 18, 2000.
Provided that in case any scheme has illiquid securities in excess of 15% of total assets as on
September 30, 2000 then such a scheme shall within a period of two years bring down the
ratio of illiquid securities within the prescribed limit of 15 per cent. in the following time frame:
All the illiquid securities above 20 per cent. of total assets of the scheme shall be assigned zero
value on September 30, 2001.
All the illiquid securities above 15 per cent. of total assets of the scheme shall be assigned zero
value on September 30, 2002.
In respect of closed ended funds, for the purposes of valuation of illiquid securities, the limits
of 15 per cent. and 20 per cent. applicable to open ended funds should be increased to 20 per
cent. and 25 per cent respectively.
Where a scheme has illiquid securities as at September 30, 2001 not exceeding 15% in the
case of an open-ended fund and 20% in the case of closed fund, the concessions of giving time
period for reducing the illiquid security to the prescribed limits would not be applicable and
at all time the excess over 15% or 20% shall be assigned nil value
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Master Circular for Mutual Funds as on March 31, 2024
9.7.3 AMC of Mutual Fund shall not be allowed to transfer illiquid securities
among their schemes.
9.8 Investment in Unlisted Equity Shares332
9.8.1 To ensure uniformity in calculation of NAV the following guidelines
are issued:
9.8.1.1 Methodology for Valuation - unlisted equity shares of a company
shall be valued "in good faith" as below:
a. Based on the latest available audited balance sheet, Net Worth
shall be calculated as the lower of item (1) and (2) below:
1. Net Worth per share = [Share Capital + Free Reserves
(excluding revaluation reserves) - Miscellaneous
expenditure not written off or deferred revenue expenditure,
intangible assets and accumulated losses] / Number of Paid
up Shares.
2. After taking into account the outstanding warrants and
options, Net Worth per share shall again be calculated and
shall be = [Share Capital + consideration on exercise of
Option and/or Warrants received/receivable by the
Company + Free Reserves (excluding Revaluation Reserves)
- Miscellaneous expenditure not written off or deferred
revenue expenditure, intangible assets and accumulated
losses] / Number of Paid up Shares plus Number of Shares
that would be obtained on conversion and/or exercise of
Outstanding Warrants and Options.
332 SEBI Circular No. MFD/CIR/03/526/2002 dated May 9, 2002
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Master Circular for Mutual Funds as on March 31, 2024
3. The lower of (1) and (2) above shall be used for calculation
of Net Worth per share and for further calculation in (c)
below.
b. Average capitalisation rate (P/E ratio) for the industry based
upon either BSE or NSE data (which shall be followed
consistently and changes, if any, noted with proper justification
thereof) shall be taken and discounted by 75 per cent. i.e. only
25 per cent of the industry average P/E shall be taken as
capitalisation rate (P/E ratio). Earnings per share (EPS) of the
latest audited annual accounts will be considered for this
purpose.
c. The value as per the Net Worth value per share and the capital
earning value calculated as above shall be averaged and further
discounted by 15 per cent for illiquidity so as to arrive at the
fair value per share.
9.8.1.2 The above valuation methodology shall be subject to the following
conditions:
a. All calculations shall be based on audited accounts.
b. If the latest Balance Sheet of the company is not available within
nine months from the close of the year, unless the accounting
year is changed, the shares of such companies shall be valued
at zero.
c. If the Net Worth of the company is negative, the share would be
marked down to zero.
d. In case the EPS is negative, EPS value for that year shall be
taken as zero for arriving at capitalised earning.
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Master Circular for Mutual Funds as on March 31, 2024
e. In case an individual security accounts for more than 5 per cent
of the total assets of the scheme, an independent valuer shall
be appointed for the valuation of the said security. To determine
if a security accounts for more than 5 per cent of the total assets
of the scheme, it shall be valued in accordance with the
procedure as mentioned above on the date of valuation.
9.8.2 At the discretion of the AMCs and with the approval of the Trustees,
unlisted equity shares may be valued at a price lower than the value
derived using the aforesaid methodology.
9.8.3 Due Diligence
9.8.3.1 Mutual Funds shall not make Investment in unlisted equity shares
at a price higher than the price obtained by using the aforesaid
methodology. However, this restriction is not applicable for
investment made in the Initial Public Offers (IPOs) of the companies
or firm allotment in public issues where all the regulatory
requirements and formalities pertaining to public issues have been
complied with by the companies and where the Mutual Funds are
required to pay just before the date of public issue.
9.8.3.2 The Board of the AMC and Board of Trustees shall lay down the
parameters for investing in unlisted equity shares. They shall pay
specific attention as to whether due diligence was exercised while
making such investments and shall review the performance of such
investments in their periodical meetings333.
9.8.4 Reporting of Compliance
333 SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000.
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Master Circular for Mutual Funds as on March 31, 2024
9.8.4.1 Comments on compliance of these Guidelines shall be indicated by
the AMCs and Trustees in their CTRs334 and Half Yearly Reports335
filed with the Board.
9.9 Valuation of securities not covered under the current valuation
policy336:
9.9.1 In case of securities purchased by AMCs do not fall within the current
framework of the valuation of securities then such AMCs shall report
immediately to AMFI regarding the same. Further, at the time of
investment AMCs shall ensure that the total exposure in such
securities does not exceed 5% of the total AUM of the scheme.
9.9.2 AMFI has been advised that the valuation agencies should ensure that
the valuation of such securities gets covered in the valuation
framework within six weeks from the date of receipt of such intimation
from mutual fund.
9.9.3 In the interim period, till AMFI makes provisions to cover such
securities in the valuation of securities framework, the AMCs shall
value such securities using their proprietary model which has been
approved by their independent trustees and the statutory auditors.
9.10 Use of own trade for valuation337
9.10.1 Various instances have come to notice wherein Mutual Funds have
used their own trades of relatively small quantity in order to value the
entire holding of such security. In order to address possible mis-use
as mentioned above, Mutual Funds shall not use their own trades for
334 For CTR format please refer to format no. 2.B under the section on formats
335 For Half Yearly Reports, please refer to format no. 2.C under the section on formats
336 SEBI/IMD/CIR No.16/193388/2010 dated February 02, 2010 and Cir/IMD/DF/4/2010
dated June 21, 2010
337 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
valuation of debt and money market securities and for Inter-scheme
transfers.
9.11 Inter-scheme transfers (IST) 338:
With respect to Inter-scheme transfers, it has been decided that:
9.11.1 AMCs shall seek prices for IST of any money market or debt security
(irrespective of maturity), from the valuation agencies.
9.11.2 AMFI, in consultation with valuation agencies shall decide a turn-
around-time (TAT), within which IST prices shall be provided by the
agencies.
9.11.3 If prices from the valuation agencies are received within the pre-
agreed TAT, an average of the prices so received shall be used for IST
pricing.
9.11.4 If price from only one valuation agency is received within the agreed
TAT, that price may be used for IST pricing.
9.11.5 If prices are not received from any of the valuation agencies within the
agreed TAT, AMCs may determine the price for the IST, in accordance
with Clause 3 (a) of Seventh Schedule of SEBI (Mutual Funds)
Regulations, 1996.
9.12 Changes in Terms of Investment 339
While making any change to terms of an investment, AMCs shall adhere to the
following conditions:
338 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
339 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
9.12.1 Any changes to the terms of investment, including extension in the
maturity of a money market or debt security, shall be reported to
valuation agencies and SEBI registered Credit Rating Agencies (CRAs)
immediately, along-with reasons for such changes. 340
9.12.2 Any extension in the maturity of a money market or debt security shall
result in the security being treated as “Default”, for the purpose of
valuation.
9.12.3 If the maturity date of a money market or debt security is shortened
and then subsequently extended, the security shall be treated as
“Default” for the purpose of valuation.
9.12.4 Any put option inserted subsequent to the issuance of the security
shall not be considered for the purpose of valuation and original terms
of the issue will be considered for valuation.
9.13 Dissemination of information:
9.13.1 All AMCs shall provide transaction details, including inter scheme
transfers, of money market and debt securities on daily basis to the
agency entrusted for providing the benchmark yield/ matrix of spread
over risk free benchmark yield. Submission of data341 would help in
daily matrix generation and would improve uniformity and accuracy
of valuation in the mutual funds industry.
9.13.2 The AMCs shall also disclose all details of debt and money market
securities transacted (including inter scheme transfers) in its schemes
portfolio on its website and the same shall be forwarded to AMFI for
340 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/126 dated November 06, 2019
341 SEBI Circular No.MFD/CIR/23 /066 / 2003 dated March 7, 2003 & SEBI Circular No.
SEBI/IMD/CIR No.16/ 193388/2010 dated February 02, 2010. For disclosure of transaction
details, please refer to the section on Formats
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Master Circular for Mutual Funds as on March 31, 2024
consolidation and dissemination as per format342. These disclosures
shall be made settlement date wise on daily basis with a time lag of
15 days. The above disclosure shall be in a comparable, downloadable
(spreadsheet) and machine readable format343.
9.13.3 All AMCs shall provide transaction details of various types of debt
securities like NCDs, Mibor linked floaters and CPs on daily basis in
the prescribed format enclosed at Annexure 2 to the agency
recommended by AMFI.344.
9.14 Valuation and disclosure of upfront fees345:
9.14.1 Guidelines for valuation of any upfront fee (or any other consideration,
by whatever name called) received in a Mutual Fund scheme, shall be
issued by AMFI, in consultation with SEBI.
9.15 Guidelines for investments in partly paid debentures346
9.15.1 Guidelines for investment by Mutual Funds in partly paid debentures
shall be issued by AMFI, in consultation with SEBI.
9.16 Guidelines to be issued by AMFI347:
9.16.1 The guidelines to be issued by AMFI, in consultation with SEBI under
paragraphs 9.1.3.1, 9.2.3.c.1, 9.4.5, 9.14 and 9.15 above shall
necessarily be followed by all Mutual Funds / AMCs. Any future
342 Please refer to format no. 8 under the section on formats
343 SEBI Circular No. Cir/IMD/DF/6/2012 dated February 28, 2012 and SEBI Circular No.
SEBI/HO/IMD/DF4/CIR/P/2020/163 dated September 01, 2020
344 SEBI Circular No. MFD/CIR.No 23 / 066 /2003 dated March 7,2003
345 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019,
Refer SEBI letter No. SEBI/HO/IMD/DF4/OW/P/2019/29520 dated November 07, 2019
346 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019,
Refer SEBI letter No. SEBI/HO/IMD/DF4/OW/P/2019/29520 dated November 07, 2019
347 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
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Master Circular for Mutual Funds as on March 31, 2024
changes to these guidelines shall be made by AMFI in consultation
with SEBI, prior to implementation.
9.17 Consistency
9.17.1 All AMC’s shall ensure that similar securities held under its various
schemes shall be valued consistently.
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 10: LOADS, FEES, CHARGES AND EXPENSES
10.1 Limits on fees and expenses charged to schemes348
10.1.1 AMC of Mutual Fund may charge certain expenses to a scheme, as
specified under Regulations.349 Apart from the these expenses, any
other expense as may be approved by SEBI under clause (xiii) of Sub
Regulation 52(4) can also be charged to the Mutual Fund schemes.
Other expenses directly attributable to a scheme may be charged with
the approval of trustees within the overall limits as provided in the
Regulation 52(6).350
10.1.2 Trustees and Asset Management Companies are advised to take
proper care and exercise due diligence to ensure that all expenses
charged to the scheme are clearly identified and disclosed in the offer
document and they are strictly in conformity with the Regulation.351
10.1.3 Additional TER352 can be charged up to 30 basis points on daily net
assets of the scheme as per Regulation 52353, if the new inflows from
retail investors354 from beyond top 30 cities355 are at least (a) 30% of
gross new inflows in the scheme or (b) 15% of the average assets under
management (year to date) of the scheme, whichever is higher.
348 SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997, SEBI Circular
No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998, SEBI Circular No.
MFD/CIR/9/120/2000 dated November 24, 2000, Refer SEBI letter No.
SEBI/IMD/DF2/OW/P/2020/11099/1 dated June 29, 2020
349 Regulation 52(4) of the Mutual Funds Regulations,1996
350 SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000.
351 SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997
352 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012, Refer SEBI letter No.
SEBI/HO/IMD/IMD-SEC-3/P/OW/2023/5823/1 dated February 24, 2023
353 Regulation 52(6A)(b) of the Mutual Funds Regulations,1996
354 SEBI Circular no. SEBI/HO/IMD/DF2/CIR/P/2018/137 dated October 22, 2018, SEBI
Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019
355 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/16 dated February 02, 2018.
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Master Circular for Mutual Funds as on March 31, 2024
Inflows of amount upto Rs.2,00,000/-356 per transaction, by
individual investors shall be considered as inflows from “retail
investor”.
In case inflows from beyond top 30 cities from retail investors is less
than the higher of (a) or (b) above, additional TER on daily net assets
of the scheme shall be charged as follows:
Daily net assets X 30 basis points X New inflows from retails investors from beyond top 30 cities
365* X Higher of (a) or (b) above
* 366, wherever applicable.
The top 30 cities shall mean top 30 cities based on Association of
Mutual Funds in India (AMFI) data on ‘AUM by Geography –
Consolidated Data for Mutual Fund Industry’ as at the end of the
previous financial year.
10.1.4 The additional TER on account of inflows from beyond top 30 cities so
charged shall be clawed back in case the same is redeemed within a
period of 1 year from the date of investment.
Accordingly, format no. 3.D. on ‘Disclosure of Monthly Average Assets
Under Management’ under the section on formats has been suitably
revised.
10.1.5 The additional commission for B 30 cities shall be paid as trail only.
357
10.1.6 Trustees and AMCs shall ensure compliance of the provisions
mentioned above at Paragraphs 10.1.3 and 10.1.5 of this Master
356 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019
357 SEBI Circular no. SEBI/HO/IMD/DF2/CIR/P/2018/137 dated October 22, 2018
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Master Circular for Mutual Funds as on March 31, 2024
Circular and trustees shall confirm the same to SEBI in the half yearly
trustee report.
10.1.7 358Regulation 52 (6A) (c) of SEBI (Mutual Funds) Regulations,
1996, allows an AMC to charge additional expenses, incurred towards
different heads mentioned under Regulation 52 (2) and Regulation
52 (4), not exceeding 0.05359 per cent of daily net assets of the
scheme.
In this respect, Mutual Fund schemes including close ended schemes,
wherein exit load is not levied / not applicable, the AMCs shall not be
eligible to charge the above mentioned additional expenses for such
schemes.
Further, existing Mutual Fund schemes including close ended
schemes (schemes as on February 02, 2018), wherein exit load is not
levied / not applicable, shall discontinue, with effect from February
02, 2018, the levy of above mentioned additional expenses, if any.
10.1.8 Total Expense Ratio – Change and Disclosure360
(a) AMCs shall prominently disclose on a daily basis, the TER
(scheme-wise, date-wise) of all schemes except infrastructure debt
fund (IDF) schemes under a separate head –“Total Expense Ratio
of Mutual Fund Schemes” on their website and on the website of
AMFI in a downloadable spreadsheet format.361
358 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/15 dated February 02, 2018
359 Regulation 52(6A)(c) of the SEBI (Mutual Funds) Regulations, 1996 and SEBI circular
SEBI/HO/IMD/DF2/CIR/P/2018/91 dated June 05, 2018, Refer SEBI Letter No.
SEBI/HO/IMD/DF2/OW/P/2019/4263/1 dated February 21, 2019 and email dated
February 23, 2023
360 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/18 dated February 5, 2018,
SEBI/HO/IMD/DF2/CIR/P/2018/91 dated June 05, 2018 and
SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019, Refer SEBI letter No.
SEBI/HO/IMD/DF2/OW/P/2018/13813/1 dated May 09, 2018, Refer SEBI letter No.
SEBI/HO/IMD/DF2/OW/P/2018/22825/1 dated August 13, 2018
361 Please refer to format no. 7.E under the section on Formats.
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Master Circular for Mutual Funds as on March 31, 2024
(b) Any change in the base TER (i.e. TER excluding additional
expenses provided in Regulation 52(6A)(b), 52(6A)(c) of SEBI
(Mutual Funds) Regulations, 1996 and Goods and Services Tax on
investment and advisory fees) in comparison to previous base TER
charged to any scheme/plan shall be communicated to investors
of the scheme/plan through notice via email or SMS at least three
working days prior to effecting such change. (For example, if
changed TER is to be effective from January 8, 2018, then notice
shall be given latest by January 2, 2018, considering at least three
working days prior to effective date). Further, the notice of change
in base TER shall be updated in the aforesaid section of website at
least three working days prior to effecting such change.
362Provided that any increase or decrease in TER in a mutual fund
scheme due to change in AUM and any decrease in TER in a
mutual fund scheme due to various other regulatory requirements
would not require issuance of any prior notice to the investors.
10.1.9 363 The above change in the base TER in comparison to previous base
TER charged to the scheme shall be intimated to the Board of
Directors of AMC along with the rationale recorded in writing.
10.1.10 The changes in TER shall also be placed before the Trustees on
quarterly basis along with rationale for such changes.
10.1.11 Mutual funds/AMCs shall make complete disclosures in the half
yearly report of Trustees to SEBI regarding the efforts undertaken by
them to increase geographical penetration of mutual funds and the
362 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019
363 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/18 dated February 05, 2018
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Master Circular for Mutual Funds as on March 31, 2024
details of opening of new branches, especially at locations beyond
top 30 cities.
10.1.12 Transparency in TER364
In order to bring transparency in expenses, reduce portfolio churning
and mis-selling in mutual fund (MF) schemes, the following shall be
adhered to:
(a) In terms of Regulation 52(1) of SEBI (Mutual Funds)
Regulations, 1996, all scheme related expenses including
commission paid to distributors, by whatever name it may be
called and in whatever manner it may be paid, shall
necessarily be paid from the scheme only within the regulatory
limits and not from the books of the Asset Management
Companies (AMC), its associate, sponsor, trustee or any other
entity through any route.
Provided365 that the expenses that are very small in value but
high in volume may be paid out of AMC’s books. Such
expenses can be paid out of AMC’s books at actuals or not
exceeding 2 bps of respective scheme AUM, whichever is lower.
A list of such miscellaneous expenses may be provided by
AMFI in consultation with SEBI. Such expenses incurred by
AMC should be properly recorded and audited in the books of
account of AMC at year end.
(b) MFs/ AMCs shall adopt full trail model of commission in all
schemes, without payment of any upfront commission or
upfronting of any trail commission, directly or indirectly, in
364 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/137 dated October 22, 2018. Refer
SEBI letter No. SEBI/HO/IMD/SEC4/OW/P/2024/1451/1 dated January 11, 2024
365 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019
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Master Circular for Mutual Funds as on March 31, 2024
cash or kind, through sponsorships, or any other route.
However, upfronting of trail commission will be allowed only
in case of inflows through Systematic Investment Plans (SIPs).
(c) In respect of inflows through SIPs into MF schemes, a carve
out has been considered only for new investors to the MF
industry (to be identified based on PAN). The upfronting of trail
commissions, based on SIP inflows, shall be up to 1% payable
yearly in advance, for a maximum period of three years.
(d) The payment of upfront trail commission would be subject to
the following 366:
i. The upfronting of trail commission may be for SIP of upto
Rs. 3,000 per month, per scheme, for an investor who is
investing for the first time in Mutual Fund schemes.
ii. For a new investor, as identified above, only the first SIP(s)
purchased by the investor shall be eligible for up-fronting.
In this regard, if multiple SIP(s) are purchased on different
dates, the SIP(s) in respect of which the instalment starts
on the earliest date shall be considered for upfronting.
iii. The upfront trail commission shall be paid from AMC’s
books.
iv. The said commission shall be amortized on daily basis to
the scheme over the period for which the payment has
been made. A complete audit trail of upfronting of trail
commissions from the AMC’s books and amortization of
366 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019
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Master Circular for Mutual Funds as on March 31, 2024
the same to scheme(s) thereafter shall be made available
for inspection.
v. The said commission should be charged to the scheme as
‘commissions’ and should also account for computing the
TER differential between regular and direct plans in each
scheme.
vi. The commission paid shall be recovered on pro-rata basis
from the distributors, if the SIP is not continued for the
period for which the commission is paid.’
(e) In case of misuse of the carve out for SIPs, the same would be
discontinued and appropriate action would be taken against
the errant participants. Further, the need of this carve out
would be reviewed by SEBI as and when required.
(f) All fees and expenses charged in a direct plan (in percentage
terms) under various heads including the investment and
advisory fee shall not exceed the fees and expenses charged
under such heads in a regular plan.
(g) No pass back, either directly or indirectly, shall be given by
MFs/ AMCs/Distributors to the investors.
(h) Training sessions and programmes conducted for distributors
should continue and should not be misused for providing any
reward or non-cash incentive to the distributors.
10.1.13 Trustees and AMCs shall ensure compliance of the provisions
mentioned at Paragraph 10.1.12 above and trustees shall confirm
the same to SEBI in the half yearly trustee report.
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Master Circular for Mutual Funds as on March 31, 2024
10.1.14 367Brokerage and transaction cost368 incurred for the purpose
of execution of trade shall be charged to the schemes as provided
under Regulation 52 (6A) (a) upto 12 bps and 5 bps for cash market
transactions and derivatives transactions respectively. Any payment
towards brokerage and transaction costs, over and above the said
12 bps and 5 bps for cash market transactions and derivatives
transactions respectively may be charged to the scheme within the
maximum limit of Total Expense Ratio (TER) as prescribed under
regulation 52369.
10.1.15 Soft-dollar arrangement refers to an arrangement between AMCs and
brokers in which the AMC executes trades through a particular
broker and in turn the broker may provide benefits such as free
research, hardware, software or even non-research-related services,
etc., to the AMC. It may be noted that such arrangements between
AMCs and brokers should be limited to only benefits (like free
research report, etc.) that are in the interest of investors and the
same should be suitably disclosed370.
10.1.16 Investor Education and Awareness371:
(a) AMCs shall annually set apart at least 2 basis points on daily
net assets within the maximum limit of TER as per regulation
367 Refer SEBI letter No. IMD/DF2/HB/18172/2016 dated June 27, 2016
368 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012 & SEBI Circular No.
CIR/IMD/DF/24/2012 dated November 19, 2012 stands replaced by SEBI SEBI/HO/IMD-
II/DOF8/P/CIR/2022/12 dated February 4, 2022.
369 Regulation 52 of the SEBI (Mutual Funds) Regulations, 1996
370 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016
371 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012, Refer SEBI letter
No. IMD/DF2/RS/813/2016 dated January 08, 2016, Refer SEBI letter No.
IMD/DF2/RS/201712507/1 dated May 31, 2017, Refer SEBI letter No.
SEBI/HO/IMD/DoF4/0W/P/2019/9576/1 dated April 12, 2019, Refer SEBI letter No.
SEBI/HO/IMD2/OW/P/27647/2019 dated October 29, 2019, Refer SEBI letter No.
SEBI/HO/OW/IMD-II/DOF3/P/2019/34582/1 dated December 24, 2019, Refer SEBI Letter
No. SEBI/HO/IMD-II/IMD-II_DOF11/P/OW/2022/60035/1 dated November 30, 2022, Refer
SEBI Letter No. SEBI/HO/IMD/IMD-SEC-1/P/OW/2023/9455/1 dated March 03, 2023
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Master Circular for Mutual Funds as on March 31, 2024
52 of the Regulations for investor education and awareness
initiatives, except the following372:
i. The charges applicable for investor education and awareness
initiatives from ETFs/ Index Funds shall be 1bps of daily net
assets of the scheme.
ii. Fund of Funds (FoFs) investing more than 80% of its NAV in
the underlying domestic funds shall not be required to set
aside 2bps of the daily net assets towards investor education
and awareness initiatives.
(b) AMCs and AMFI shall carry out focused investor education and
awareness initiatives for passive funds.
(c) Trustees of Mutual Funds shall make complete disclosures in
the half yearly trustee report to SEBI regarding the investor
education and awareness initiatives undertaken.
(d) 373Certain portion of the 2 basis points of daily net assets is
being set aside by Mutual Funds/AMCs for investor education
and awareness initiatives at industry level.
(e) In this respect, for the purpose of increasing awareness of
Mutual Funds as a financial product category it has been
decided to permit celebrity endorsements374 at industry level,
subject to the following conditions:
i. Celebrity endorsement shall be allowed only at industry
level, for the purpose of increasing awareness of Mutual
372 SEBI Circular No. SEBI/HO/IMD/DOF2/P/CIR/2022/69 dated May 23, 2022
373 SEBI Circular No. CIR/IMD/DF/23/2017 dated March 15, 2017
374 Refer SEBI letter No. SEBI/HO/IMD/IMD-PoD-2/P/OW/2022/59612/1 dated November
28, 2022
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Master Circular for Mutual Funds as on March 31, 2024
Funds as a financial product category. Such celebrity
endorsements should not promote a scheme of a particular
Mutual Fund or be used as a branding exercise of a Mutual
Fund house/ AMC.
ii. Expenses towards such celebrity endorsements for
increasing awareness of Mutual Funds shall be limited to
the amounts that are aggregated by Mutual Funds at
industry level for the purpose of conducting investor
education and awareness initiatives, in terms of Paragraph
10.1.16.(a) of this Master Circular.
iii. Prior approval of SEBI shall be required for issuance of any
endorsement of Mutual Funds as a financial product,
which features a celebrity for the purpose of increasing
awareness of Mutual Funds.
10.1.17 375The following expenses cannot be charged to the schemes of
Mutual Funds:
a. Penalties and fines for infraction of laws.
b. Interest on delayed payment to the unit holders.
c. Legal, marketing, publication and other general expenses not
attributable to any scheme(s).
d. Fund Accounting Fees.
e. Expenses on investment management/general management.
f. Expenses on general administration, corporate advertising and
infrastructure costs.
g. Depreciation on fixed assets and software development
expenses.
375 SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000
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Master Circular for Mutual Funds as on March 31, 2024
h. Such other costs as may be prohibited by the Board.
10.1.18 The expenditure and/or fee payable by Mutual Funds to the
Depositories may either be capitalized or included as part of
recurring expenditure within the limits prescribed under Regulation
52(6) of the Mutual Funds Regulations376.
10.1.19 Further, each item of expenditure accounting for more than 10% of
total expenditure shall be disclosed in the accounts or the notes
thereto of the schemes377.
10.1.20 Provision of charging of additional management fees by the Asset
Management Companies in case of schemes launched on no load
basis378.
a. AMC shall not collect any additional management fees referred to
in Regulation379.
b. Mutual Fund Schemes to be launched including those for which
observation letter have been issued under Regulation380 would be
required to carry out the changes in SID and file the same with
SEBI before the launch.
10.2 Restriction on paying brokerage or commission381
10.2.1 In case of investments made by the Sponsor(s), no brokerage or
commission shall be paid.
376 SEBI Circular No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998.
,3,, 77 SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000.
378 SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010
379 Regulation 52(3) of SEBI Mutual Funds Regulation, 1996
380 Regulation 29 of SEBI (Mutual Funds) Regulations, 1996
381 SEBI Circular No. MFD/CIR No.3/211/2001 dated April 30, 2001, SEBI Circular No.
MFD/CIR No.5/153/2001 dated May 24, 2001.
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Master Circular for Mutual Funds as on March 31, 2024
10.3 Restriction on charging Goods & Service Tax 382
10.3.1 AMC(s) can charge Goods & Service Tax, as per applicable Taxation
Laws, to the scheme(s) within the limits prescribed under
Regulations383
10.3.2 Mutual funds /AMCs may charge Goods & Service Tax on investment
and advisory fees to the scheme in addition to the maximum limit
of TER as prescribed in Regulation 52384.
10.3.3 Goods & Service Tax on other than investment and advisory fees, if
any, shall be borne by the scheme within the maximum limit of TER
as per Regulation 52385.
10.3.4 Goods & Service Tax on exit load, if any, shall be paid out of the exit
load proceeds and exit load net of Goods & Service Tax, if any, shall
be credited to the scheme.
10.3.5 Goods & Service Tax on brokerage and transaction cost386 paid for
execution of trade, if any, shall be within the limit prescribed under
regulation 52 of the Regulations.
10.4 Empowering investors through transparency in payment of
commission and load structure387
382 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012, SEBI Circular No.
SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021.
383 Reg.52(6) of the SEBI (Mutual Funds) Regulations, 1996.
384 Regulation 52 of SEBI (Mutual Funds) Regulations, 1996
385 Regulation 52 of SEBI (Mutual Funds) Regulations, 1996
386 SEBI Circular No. CIR/ IMD/ DF/ 24/2012 dated November 19, 2012, Refer SEBI letter
No. IMD/DF2/HB/18172/2016 dated June 27, 2016
387 SEBI Circular No SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009
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Master Circular for Mutual Funds as on March 31, 2024
10.4.1 In order to empower investors in deciding the commission paid to
distributors in accordance with the level of service received, it has
been mandated that:
a. There shall be no entry load388 for all Mutual Fund schemes.
b. The scheme application forms shall carry a suitable disclosure to
the effect that the upfront commission to distributors will be paid
by the investor directly to the distributor, based on his assessment
of various factors including the service rendered by the distributor.
c. The load balances are maintained as ‘liabilities’ in the books of the
scheme and are not included in the net asset value (NAV). The
usage389 of the load account shall be subject to the following:
i. The load balance shall be segregated into two accounts in the
books of accounts of the scheme - one to reflect the balance
as on July 31, 2009 and the other to reflect accretions since
August 01, 2009.
ii. However, not more than one-third of load balance as on July
31, 2009 shall be used in any financial year. It is clarified
though the unutilized balances can be carried forward, yet
in no financial year the total spending can be more than one
third of the load balances on July 31, 2009.
388 Waiver of load for direct applications - Vide SEBI Circular No. SEBI/IMD/CIR
No.10/112153/07 dated December 31, 2007, SEBI mandated w.e.f January 4,2009 no entry
load shall be charged for applications received directly by the AMC(s) through internet or
submitted directly to the AMC(s) or Collection Center/Investor Service Centre and not routed
through any distributor or agent or broker. This waiver was applicable to both additional
purchases under the same folio and ‘switch in’ to a scheme from other schemes also done
directly by the investor. AMCs shall follow the provisions pertaining to informing the
unitholders upon a change in load structure as per clause 3(d) of standard observations.
389 SEBI Circular No. CIR/IMD/DF/4/2011 dated March 9, 2011
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Master Circular for Mutual Funds as on March 31, 2024
The accretions after July 31, 2009 can be used by mutual
funds for marketing and selling expenses including
distributor’s/agent's commissions without any restrictions
mentioned in Paragraph (ii) above.
d. The exit load charged390, if any, after the commencement of
SEBI (Mutual Funds) (Second Amendment) Regulations, 2012,
shall be credited to the scheme.
e. The distributors should disclose all the commissions (in the
form of trail commission or any other mode) payable to them
for the different competing schemes of various Mutual Funds
from amongst which the scheme is being recommended to the
investor.
10.4.2 The above guidelines became applicable for:
a. Investments in mutual fund schemes (including additional
purchases and switch-in to a scheme from other schemes)
w.e.f August 1, 2009
b. Redemptions from mutual fund schemes (including switch-out
from other schemes) w.e.f August 1, 2009
c. New mutual fund schemes launched on or after August 1,
2009
d. All Systematic Investment Plans (SIP) including SIPs registered
prior to August 1, 2009391.
10.5 Transaction Charges392
390 Regulation 51A of SEBI (Mutual Funds) Regulations, 1996.
391SEBI Circular No. CIR/IMD/df/21/2012 dated September 13, 2012,
SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019
392 SEBI Circular no. CIR/IMD/DF/13/2011 dated August 22, 2011
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Master Circular for Mutual Funds as on March 31, 2024
10.5.1 A transaction charge per subscription of Rs. 10,000/- and above be
allowed to be paid to the distributors of the Mutual Fund products.
However, there shall be no transaction charges on direct investments.
The transaction charge shall be subject to the following:
a. For existing investors in a Mutual Fund, the distributor may be
paid Rs.100/- as transaction charge per subscription of Rs.
10,000/- and above.
b. As an incentive to attract new investors, the distributor may be
paid Rs.150/- as transaction charge for a first time investor in
Mutual Funds.
c. The terms and conditions relating to transaction charge shall be
part of the application form in bold print.
d. The transaction charge, if any, shall be deducted by the AMC
from the subscription amount and paid to the distributor; and the
balance shall be invested.
e. The statement of account shall clearly state that the net
investment as gross subscription less transaction charge and give
the number of units allotted against the net investment.
f. Distributors shall be able to choose to opt out of charging the
transaction charge. However, the ‘opt-out’ shall be at distributor
level and not investor level i.e. a distributor shall not charge one
investor and choose not to charge another investor. Further,
Distributors shall have also the option to either opt in or opt out
of levying transaction charge based on type of the product393.
393 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012
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g. The AMCs shall be responsible for any malpractice/mis-selling by
the distributor while charging transaction costs.
h. There shall be no transaction charge on subscription below Rs.
10,000/-
i. In case of SIPs, the transaction charge shall be applicable only if
the total commitment through SIPs amounts to Rs. 10,000/- and
above. In such cases the transaction charge shall be recovered in
3-4 installments.
j. There shall be no transaction charge on transactions other than
purchases/ subscriptions relating to new inflows.
10.5.2 AMCs shall institute systems to detect if a distributor is splitting
investments in order to enhance the amount of transaction charges and
take stringent action including recommendations to AMFI to take
appropriate action.
10.5.3 Mutual Funds/ AMCs shall carry out an exercise of de-duplication of
folios across all Mutual Funds within a period of 6 months from August
22, 2011394.
10.6 No Load on Bonus Units and Units allotted on Reinvestment of
Dividend395
10.6.1 AMC(s) shall not charge entry and/or exit load on bonus units and
units allotted on reinvestment of dividend. Necessary disclosures in
this regard shall be made in the SID filed with the Board
394 Refer SEBI letter No. IMD/DF2/DS/24539/2017 dated October 10, 2017
395 SEBI Circular No. SEBI/IMD/CIR No. 14/120784/08 dated March 18, 2008
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10.7 Filing fees396
10.7.1 Filing fees397 as per the Second Schedule of SEBI (Mutual Funds)
Regulations, 1996 shall be applicable for offer documents and
placement memoranda.
10.8 Exit load parity398
10.8.1 While charging exit loads, no distinction among unit holders should
be made based on the amount of subscription399. While complying
with the same, AMCs should ensure that “any imposition or
enhancement in the load shall be applicable on prospective
investments only.400
10.8.2 Further, the parity among all classes of unit holders in terms of
charging exit load shall be made applicable at the portfolio level.401
10.9 Borrowing Costs402
10.9.1 With regard to the cost of borrowings in terms of Regulation 44(2) of
SEBI (Mutual Funds) Regulations, 1996, it has been decided that for
a given scheme, the same shall be adjusted against the portfolio yield
of the scheme and borrowing costs in excess of portfolio yield, if any,
shall be borne by the AMC.
396 SEBI Circular No. SEBI Cir No. SEBI / IMD/ CIR No. 5 / 169030 / 2009 dated July 8,
2009, Refer SEBI Letter No. IMD/SG/8668/06 dated October 13, 2006
397 Gazette Notification No. LAD-NRO/GN/20014-15/03/1089on SEBI (Payment of Fees)
(Amendment) Regulations, 2014 dated 23 May, 2014, Second Schedule of SEBI (Mutual
Funds) Regulations, 1996
398 Refer SEBI email dated July 07, 2010, Refer SEBI letter No.
SEBI/HO/IMD/DF2/OW/P/2019/271771/1 dated October 15, 2019
399 SEBI Circular No. SEBI / IMD / CIR No. 6 /172445/ 2009 dated August 7,2009 All Mutual
Funds shall ensure compliance with this circular on or before August 24, 2009
400 SEBI Circular No - SEBI / IMD / CIR No. 7 /173650 / 2009 dated August 17,2009 and
SEBI circular No. SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008
401 SEBI Circular No - SEBI / IMD / CIR No. 7 /173650 / 2009 dated August 17,2009
402 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019
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CHAPTER 11: DIVIDEND DISTRIBUTION PROCEDURE403,404
11.1 All the existing (i.e. schemes as on October 05, 2020) and proposed
Schemes of Mutual Funds shall name / rename the Dividend option(s)
in the following manner:
Option / Plan Name
Dividend Payout Payout of Income Distribution cum
capital withdrawal option
Dividend Re-investment Reinvestment of Income Distribution
cum capital withdrawal option
Dividend Transfer Plan Transfer of Income Distribution cum
capital withdrawal plan
11.2 Offer documents shall clearly disclose that the amounts can be
distributed out of investors capital (Equalization Reserve), which is part
of sale price that represents realized gains. Further, AMCs shall ensure
that the said disclosure is made to investors at the time of subscription
of such options/plans.
11.3 AMCs shall ensure that whenever distributable surplus is distributed, a
clear segregation between income distribution (appreciation on NAV) and
capital distribution (Equalization Reserve) shall be suitably disclosed in
the Consolidated Account Statement provided to investors.
11.4 405The payment of dividend to the unitholders shall be made within
seven working days from the record date.
403 SEBI Circular No. SEBI/IMD/CIR No.1/64057/06 dated April 4, 2006, SEBI Circular No.
SEBI/HO/IMD/DF3/CIR/P/2020/194 dated October 05, 2020.
404 For details on advertisement on dividend please refer to Chapter No. 14 on ‘Advertisements’
1 4 4No. 05 Regulation 53(a) of the SEBI (Mutual Funds) Regulations, 1996 & SEBI Circular No.
SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 dated November 25, 2022
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11.5 Regulations406 permit Mutual Funds to distribute returns including
dividend. To introduce uniform practices in dividend distribution, the
following guidelines should be followed:
11.6 These guidelines are applicable to all Mutual Fund schemes/plans
which intend to declare the dividend irrespective of their dates of
launch.407
11.6.1 Unlisted Scheme(s)/ Plan(s)
11.6.1.1 The Trustees shall decide the quantum of dividend and the record
date in their meeting408. Dividend so decided, shall be paid, subject
to availability of distributable surplus.
11.6.1.2 Record date shall be the date which will be considered for the
purpose of determining the eligibility of investors whose names
appear on the register of unit holders for receiving dividends. The
NAV shall be adjusted to the extent of dividend distribution and
statutory levy, if applicable, at the close of business hours on record
date.
11.6.1.3 409Within one calendar day of the decision by the trustees, AMC
shall issue notice to the public communicating the decision
including the record date. The record date shall be two working
days410 from the date of publication in at least one English
newspaper or in a newspaper published in the language of the
region where the Head Office of the mutual fund is situated,
whichever is issued earlier.
406 Regulation 53(a) of the SEBI (Mutual Funds) Regulations, 1996
407 SEBI Circular No SEBI/IMD/CIR No. 3/65370/06 dated April 21,2006
408 Clause 20 of Third Schedule of SEBI (Mutual Funds) Regulations, 1996
409 SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
410 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 dated November 25,
2022
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11.6.1.4 Before the issue of such notice, no communication whatsoever
indicating the probable date of dividend declaration shall be issued
by any Trustees of Mutual Funds, AMCs or its distributors of its
products.
11.6.1.5 The notice shall, in font size 10, bold, categorically state that
pursuant to dividend distribution, NAV of the scheme would fall to
the extent of payout and statutory levy (if applicable).
11.6.2 Liquid / Debt Schemes with frequent dividend distribution
11.6.2.1 The requirement of giving notice is not mandatory for scheme(s)/
plan(s)/ option(s) with dividend distribution frequency ranging from
daily up to monthly distribution if requisite disclosures in this
regard are made in the SID.
11.6.3 411With respect to declaration of dividends upto monthly frequency,
the trustees can delegate to the officials of AMC to declare and fix the
record date as well as decide the quantum of dividend, subject to the
following;
I.Record date is specified in the offer document and the same is
adhered to.
II.Such delegation to AMC officials shall mandatorily include CEO of
AMC and making him responsible for such declaration of
dividends, subject to adhering to the policy framework as
approved by Trustees.
III.The policy shall specify appropriate parameters or factors (for
example Growth in NAV from the last dividend declared, or
availability of adequate distributable surplus, or minimum
reserves to be maintained, etc.) to be considered prior to deciding
the quantum.
411 SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
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IV.Actual dividend declared to be ratified by the Trustees in its
immediately following Board meeting.
11.6.4 Listed Schemes/Plans
11.6.4.1 Listed scheme(s)/ plan(s) shall follow the requirements stipulated
in the Listing Agreement for dividend declaration and distribution.
11.7 Non availability of Unit Premium Reserve for dividend
distribution412
11.7.1 Regulations413 provide the accounting policies to be followed for
determining distributable surplus and accounting the sale and
repurchase of units in the books of the Mutual Fund. The format for
Scheme Balance Sheet (including Abridged) provides for disclosure of
Unit Premium Reserve.
11.7.2 Unit Premium Reserve, which is part of the sales price of units that is
not attributable to realized gains, cannot be used to pay dividend.
Therefore:
11.7.2.1 When units of an open-ended scheme are sold, and sale price is
higher than face value of the unit, part of sale proceeds that
represents unrealized gains shall be credited to a separate account
(Unit Premium Reserve) and shall be treated at par with unit capital
and the same shall not be utilized for the determination of
distributable surplus.
11.7.2.2 When units of an open-ended scheme are sold, and sale price is less
than face value of the unit, the difference between the sale price
and face value shall be debited to distributable reserves and the
412 SEBI circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010
413 Ninth and Eleventh Schedule of SEBI (Mutual Funds) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
dividend can be declared only when distributable reserves become
positive after adjusting the amount debited to reserves as per
Regulations414.
414 Clause 2(a) (ix) of Eleventh Schedule of SEBI (Mutual Funds) Regulations, 1996
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CHAPTER 12: INVESTMENT BY SCHEMES
12.1 Investment in Listed and Unrated Debt Instruments415
12.1.1 Mutual fund scheme shall not invest in unlisted debt instruments
including commercial papers (CPs), other than (a) government
securities, (b) other money market instruments and (c) derivative
products such as Interest Rate Swaps (IRS), Interest Rate Futures
(IRF), etc. which are used by mutual funds for hedging.
However, mutual fund schemes may invest in unlisted Non-
Convertible Debentures (NCDs) not exceeding 10% of the debt
portfolio of the scheme subject to the condition that such unlisted
NCDs have a simple structure (i.e. with fixed and uniform coupon,
fixed maturity period, without any options, fully paid up upfront,
without any credit enhancements or structured obligations) and are
rated and secured with coupon payment frequency on monthly basis.
12.1.2 Clarification on existing grandfathered unlisted NCDs416
The existing investments of mutual fund schemes in unlisted debt
instruments, including NCDs, may be grandfathered till maturity date
(as stands as on October 01, 2019) of such instruments. The
grandfathering of the identified NCDs (existing grandfathered unlisted
NCDs) is applicable across the mutual fund industry. Accordingly,
mutual funds can transact in such identified NCDs and the criteria
specified in Paragraph 12.1.1 above is not applicable. However,
investments in such identified NCDs shall continue to be subject to
compliance with investment due diligence and all other applicable
investment restrictions.
415 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 1, 2019, Refer
SEBI letter No. SEBI/HO/IMD/DF2/OW/P/2019/138/1 dated January 01, 2019
416 SEBI circular No. EBI/HO/IMD/DF2/CIR/P/2020/75 dated April 28, 2020
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12.1.3 For the purpose of the provisions of paragraph 12.1, listed debt
instruments shall include listed and to be listed debt instruments.
12.1.4 All fresh investments by mutual fund schemes in CPs would be made
only in CPs which are listed or to be listed.
12.1.5 Further, investment in unrated debt and money market instruments,
other than government securities, treasury bills, derivative products
such as Interest Rate Swaps (IRS), Interest Rate Futures (IRF), etc. by
mutual fund schemes shall be subject to the following:
a. Investments should only be made in such instruments, including
bills re-discounting, usance bills, etc., that are generally not rated
and for which separate investment norms or limits are not
provided in SEBI (Mutual Fund) Regulations, 1996 and various
circulars issued thereunder.
b. Exposure of mutual fund schemes in such instruments, shall not
exceed 5% of the net assets of the schemes.
c. All such investments shall be made with the prior approval of the
Board of AMC and the Board of trustees.
d. The existing investments of mutual fund schemes in such
instruments in excess of the aforesaid limit of 5% may be
grandfathered till maturity date (as stands as on October 01,
2019) of such instruments.
e. 417The single issuer limit and the group exposure limit shall be
calculated at the issuing bank level as BRDS are issued with
recourse to the issuing bank.
417 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2021/683 dated December 10, 2021
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f. Investment in BRDS by debt schemes of mutual funds shall be
considered as exposure to financial services sector for the purpose
of sector exposure limits.
12.2 418Investment in Instruments having Special Features
12.2.1 Mutual Funds invest in certain debt instruments with special features
viz. subordination to equity (absorbs losses before equity capital) and
/or convertible to equity upon trigger of a pre-specified event for loss
absorption. Additional Tier I bonds and Tier 2 bonds issued under
Basel III framework are some instruments which may have above
referred special features. The debt instruments having such special
features, which otherwise are Non-Convertible Debentures, may be
treated as debt instruments until converted to equity.
12.2.2 The investment limits of mutual funds in such instruments shall be
as under:
a) No Mutual Fund under all its schemes shall own more than
10% of such instruments issued by a single issuer;
b) A Mutual Fund scheme shall not invest
i. more than 10% of its NAV of the debt portfolio of the
scheme in such instruments; and
ii. more than 5% of its NAV of the debt portfolio of the
scheme in such instruments issued by a single issuer.
The above investment limit for a mutual fund scheme shall be
within the overall limit for debt instruments issued by a single
issuer as specified at clause 1 of the Seventh Schedule of SEBI
418 SEBI circular No. SEBI/HO/IMD/DF4/CIR/P/2021/032 dated March 10, 2021
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(Mutual Fund) Regulations, 1996, and other prudential limits
with respect to the debt instruments.
12.2.3 The investments of mutual fund schemes in such instruments in
excess of the limits specified under paragraph above as on March 10,
2021 may be grandfathered and such mutual fund schemes shall not
make any fresh investment in such instruments until the investment
comes below the specified limits.
12.3 Restrictions on Investment in debt instruments having
Structured Obligations / Credit Enhancements:419
12.3.1 The investment of mutual fund schemes in the following instruments
shall not exceed 10% of the debt portfolio of the schemes and the
group exposure in such instruments shall not exceed 5% of the debt
portfolio of the schemes:
a. Unsupported rating of debt instruments (i.e. without factoring-in
credit enhancements) is below investment grade and
b. Supported rating of debt instruments (i.e. after factoring-in credit
enhancement) is above investment grade.
For the purpose of this provision, ‘Group’ shall have the same
meaning as defined in Paragraph 12.9.3.3 of this Master Circular.
12.3.2 Investment limits as mentioned in Paragraph 12.3.1 above shall not
be applicable on investments in securitized debt instruments, as
defined in SEBI (Public Offer and Listing of Securitized Debt
Instruments) Regulations 2008.
419 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 1, 2019
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12.3.3 Investment in debt instruments, having credit enhancements backed
by equity shares directly or indirectly, shall have a minimum cover of
4 times considering the market value of such shares.
AMCs may ensure that the investment in debt instruments having
credit enhancements are sufficiently covered to address the market
volatility and reduce the inefficiencies of invoking of the pledge or
cover, whenever required, without impacting the interest of the
investors. In case of fall in the value of the cover below the specified
limit, AMCs should initiate necessary steps to ensure protection of the
interest of the investors.
12.3.4 The existing investments by mutual fund schemes in debt
instruments that are not in terms of the provisions of Paragraph 12.3
above may be grandfathered till maturity date (as stands as on the
October 01, 2019) of such debt instruments.
12.3.5 Details of investments in debt instruments having structured
obligations or credit enhancement features should be disclosed
distinctively in the monthly portfolio statement of mutual fund
schemes.
12.4 Transactions in Corporate Bonds/Commercial Papers through
Request for Quotes (“RFQ”) platform: 420 421
12.4.1 In order to increase the liquidity on exchange platform:
12.4.1.1 On monthly basis, Mutual Funds shall undertake minimum 25%
of their total secondary market trades by value (excluding Inter
Scheme Transfer trades) in Corporate Bonds by placing/seeking
420 SEBI circular No. SEBI/HO/IMD/DF3/CIR/P/2020/130 dated July 22, 2020, Refer SEBI
letter No. SEBI/HO/OW/IMD-II/DOF3/P/2021/1467/1 dated January 18, 2021
421 SEBI circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/641 dated October 6, 2021
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Master Circular for Mutual Funds as on March 31, 2024
quotes through one-to-many mode on the Request for Quote
(RFQ) platform of stock exchanges and
12.4.1.2 On monthly basis, Mutual Funds shall now undertake minimum
10% of their total secondary market trades by value (excluding
Inter Scheme Transfer trades) in Commercial Papers by
placing/seeking quotes through one-to-many mode on the
Request for Quote (RFQ) platform of stock exchanges
12.4.1.3 The percentage as specified shall be reckoned on the average of
secondary trades by value in immediate preceding three months
on rolling basis.
For example, for the month of October 2020, Mutual Funds shall
undertake 10% (by value) of their average secondary market
trades (excluding IST) done in immediate preceding three months
i.e. July 2020, August 2020 and September 2020 for Corporate
bonds by placing/seeking quotes through RFQ platform for Stock
exchanges.
12.4.1.4 All transactions in Corporate Bonds and Commercial Papers
wherein Mutual Fund is on both sides of the trade shall be
executed through RFQ platform of stock exchanges in one-to-one
mode.
12.4.1.5 Any transaction entered by mutual fund in Corporate Bonds in
one to many mode and gets executed with another mutual fund
shall also be counted for the aforesaid 10% requirement.
12.4.1.6 Mutual Funds are permitted to accept the Contract Note from the
brokers for transactions carried out in One to One (OTO) and One
to Many (OTM) modes of RFQ platform.
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12.5 Investments by Index Funds:422
12.5.1 Investments by index funds shall be in accordance with the weightage
of the scrips in the specific index as disclosed in the SID423 In case of
sector or industry specific scheme, the upper ceiling on investments
may be in accordance with the weightage of the scrips in the
representative sectoral index or sub index as disclosed in the SID or
10% of the NAV of the scheme, whichever is higher.
12.6 Investments by Liquid Schemes and plans424
12.6.1 The ‘liquid fund schemes and plans’ shall make investment in
/purchase debt and money market securities with maturity of upto
91 days only with effect from May 1, 2009425. This shall also be
applicable in case of inter scheme transfer of securities 426
12.6.1.1 Explanation:
a. In case of securities where the principal is to be repaid in a single
payout the maturity of the securities shall mean residual
maturity. In case the principal is to be repaid in more than one
payout then the maturity of the securities shall be calculated on
the basis of weighted average maturity of security.
422 SEBI Circular No - MFD/CIR/09/014/2000 dated January 5, 2000, Refer SEBI letter No.
SEBI/H0/0W/IMD-II/DOF3/P/24098/2022 dated June 10, 2022
423 See Clause 10, Seventh Schedule of Mutual Funds Regulations.
< 4 24 SEBI Circular No - SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009
426 Transition provision: Inter-scheme transfers of securities having maturity upto 365 days
and held in other schemes as on February 01, 2009 shall be permitted till October 31, 2009.
With effect from November 1, 2009 the requirements stated at paragraph 12.3.1 above shall
apply to such inter-se scheme transfers also.
<
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b. In case of securities with put and call options (daily or otherwise)
the residual maturity of the securities shall not be greater than
91 days427
c. In case the maturity of the security falls on a non-business day
then settlement of securities will take place on the next business
day.
12.6.2 The above requirements shall be disclosed in the SID and shall form
part of the investment allocation pattern. Any deviation from these
requirements shall be viewed as violation of investment restrictions.
12.7 Investments by close ended debt schemes428:
12.7.1 Close ended debt schemes shall invest only in such securities which
mature on or before the date of the maturity of the scheme429
12.7.2 Close ended debt schemes shall not invest in perpetual bonds.430
12.8 Introduction of credit risk based single issuer limit for investment
by mutual fund schemes in debt and money market instruments431
12.8.1 As per Regulation 44(1) read with clause 1 of Seventh Schedule of
SEBI (Mutual Funds) Regulations, 1996 (“MF Regulation”), a mutual
fund scheme shall not invest more than 10% of its NAV in debt
instruments, issued by a single issuer, comprising money market
securities and non-money market securities rated investment grade
427 Applicable with effect from May 01, 2009.
428 Refer SEBI letter No. SEBI/HO/IMD/IMD-RAC-2/P/OW/2023/26266/1 dated June 28,
2023
429 SEBI Circular No IMD/CIR No 12/147132/08 dated December 11, 2008. Also refer
Regulations 32, 33, 52(4)(xiid), 18(4)(h), 48(2) for other provisions pertaining to close-ended
schemes.
430 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2021/032 dated March 10, 2021
431 SEBI Circular No. SEBI/HO/IMD/IMD-1 DOF2/P/CIR/2022/164 dated November 29,
2022
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Master Circular for Mutual Funds as on March 31, 2024
or above by a Credit Rating Agency (CRA). This overall investment limit
may be extended to 12% of the NAV of the scheme with the prior
approval of the Board of Trustees and Board of Directors of the Asset
Management Company.
12.8.2 In order to avoid inconsistency in investment by mutual funds in debt
instruments of an issuer, irrespective of the scheme being actively or
passively managed, it has been decided to introduce a credit rating
based single issuer limit for actively managed mutual fund schemes.
12.8.3 Accordingly, within the limits specified in the clause 1 of Seventh
Schedule432, following prudential limits shall be followed, for schemes
other than Credit risk funds:
12.8.3.1 A Mutual Fund scheme shall not invest more than:
a) 10% of its NAV in debt and money market securities rated AAA;
or
b) 8% of its NAV in debt and money market securities rated AA;
or
c) 6% of its NAV in debt and money market securities rated A and
below issued by a single issuer
The above instrument limits may be extended by up to 2% of the
NAV of the scheme with prior approval of the Board of Trustees
and Board of Directors of the AMC, subject to compliance with
the overall 12% limit specified in clause 1 of Seventh Schedule433.
12.8.4 The long term rating of issuers shall be considered for the money
market instruments. However, if there is no long term rating available
432 SEBI (Mutual Funds) Regulations, 1996
433 SEBI (Mutual Funds) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
for the same issuer, then based on credit rating mapping of CRAs
between short term and long term ratings, the most conservative long
term rating shall be taken for a given short term rating. Exposure to
government money market instruments such as TREPS on G-Sec/ T-
bills shall be treated as exposure to government securities.
12.8.5 The above provisions shall be applicable for all the new schemes to be
launched with effect from November 29, 2022. Existing schemes (as
on November 29, 2022) shall be grandfathered from these guidelines
till the maturity of the underlying debt and money market securities.
12.9 Prudential limits and disclosures on portfolio concentration risk
in debt oriented mutual fund schemes434 435
12.9.1 436Mutual Funds/AMCs shall ensure that total exposure of debt
schemes of mutual funds in a particular sector (excluding
investments in Bank CDs, triparty repo on Government securities or
treasury bills437, G-Secs, TBills, short term deposits of Scheduled
Commercial Banks and AAA rated securities issued by Public
Financial Institutions and Public Sector Banks) shall not exceed 20%
of the net assets of the scheme;
Provided that an additional exposure to financial services sector (over
and above the limit of 20%) not exceeding 10% of the net assets of the
scheme shall be allowed only by way of increase in exposure to
Housing Finance Companies (HFCs); Further, an additional exposure
of 5% of the net assets of the scheme has been allowed for investments
434 SEBI Circular No. CIR/IMD/ DF/ 21/ 2012 dated September 13, 2012 and SEBI Circular
No. CIR/IMD/DF/24/2012 dated November 19, 2012 SEBI/ HO/ IMD/ DF2/CIR/P/2016/35
dated February 15, 2016 and SEBI Circular No. SEBI/ HO/ IMD/ DF2/CIR/P/2016/68 dated
August 10, 2016
435 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 1, 2019
436 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/14 dated February 22, 2017
437 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
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Master Circular for Mutual Funds as on March 31, 2024
in securitized debt instruments based on retail housing loan portfolio
and/or affordable housing loan portfolio.
However, the overall exposure in HFCs shall not exceed the sector
exposure limit of 20% of the net assets of the scheme.
Provided further that the additional exposure to such securities
issued by HFCs are rated AA and above and these HFCs are registered
with National Housing Bank (NHB) and the total investment/
exposure in HFCs shall not exceed 20% of the net assets of the
scheme.
12.9.2 Further, appropriate disclosures in this regard shall be made in
Scheme Information Document (SID) and Key Information
Memorandum (KIM) of debt schemes.
12.9.3 Group Exposure –
12.9.3.1 Mutual Funds/ AMCs shall ensure that total exposure of debt
schemes of mutual funds in a group (excluding investments in
securities issued by Public Sector Units, Public Financial
Institutions and Public Sector Banks) shall not exceed 20% of the
net assets of the scheme. Such investment limit may be extended
to 25% of the net assets of the scheme with the prior approval of
the Board of Trustees.
12.9.3.2 The investments by debt mutual fund schemes in debt and
money market instruments of group companies of both the
sponsor and the asset management company shall not exceed
10% of the net assets of the scheme. Such investment limit may
be extended to 15% of the net assets of the scheme with the prior
approval of the Board of Trustees. 438
438 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 1, 2019
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Master Circular for Mutual Funds as on March 31, 2024
12.9.3.3 For this purpose, a group means a group as defined under
regulation 2 (mm) of SEBI (Mutual Funds) Regulations, 1996
(Regulations) and shall include an entity, its subsidiaries, fellow
subsidiaries, its holding company and its associates.
12.9.3.4 The investments of mutual fund schemes in debt and money
market instruments of group companies of both the sponsor and
the asset management company of the mutual fund in excess of
the limits specified therein, made on or before October 1, 2019
may be grandfathered till maturity date of such instruments. The
maturity date of such instruments shall be as applicable on
October 1, 2019.
12.9.3.5 All AMCs shall publish on their respective website a list of their
group companies and those of their sponsor(s).439
12.9.3.6 AMFI shall publish on its website a list of all group companies
along with names and identifier of the respective group that are
considered for calculation of group exposure by mutual fund
schemes and also the sector to which each company belongs. 440
12.9.3.7 The disclosures at Paragraphs 12.9.3.5 and 12.9.3.6 above shall
be made on 1st working day of each calendar quarter starting
from January 1, 2020.441
12.9.4 Trustee shall review exposure of a mutual fund, across all its schemes,
towards individual issuers, group companies and sectors. Trustee
should satisfy themselves on the levels of exposure and confirm the
same to SEBI in the half-yearly trustee report starting from the half-
year ending March 31, 2016.
439 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/152 dated December 10, 2019
440 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/152 dated December 10, 2019
441 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/152 dated December 10, 2019
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12.9.5 The revised investment restrictions at issuer level, sector level and
group level shall be applicable to all new schemes and fresh
investments by existing schemes from February 15, 2016.
12.9.6 Existing mutual fund schemes shall comply with the revised
investment restrictions at issuer level, sector level and group level
within a period of one year from February 15, 2016. Existing close
ended schemes shall not be required to sell their investments to
comply with the restrictions. However, if existing close ended schemes
sell their investments then their fresh investments shall be subject to
the restrictions.
12.10 442Investment in Non-Convertible Preference Shares(NCPSs):
12.10.1 NCPSs shall be treated as debt instruments and investment
restrictions as applicable on debt instruments as specified in MF
Regulations & circulars issued thereunder shall also be applicable
to NCPSs.
12.11 Stock Lending Scheme443
12.11.1 The following guidelines are issued to facilitate lending of securities
by Mutual Funds through intermediaries approved by the Board in
accordance with the Stock Lending & Borrowing Scheme.444
Existing schemes (schemes existing as on June 6, 2008) may
engage in short selling of securities as well as lending and
borrowing of securities after making additional disclosures
442 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
443 SEBI/IMD/CIR No.6/127947/08 dated June 6, 2008 read with SEBI Circular No
MFD/CIR/01/047/99 dated February 10, 1999.
, 4 44 Regulation 44(4) of the SEBI (Mutual Funds) Regulations, 1996.
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including risk factors in the SID in accordance with Paragraph 1.2.2
of this Master Circular, as amended from time to time.
12.11.2 Disclosure Requirements
12.11.2.1 The following information shall be disclosed in the SID to enable
the investors and unit holders to take an informed decision:
a. Intention to lend securities belonging to a particular Mutual
Fund scheme in accordance with the guidelines on securities
lending and borrowing issued by SEBI from time to time.445
b. Exposure limit with regard to securities lending, both for the
scheme as well as for a single intermediary.
c. Risks factors such as loss, bankruptcy etc. associated with
such transactions.
12.11.3 Reporting Requirement
12.11.3.1 The AMC(s) shall report to the Trustees on a quarterly basis
about the level of lending, in terms of value, volume and
intermediaries and also earnings and/or losses, value of
collateral security etc.
12.11.3.2 The Trustees shall periodically review the securities lending
contract and take reasonable steps to ensure that the same is
not, in any way, detrimental to the interests of the unit holders
of the scheme.
12.11.3.3 The Trustees shall offer their comments on the above aspects in
the Half Yearly Trustee Report filed with the Board.446
445 SEBI Circular No - SEBI / IMD / CIR No 14 / 187175/ 2009 dated December 15,2009
446 Regulation 18(23)(a) of the Mutual Funds Regulations. Further, for format of Half Yearly
Trustee Report, please refer to format no. 2.C under the section on Formats.
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12.11.4 Existing schemes
12.11.4.1 In case an existing SID does not provide for lending of securities,
AMCs may still lend securities belonging to the scheme, in
accordance with the SEBI Guidelines, provided approval is
obtained from the Trustees and the intention to lend securities is
conveyed to the unit holders.
12.12 Approval for Investment in Unrated Debt Instruments447
12.12.1 AMCs may, for the purpose of operational flexibility, constitute
committees to approve investment proposals in unrated
instruments. However, detailed parameters for investment in
unrated debt instruments have to be approved by the Board of the
AMC and Trustees. Details of such investments shall be
communicated by the AMCs to the Trustees in their periodical
reports, along with clear indication as to how the parameters set for
investments have been complied with. Prior approval of the Board
of the AMC and Trustees shall be required in case investment is
sought to be made in an unrated security falling outside the
prescribed parameters.
12.13 Investments in Units of Venture Capital Funds448
12.13.1 Mutual Fund schemes can invest in units of Venture Capital Funds
within the prescribed investment limits as applicable.449
12.14 Investment limits for Government guaranteed debt securities450
447 SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000.
448 SEBI Circular No. MFD/CIR/9/230/2001 dated August 14, 2001.
, 4 ,, 49 Clauses 10 and 11, Seventh Schedule of SEBI (Mutual Funds), Regulations, 1996.
, 4 , 50 SEBI Circular No. SEBI/IMD/CIR No.8/18944/03 dated October 6, 2003.
,
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12.14.1 Prudential investment norms as per Regulations stipulating limits
for investments in debt securities451 issued by a single issuer are
applicable to all debt securities issued by public bodies or
institutions such as electricity boards, municipal corporations,
state transport corporations etc. guaranteed by either State /
Central Government. Government securities issued by Central
and/or State Government or on its behalf, by the RBI are however
exempt from these limits.
12.15 Investment Restrictions for Securitised Debt452
12.15.1 For investments made in Securitised Debt (mortgage backed
securities and asset backed securities), restrictions as per Clause 1
of Seventh Schedule453 shall not apply at the originator level.
12.16 Investments in Short Term Deposits (STDs) of Scheduled
Commercial Banks - pending deployment454
12.16.1 The guidelines for deployment of funds in short term deposits of
commercial banks for schemes are as under:
12.16.1.1 “Short Term” for parking of funds by Mutual Funds shall be
treated as a period not exceeding 91 days.
12.16.1.2 Such deposits shall be held in the name of the concerned
scheme.
451 Clauses 1 and 1A, Seventh Schedule of SEBI (Mutual Funds), Regulations, 1996.
, 4 , 52 SEBI Circular No. SEBI/IMD/CIR No.6/63715/06 dated March 29, 2006, Refer SEBI email
dated August 25, 2010
453 Clause I of Schedule VII of SEBI (Mutual Fund), Regulations, 1996
454 SEBI Circulars No. SEBI/IMD/CIR No.9/20306/03 dated November 12, 2003, SEBI
Circular No. SEBI/IMD/Cir No.1/91171/07 dated April 16, 2007, SEBI and Clause 8 of
Seventh Schedule of Mutual Funds Regulations, 1996.
,,,
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12.16.1.3 No mutual fund scheme shall park more than 15% of their net
assets in short term deposits of all scheduled commercial banks
put together. This limit however may be raised to 20% with prior
approval of the Trustees. Also, parking of funds in short term
deposits of associate and sponsor scheduled commercial banks
together shall not exceed 20% of the total deployment by the
Mutual Fund in short term deposits.
12.16.1.4 No mutual fund scheme shall park more than 10% of the net
assets in short term deposits with any one scheduled commercial
bank including its subsidiaries.
12.16.1.5 Trustees/AMCs shall ensure that no funds of a scheme is parked
in Short Term Deposit of a bank which has invested in that
scheme. Trustees/AMCs shall also ensure that the bank in
which a scheme has STD do not invest in the said scheme until
the scheme has STD with such bank.455
12.16.1.6 Asset Management Company (AMC) shall not be permitted to
charge investment management and advisory fees for parking of
funds in short term deposits of scheduled commercial
banks.456Half Yearly portfolio statements shall disclose all funds
parked in short term deposit(s) under a separate heading. Details
shall also include name of the bank, amount of funds parked,
percentage of NAV.
12.16.1.7 Trustees shall, in the Half Yearly Trustee Reports certify that
provisions of the Mutual Funds Regulations pertaining to
parking of funds in short term deposits pending deployment are
455 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/093 dated August 16, 2019.
, 4 ,,,,, 56 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/101 dated September 20, 2019.
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complied with at all points of time. The AMC(s) shall also certify
the same in its CTR(s).
12.16.1.8 Investments made in short term deposits pending deployment of
funds457 shall be recorded458 and reported to the Trustees
including the reasons for the investment especially comparisons
with interest rates offered by other scheduled commercial
banks.459
12.16.1.9 Except for Paragraph 12.16.1.7 above, the above guidelines shall
not apply to term deposits placed as margins for trading in cash
and derivatives market460. All term deposits placed as margins
shall be disclosed in the half yearly portfolio statements under a
separate heading. Details such as name of bank, amount of term
deposits, duration of term deposits, percentage of NAV may be
disclosed461.
12.17 Reconciliation Procedure for Investment in Government
Securities462
12.17.1 According to the RBI guidelines463 issued to all SGL account
holders, to make transactions in government securities
transparent, a monthly reconciliation system has been introduced
457 Clause 8, Schedule Seven, SEBI (Mutual Funds), Regulations, 1996.
, 4 ,,,,, 58 SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000.
,4, 59 SEB I Circul ar No. SEBI/IMD/CIR No.9/20306/03 dated November 12, 2003.
, 460 SEBI Circular No. SEBI/IMD/Cir No.7/129592/08 dated June 23, 2008.
461 SEBI Circular No. SEBI/IMD/Cir No.7/129592/08 dated June 23, 2008
462 SEBI Circular No. MFD/CIR/19/22474/2002 dated November 20, 2002.
, 4 , 63 RBI Circular No.P.D.O.SGL.CIRR/1945/2002-2003 dated November 1, 2002.
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between RBI and Mutual Funds maintaining SGL/CSGL accounts
with respect to Government Securities on an ongoing basis.
12.17.2 AMCs shall reconcile the balances reported in the monthly
statements furnished by RBI with the transactions undertaken by
them.
12.17.3 The reconciliation procedure shall be made part of internal audit
and the auditors shall on a continuous basis, check the status of
reconciliation and submit a report to the Audit Committee. These
reports shall be placed in the meetings of the Board of the AMC and
Trustees. AMCs shall submit, on a quarterly basis to the RBI, a
certificate confirming compliance with these requirements and any
other guidelines issued by the RBI from time to time in this regard.
Compliance shall also be reported to the Board in the CTRs of
AMC(s) and Half Yearly Trustee Reports.
12.18 Participation of mutual funds in repo in corporate debt
securities464
12.18.1 Mutual funds can participate in repos in corporate debt securities
as per the guidelines issued by RBI from time to time, subject to the
following conditions:
12.18.1.1 The gross exposure of any mutual fund scheme to repo
transactions in corporate debt securities shall not be more than
10 % of the net assets of the concerned scheme.
12.18.1.2 The cumulative gross exposure through repo transactions in
corporate debt securities along with equity, debt and derivatives
shall not exceed 100% of the net assets of the concerned scheme.
464 SEBI Circular No. CIR/IMD/DF/19/2011 dated November 11, 2011
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12.18.1.3 [Mutual funds shall participate in repo transactions on
following corporate debt securities:
a) Listed AA and above rated corporate debt securities
b) Commercial Papers (CPs) and Certificate of Deposits
(CDs)]465
12.18.1.3A [For the purpose of consideration of credit rating of exposures on
repo transactions for various purposes including for Potential Risk
Class (PRC) matrix, liquidity ratios, Risk-o-meter etc., the same
shall be as that of the underlying securities, i.e., on a look through
basis.
12.18.1.3B For transactions where settlement is guaranteed by a Clearing
Corporation, the exposure shall not be considered for the purpose
of determination of investment limits for single issuer, group
issuer and sector level limits.]466
12.18.1.4 In terms of Regulation 44 (2) of the Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996, mutual funds
shall borrow through repo transactions only if the tenor of the
transaction does not exceed a period of six months.
12.18.1.5 The Trustees and the Asset Management Companies shall frame
guidelines about, inter alia, the following in context of these
transactions keeping in mind the interest of investors in their
schemes:
465 Substituted vide SEBI Circular No. SEBI/HO/IMD/IMD PoD-2/P/CIR/2023/85 dated
June 8, 2023. Prior to substitution, clause read as under:
“Mutual funds shall participate in repo transactions only in AA and above rated corporate debt
securities.”
466 Inserted vide SEBI Circular No. SEBI/HO/IMD/IMD PoD-2/P/CIR/2023/85 dated June
8, 2023.
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a. Category of counterparty
b. Credit rating of counterparty
c. Tenor of collateral
d. Applicable haircuts
12.18.1.6 AMCs shall ensure compliance with the Seventh Schedule of the
Mutual Funds Regulations about restrictions on
investments, wherever applicable, with respect to repo
transactions in corporate debt securities.
12.18.1.7 The details of repo transactions of the schemes in corporate debt
securities, including details of counterparties, amount involved
and percentage of NAV shall be disclosed to investors in the half
yearly portfolio statements and to SEBI in the half yearly trustee
report.
12.18.1.8 To enable the investors in the mutual fund schemes to take an
informed decision, the concerned Scheme Information Document
shall disclose the following:
a. The intention to participate in repo transactions in
corporate debt securities in accordance with directions
issued by RBI and SEBI from time to time;
b. The exposure limit for the scheme; and
c. The risk factors associated with repo transactions in
corporate bonds.
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12.19 Overseas Investment467 468
12.19.1 Applicable limits:
12.19.1.1 469Mutual Funds can make overseas investments subject to a
maximum of US $ 1 billion per Mutual Fund, within the overall
industry limit of US $ 7 billion.
12.19.1.2 Mutual Funds can make overseas investments in Exchange
Traded Fund (ETF(s)) subject to a maximum of US $ 300 million
per Mutual Fund, within the overall industry limit of US $ 1
billion.
12.19.1.3 The allocation methodology of the aforementioned limits shall be
as follows:
a. In case of overseas investments specified at Paragraph
12.19.1.1 above, US $ 50 million would be reserved for
each mutual fund individually, with in the overall industry
limit of US $ 7 billion.
b. New Fund Offers (“NFOs”): Mutual Funds launching new
schemes intending to invest in Overseas securities /
Overseas ETFs shall ensure that the scheme documents
shall disclose the intended amount that they plan to invest
in Overseas securities / Overseas ETFs subject to
maximum limits specified at Paragraph 12.19.1, as the
case maybe. Such limits disclosed in scheme documents
will be valid for a period of six months from the date of
467 SEBI Circular No. SEBI/IMD/CIR No.7/104753/07 dated September 26, 2007 & SEBI
Circular No. SEBI/IMD/CIR No.2/122577/08 dated April 8, 2008, Refer SEBI letter No.
SEBI/HO/IMD/IMDII/DOF3/P/OW/2021/11530/1 dated June 4, 2021, Refer SEBI emails
dated January 28, 2022, March 19, 2024 and March 20, 2024.
468 SEBI Circular No.SEBI/HO/IMD/DF3/CIR/P/2020/225 dated November 05, 2020.
469 SEBI Circular No. SEBI/HO/IMD/IMD-II/DOF3/P/CIR/2021/571 dated June 03, 2021.
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closure of NFO. Further investments should follow the
norms for ongoing schemes.
c. Ongoing Schemes: For all ongoing schemes that invest or
are allowed to invest in Overseas securities / Overseas
ETFs, an investment headroom of 20% of the average AUM
in Overseas securities / Overseas ETFs of the previous
three calendar months would be available to the Mutual
Fund for that month to invest in Overseas securities /
Overseas ETFs subject to maximum limits specified at
Paragraph 12.19.1 above, as the case maybe.
d. 470The above disclosure Paragraph 12.19.1.3.(b) and
12.19.1.3.(c) would be soft limits for the purpose of
reporting only by Mutual Funds on monthly basis in the
prescribed format471.
12.19.1.4 Further, Mutual Funds shall report the utilization of overseas
investment limits on monthly basis, within 10 days from end of
each month. The format for reporting is enclosed at formats
section472
12.19.2 Permissible Investments:
12.19.2.1 ADR(s) and/or GDR(s) issued by Indian or foreign companies.
12.19.2.2 Equity of overseas companies listed on recognized Stock
Exchanges overseas.
12.19.2.3 Initial and Follow on Public Offerings for listing at recognized
Stock Exchanges overseas.
470 SEBI Circular No. SEBI/HO/IMD/IMD-II/DOF3/P/CIR/2021/571 dated June 03, 2021.
471 Please refer Format no. 2.I under the section on formats
472 Please refer Format no. 2.I under the section on formats
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Master Circular for Mutual Funds as on March 31, 2024
12.19.2.4 Foreign debt securities in the countries with fully convertible
currencies, short term as well as long term debt instruments with
rating not below investment grade by accredited/ registered
credit rating agencies.
12.19.2.5 Money Market Instruments rated not below investment grade.
12.19.2.6 Repos in form of investment, where the counterparty is rated not
below investment grade; repo shall not however involve any
borrowing of funds by Mutual Funds.
12.19.2.7 Government securities where the countries are rated not below
investment grade.
12.19.2.8 Derivatives traded on recognized stock exchanges overseas only
for hedging and portfolio balancing with underlying as securities.
12.19.2.9 Short term deposits with banks overseas where the issuer is
rated not below investment grade.
12.19.2.10 Units / securities issued by overseas Mutual Funds or unit
trusts registered with overseas regulators and investing in
a. Aforesaid Securities
b. Real Estate Investment Trusts listed on recognized Stock
Exchanges overseas or
c. Unlisted overseas securities, not exceeding 10% of their
net assets
12.19.3 Other Conditions: Apart from SEBI (Mutual Funds) Regulations,
1996 and guidelines issued from time to time, the AMCs shall
adhere to the following specific guidelines while making overseas
investments:
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Master Circular for Mutual Funds as on March 31, 2024
12.19.3.1 Appointment of a Dedicated Fund Manager:
a. A dedicated fund manager shall be appointed for making the
above overseas investments stipulated under Paragraph
12.19.2.1 to 12.19.2.9.
12.19.3.2 Due Diligence:
a. The Board of the AMC and Trustees shall exercise due
diligence in making investment decisions and record the
same.473 They shall make a detailed analysis of risks and
returns of overseas investment and how these investments
would be in the interest of investors. Investment shall be
made in liquid actively traded securities /instruments.
b. The Board of the AMC and Trustees may prescribe detailed
parameters for making such investments which may include
identification of countries, country rating, country limits etc.
They shall satisfy themselves that the AMC has experienced
key personnel, research facilities and infrastructure for
making such investments. Other specialized agencies and
service providers associated with such investments e.g.
custodian, bank, advisors etc. shall also have adequate
expertise and infrastructure facilities. Their past track record
of performance and regulatory compliance record, if they are
registered with foreign regulators, should also be considered.
Necessary agreements may be entered into with them as
required.
12.19.3.3 Mandatory Disclosure Requirements for Mutual Fund schemes
proposing overseas investments:
473 SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000.
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a. Intention to invest in foreign securities and/or ETF(s) shall
be disclosed in the SID. The attendant risk factors and
returns ensuing from such investments shall be explained
clearly in the SID. AMCs shall also disclose as to how such
investments will help in the furtherance of the investment
objectives of the scheme(s). Such disclosures shall be in a
language comprehensible to an average investor.
b. AMCs shall disclose the name of the Dedicated Fund Manager
for making overseas investments as stipulated under
Paragraph 12.19.3.1.a above.
c. AMCs shall disclose exposure limits i.e. the percentage of
assets of the scheme they would invest in foreign securities /
ETF(s).
d. Such investments shall be disclosed while disclosing Half
Yearly portfolios in the prescribed format under a separate
heading "Foreign Securities and/or overseas ETF(s)." Scheme
wise percentage of investments made in such securities shall
be disclosed while publishing Half Yearly Results in the
prescribed format474 as a footnote.
12.19.3.4 Investment by Existing Schemes:
a. Existing schemes of Mutual Funds where the SID provides for
investment in foreign securities and attendant risk factors
but which have not yet invested, may invest in foreign
securities, consistent with the investment objectives of the
schemes, provided a Dedicated Fund Manager has been
appointed as stipulated in Paragraph 12.19.3.1 above.
474 For Half Yearly Results, please refer to format no. 3.A under the section on Formats
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Master Circular for Mutual Funds as on March 31, 2024
Additional disclosures specified above shall be included by
way of addendum and unit holders will be informed
accordingly.
b. In case the SID of an existing scheme does not provide for
overseas investment, the scheme, if it so desires, may make
such investments in accordance with these Guidelines,
provided that prior to the overseas investments for the first
time, the AMC shall ensure that a written communication
about the proposed investment is sent to each unit holder
and an advertisement is given in one English daily
newspaper having nationwide circulation as well as in a
newspaper published in the language of the region where
the Head Office of the Mutual Fund is situated. The
communication to unit holders shall also disclose the risk
factors associated with such investments.
12.19.3.5 Detailed periodic reporting to Trustees by AMC(s) shall include:
a. Performance of overseas investments
b. Amount invested in various schemes and any breach of the
exposure limit laid down in the SID.
12.19.3.6 Review of Performance:
a. The Board of the AMC and Trustees shall review the
performance of schemes making overseas investments with
appropriate benchmark(s) as disclosed in the SID.
12.19.3.7 Reporting to the Board:
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Master Circular for Mutual Funds as on March 31, 2024
a. The Trustees shall offer their comments on the compliance
of these guidelines in the Half Yearly Reports filed with the
Board.
12.19.3.8 Prudential Investment Norms:
a. Investment restrictions specified in Schedule Seven of the
Mutual Funds Regulations are applicable to overseas
investments stipulated under Paragraphs 12.19.2.1-
12.19.2.10 above.
b. However, Clause 4 of the Seventh Schedule of the Mutual
Funds Regulations that restricts investments in Mutual
Fund units up to 5% of net assets and prohibits charging of
fees, shall not be applicable to investments in Mutual Funds
in foreign countries made in accordance with these
Guidelines.
c. Management fees and other expenses charged by the Mutual
Funds in foreign countries along with the management fee
and recurring expenses charged to the domestic Mutual
Fund scheme shall not exceed the total limits on expenses
as prescribed under Regulation 52(6) of the Mutual Funds
Regulations. Where the scheme is investing only a part of
the net assets in overseas Mutual Funds, the same principle
shall be applicable for that part of investment. Details of
calculation for charging such expenses shall be reported to
the Board of the AMC and the Trustees and shall also be
disclosed in the Annual Report of the scheme.
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Master Circular for Mutual Funds as on March 31, 2024
d. The application475 for seeking approval for investing in
foreign securities, ADR/GDR/overseas ETF(s) shall be made
in advance of making investments. On receipt of approval
from the Board, intimation may be sent by the AMC(s) to
Overseas Investment Division, Foreign Exchange
Department, RBI.
12.20 Investments in Indian Depository Receipts (IDRs) 476
12.20.1 Mutual funds can invest in Indian Depository Receipts477 [Indian
Depository Receipts as defined in Companies (Issue of Indian
Depository Receipts) Rules, 2004] subject to compliance with SEBI
(Mutual Funds) Regulations 1996 and guidelines issued there
under, specifically investment restrictions as specified in the
Seventh Schedule of the Regulations.
12.21 Investments in units of REITs / InvITs478
12.21.1 The investment restrictions mentioned at Clause 13 in the Seventh
Schedule of SEBI (Mutual Funds) Regulations, 1996 shall be
applicable to all fresh investments by all schemes, including an
existing scheme.
12.21.2 Any existing scheme intending to invest in units of REITs/InvITs
shall abide by the provisions of Regulation 18 (15A) of SEBI (Mutual
Funds) Regulations, 1996.
12.21.3 For investment in units of REITs / InvITs by an existing Mutual
Fund scheme, unit holders of the scheme shall be given a time
475 Please refer to format no. 4 under the section on formats for format of proposal for
investments in foreign securities and ETFs
476 SEBI Circular No. IMD/CIR. No.1/165935/2009 dated June 09, 2009
477 Regulation 43(1) of SEBI (Mutual Funds) Regulations, 1996
478 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/17 dated February 28, 2017
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Master Circular for Mutual Funds as on March 31, 2024
period of at least 15 days for the purpose of exercising the exit
option.
12.22 Investment Restrictions479
12.22.1 All investment restrictions as contained in the Regulations480 shall
be applicable at the time of making investment.
12.23 Recording of Investment Decisions481
12.23.1 AMC(s) shall exercise due diligence and care in all investment
decisions as would be exercised by other persons engaged in the
same business.482 Further AMC(s) shall maintain records in
support of each investment decision which will indicate data, facts
and opinion leading to that decision. While broad parameters for
investments can be prescribed by the Board of Directors of the
AMC, the basis for taking individual scrip wise investment decision
in equity and debt securities shall be recorded. A detailed research
report analyzing various factors for each investment decision taken
for the first time shall be maintained and the reasons for
subsequent purchase and sales in the same scrip shall also be
recorded. The contents of the research reports may be decided by
the AMC(s) and the Trustees.
12.23.2 The Board of the AMC shall develop a mechanism to verify that due
diligence is being exercised while making investment decisions
especially in cases of investment in unlisted and privately placed
479 SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000, Refer SEBI letter No.
SEBI/HO/IMD-II/DoF8/OW/P/05031/2022- dated February 07, 2022
480 Seventh Schedule of SEBI (Mutual Funds) Regulations, 1996.
481 SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000, Refer SEBI letter No.
SEBI/HO/IMD II/DoF4/OW/P/3503/2021 dated February 09, 2021
482 Regulation 2 5(2) of the SEBI (Mutual Funds) Regulations, 1996.
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securities, unrated debt securities, securities classified as below
investment grade or default483, transactions where associates are
involved and instances where the performance of the scheme(s) is
poor.
12.23.3 AMC(s) shall report compliance with these requirements in their
periodical reports to the Trustees and the Trustees shall report the
same to the Board in the Half Yearly Trustee Reports484. Trustees
shall also check compliance with these Guidelines through
independent auditors or internal and/or statutory auditors or other
systems developed by them.
12.24 Cumulative Gross Exposure Limits485:
12.24.1 The cumulative gross exposure through equity, debt, derivative
positions (including commodity and fixed income derivatives), repo
transactions and credit default swaps in corporate debt securities,
Real Estate Investment Trusts (REITs), Infrastructure Investment
Trusts (InvITs), other permitted securities/assets and such other
securities/assets as may be permitted by the Board from time to
time should not exceed 100% of the net assets of the scheme.
12.25 Norms for investment and disclosure by Mutual Funds in
derivatives486
12.25.1 Mutual Funds shall not write options or purchase instruments with
embedded written options except for the covered call strategy487.
483 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019.
484 For Half Yearly Trustee Report please refer to format no. 2.C under the section on Formats
485 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
486 SEBI Circular No. Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010 and SEBI Circular No.
SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021, Refer SEBI letter No.
SEBI/HO/ IMD-II/DOF3/OW/P/2021/31487/1 dated November 3, 2021
487 Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/17 dated January 16, 2019
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12.25.2 The total exposure related to option premium paid must not exceed
20% of the net assets of the scheme.
12.25.3 Cash or cash equivalents with residual maturity of less than 91
days may be treated as not creating any exposure.
12.25.4 Exposure due to hedging positions may not be included in the above
mentioned limits subject to the following:
a. Hedging positions are the derivative positions that reduce
possible losses on an existing position in securities and till the
existing position remains.
b. Hedging positions cannot be taken for existing derivative
positions. Exposure due to such positions shall have to be
added and treated under limits mentioned in Paragraph 12.24.1
above.
c. Any derivative instrument used to hedge has the same
underlying security as the existing position being hedged.
d. The quantity of underlying associated with the derivative
position taken for hedging purposes does not exceed the
quantity of the existing position against which hedge has been
taken.
12.25.5 488Mutual Funds may enter into plain vanilla Interest Rate Swaps
(IRS) for hedging purposes. The value of the notional principal in
such cases must not exceed the value of respective existing assets
being hedged by the scheme.
488 SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/580 dated June 18, 2021
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12.25.6 In case of participation in IRS is through over the counter
transactions, the counter party has to be an entity recognized as a
market maker by RBI and exposure to a single counterparty scheme
in such transactions should not exceed 10% of the net assets of the
scheme. However, if mutual funds are transacting in IRS through
an electronic trading platform offered by the Clearing Corporation
of India Ltd (CCIL) and CCIL is the central counterparty for such
transactions guaranteeing settlement, the single counterparty limit
of 10% shall not be applicable.
12.25.7 Exposure due to derivative positions taken for hedging purposes in
excess of the underlying position against which the hedging
position has been taken, shall be treated under the limits
mentioned in Paragraph 12.24.1.
12.25.8 Writing of Covered Call Options by Mutual Fund Schemes489:
Mutual funds have been permitted to write call options under a
covered call strategy as prescribed below:
i. Mutual Fund schemes (except Index Funds and ETFs) may write
call options only under a covered call strategy for constituent
stocks of NIFTY 50 and BSE SENSEX subject to the following:
a. The total notional value (taking into account strike price as
well as premium value) of call options written by a scheme
shall not exceed 15% of the total market value of equity
shares held in that scheme.
b. The total number of shares underlying the call options
written shall not exceed 30% of the unencumbered shares
489 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/17 dated January 16, 2019
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of a particular company held in the scheme. The
unencumbered shares in a scheme shall mean shares that
are not part of Securities Lending and Borrowing
Mechanism (SLBM), margin or any other kind of
encumbrances.
c. At all points of time the Mutual Fund scheme shall comply
with the provisions at Paragraphs 12.25.8.(i).(a) and
12.25.8.(i).(b) above. In case of any passive breach of the
requirement at Paragraph 12.25.8.(i).(a), the respective
scheme shall have 7 trading days to rebalance the portfolio.
During the rebalancing period, no additional call options
can be written in the said scheme.
d. In case a Mutual Fund scheme needs to sell securities on
which a call option is written under a covered call strategy,
it must ensure compliance with Paragraphs 12.25.8.(i).(a)
and 12.25.8.(i).(b) above while selling the securities.
e. In no case, a scheme shall write a call option without holding
the underlying equity shares. A call option can be written
only on shares which are not hedged using other derivative
contracts.
f. The premium received shall be within the requirements
prescribed in terms of Paragraph 12.25.2 above i.e. the total
gross exposure related to option premium paid and received
must not exceed 20% of the net assets of the scheme.
g. The exposure on account of the call option written under the
covered call strategy shall not be considered as exposure
under Paragraph 12.24.1 above.
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h. The call option written shall be marked to market daily and
the respective gains or losses factored into the daily NAV of
the respective scheme(s) until the position is closed or
expired.
ii. For schemes intending to use covered call strategy, the risks and
benefit of the same, must be disclosed in the Scheme Information
Document.
iii. Format for the purpose of uniform disclosure of investments in
derivative instruments by Mutual Funds in half yearly portfolio
disclosure, annual report or in any other disclosures is
prescribed490. Further, the call options written shall be disclosed
in the format491 prescribed.
iv. For existing schemes (schemes as on January 16, 2019), writing
of call options shall be permitted subject to appropriate
disclosure and compliance with Regulation 18 (15A) of SEBI
(Mutual Funds) Regulations, 1996.
12.25.9 Hedging of Interest Rate Risk492
12.25.9.1 To reduce interest rate risk in a debt portfolio, mutual funds may
hedge the portfolio or part of the portfolio (including one or more
securities) on weighted average modified duration basis by using
Interest Rate Futures (IRFs). The maximum extent of short
position that may be taken in IRFs to hedge interest rate risk of
the portfolio or part of the portfolio, is as per the formula given
below:
490 Please refer format no. 3.C under the section on formats
491 Please refer format no. 7.F under the section on formats
492 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/109 dated September 27, 2017
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(Portfolio Modified Duration * Market Value of the Portfolio)
(Futures Modified Duration * Futures Price / PAR)
12.25.9.2 In case the IRF used for hedging the interest rate risk has
different underlying security(s) than the existing position being
hedged, it would result in imperfect hedging.
12.25.9.3 Imperfect hedging using IRFs may be considered to be exempted
from the gross exposure, up to maximum of 20% of the net assets
of the scheme, subject to the following:
i. Exposure to IRFs is created only for hedging the interest rate
risk based on the weighted average modified duration of the
bond portfolio or part of the portfolio.
ii. Mutual Funds are permitted to resort to imperfect hedging,
without it being considered under the gross exposure limits, if
and only if, the correlation between the portfolio or part of the
portfolio (excluding the hedged portions, if any) and the IRF is
at least 0.9 at the time of initiation of hedge. In case of any
subsequent deviation from the correlation criteria, the same
may be rebalanced within 5 working days and if not rebalanced
within the timeline, the derivative positions created for hedging
shall be considered under the gross exposure computed in
terms of Paragraph 12.24.1 above. The correlation should be
calculated for a period of last 90 days.
Explanation: If the fund manager intends to do imperfect
hedging up to 15% of the portfolio using IRFs on weighted
average modified duration basis, either of the following
conditions need to be complied with:
(a) The correlation for past 90 days between the portfolio and
the IRF is at least 0.9 or
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(b) The correlation for past 90 days between the part of the
portfolio (excluding the hedged portions, if any) i.e. at
least 15% of the net asset of the scheme (including one or
more securities) and the IRF is at least 0.9.
iii. At no point of time, the net modified duration of part of the
portfolio being hedged should be negative.
iv. The portion of imperfect hedging in excess of 20% of the net
assets of the scheme should be considered as creating
exposure and shall be included in the computation of gross
exposure in terms of Paragraph 12.24.1 above.
12.25.9.4 The basic characteristics of the scheme should not be affected by
hedging the portfolio or part of the portfolio (including one or
more securities) based on the weighted average modified
duration.
Explanation: In case of long term bond fund, after hedging the
portfolio based on the modified duration of the portfolio, the net
modified duration should not be less than the minimum modified
duration of the portfolio as required to consider the fund as a
long term bond fund.
12.25.9.5 The interest rate hedging of the portfolio should be in the interest
of the investors.
12.25.9.6 Mutual Fund schemes may imperfectly hedge their portfolio or
part of their portfolio using IRFs, subject to the following
conditions:
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i. Prior to commencement of imperfect hedging, existing schemes
(schemes as on September 27, 2017) shall comply with the
provisions of Regulation 18 (15A) of SEBI (Mutual Funds)
Regulations, 1996 and all unit holders shall be given a time-
period of at least 30 days to exercise the option to exit at
prevailing NAV without charging of exit load.
The risks associated with imperfect hedging shall be disclosed
and explained by suitable numerical examples in the offer
documents and also needs to be communicated to the
investors through public notice or any other form of
correspondence.
ii. In case of new schemes (schemes launched on or after
September 27, 2017), the risks associated with imperfect
hedging shall be disclosed and explained by suitable numerical
examples in the offer documents.
12.25.10 Disclosure of Derivative Positions
In addition to the existing provisions, the mutual funds shall also
make the following disclosures
12.25.10.1 Separately disclose the hedging positions through IRF (both
perfectly and imperfectly) in respective debt portfolios as per the
prescribed format493.
12.25.10.2 Investment in interest rate derivatives (both IRS/IRF) shall also
be disclosed in the monthly portfolio disclosure in terms of
Paragraph 5.1 of this Master Circular.
493 Please refer format no. 3.C & 7.F under the section on formats.
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12.25.10.3 Disclosure of the details of interest rate derivatives (both
IRS/IRF) used for hedging along with debt and money market
securities transacted on its website and also forwarded to AMFI
as per Paragraph 9.13 of this Master Circular.
12.25.11 Definition of Exposure in case of Derivative Positions
12.25.11.1 Each position taken in derivatives shall have an associated
exposure as defined under. Exposure is the maximum possible
loss that may occur on a position. However, certain derivative
positions may theoretically have unlimited possible loss.
Exposure in derivative positions shall be computed as follows:
Position Exposure
Long Future Futures Price * Lot Size * Number of
Contracts
Short Future Futures Price * Lot Size * Number of
Contracts
Option bought Option Premium Paid * Lot Size *
Number of Contracts.
12.25.11.2 The provisions shall be applicable for all new schemes launched
post August 18, 2010. For all existing schemes (as on August
18, 2010), compliance with the guidelines shall be effective from
October 01, 2010.
12.26 Participation of mutual funds in Exchange Traded Commodity
Derivatives (ETCDs) 494:
12.26.1 Mutual funds are permitted to participate in ETCDs in India, except
in commodity derivatives on ‘Sensitive Commodities’495.
494 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/65 dated May 21, 2019
495 SEBI circular no. SEBI/HO/CDMRD/DMP/CIR/P/2017/84 dated July 25, 2017
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12.26.2 ETCDs having gold as the underlying, shall also be considered as
‘gold related instrument’ for Gold Exchange Traded Funds (Gold
ETFs).
12.26.3 496No Mutual fund schemes shall invest in physical goods except in
‘gold’ through Gold ETFs. Further, as mutual fund schemes
participating in ETCDs may hold the underlying goods in case of
physical settlement of contracts, in that case mutual funds shall
dispose of such goods from the books of the scheme, at the earliest,
not exceeding the timeline prescribed below:
a) For Gold and Silver: - 180 days from the date of holding of
physical goods,
b) For other goods (except for Gold and Silver):
1) By the immediate next expiry day of the same contract series
of the said commodity.
2) However, if Final Expiry Date (FED) of the goods falls before
the immediate next expiry day of the same contract series of
the said commodity, then within 30 days from the date of
holding of physical goods.
12.26.4 No mutual fund scheme shall have net short positions in ETCDs on
any particular good, considering its positions in physical goods as
well as ETCDs, at any point of time.
12.26.5 Mutual funds are permitted to participate in ETCDs through the
following schemes:
a. Hybrid schemes497 including multi asset scheme and
b. Gold ETFs.
496 SEBI circular no. SEBI/HO/IMD/DF2/CIR/P/2020/96 dated June 05, 2020, Refer SEBI
letter No. SEBI/HO/IMD/DF3/OW/P/2019/31579/1 dated November 28, 2019
497 SEBI Circular No.SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 06, 2017
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12.26.6 The following exposures shall not be considered in the cumulative
gross exposure for the purpose of Paragraph 12.24.1 above 498:
a. Short position in Exchange Traded Commodity Derivatives
(ETCDs) not exceeding the holding of the underlying goods
received in physical settlement of ETCD contracts
b. Short position in ETCDs not exceeding the long position in
ETCDs on the same goods.
c. Further, the mutual funds shall not write options, or purchase
instruments with embedded written options in goods or on
commodity futures.
12.26.7 In case of existing schemes (schemes existing as on May 21, 2019),
as mentioned in Paragraph 12.26.5 above, prior to commencement
of participation in ETCDs, the scheme shall comply with the
provisions of Regulation 18(15A) of SEBI (Mutual Funds)
Regulations, 1996, as this will lead to change in fundamental
attributes of the scheme and all unitholders shall be given a time
period of at least 30 days to exercise the option to exit at prevailing
NAV without charging of exit load, if any.
12.26.8 Prior to participation in ETCDs, the AMCs shall adhere to the
following:
a. Appoint a dedicated fund manager with requisite skill and
experience in commodities market (including commodity
derivatives market).
b. Appoint a custodian registered with the Board for custody of the
underlying goods, arising due to physical settlement of contracts.
c. Have written down investment policy for participation in ETCDs
approved by the Board of the Asset Management Company and
the Board of Trustees.
498 SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2021/10 dated January 15, 2021
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d. Have written down valuation policies approved by the Board of
the AMC and the Board of Trustees for valuation of commodity
derivatives and the underlying goods, arising due to physical
settlement of contracts. The approved valuation policies should
be subject to the principles of fair valuation of the assets of
mutual funds schemes.
12.26.9 Mutual fund schemes may participate in the ETCDs as ‘clients’ and
shall be subject to all the rules, regulations and instructions,
position limit norms, etc. as may be applicable to clients, issued by
SEBI and Exchanges from time to time. The position limits at mutual
fund level be as applicable to ‘Trading Members’.
12.26.10 Schemes investing in ETCDs shall be benchmarked against an
appropriate benchmark.
12.26.11 AMCs shall not on board Foreign Portfolio Investors (FPIs) in
schemes investing in ETCDs until FPIs are permitted to participate
in ETCDs.
12.26.12 Investment Limits in ETCDs: Participation of mutual funds in
ETCDs shall be subject to the following investment limits:
a. Mutual fund schemes shall participate in ETCDs of a
particular goods (single), not exceeding 10% of net asset value
of the scheme. However, the limit of 10% is not applicable for
investments through Gold ETFs in ETCDs having gold as
underlying.
b. In case of multi assets allocation schemes, the exposure to
ETCDs shall not be more than 30% of the net asset value of
the scheme.
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c. In case of other hybrid schemes excluding multi assets
allocation scheme, the participation in ETCDs shall not
exceed 10% of net asset value of the scheme.
12.26.13 In case of mutual fund schemes investing in ETCDs, the AMC shall
adhere to the following:
a. The NAVs of those schemes shall be updated on each
business day by the AMCs on their website and on the
website of AMFI by 09:00 a.m. of the following calendar day.
b. The format of monthly and half yearly portfolio may be
modified to reflect the investment in ETCDs.
c. The total exposure to ETCDs shall be disclosed as a line item
in the Monthly Cumulative Report (MCR) submitted by
mutual funds.
12.27 Interval Schemes/Plans499
12.27.1 Certain SIDs provide that the subscription to the scheme can be
made during a specific period (known as specified transaction
period) and the repurchase of units is permitted on all business
days subject to applicable loads (except for redemption during
specified transaction period when no load is charged). These
schemes are generally referred to as ‘interval schemes’.
12.27.2 For all interval schemes/plans:
12.27.2.1 The units shall be mandatorily listed.
12.27.2.2 No redemption/repurchase of units shall be allowed except
during the specified transaction period (the period during which
499 SEBI Circular No. CIR/IMD/DF /19/2010 dated November 26, 2010
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both subscription and redemption may be made to and from the
scheme). The specified transaction period shall be of minimum 2
working days.
12.27.2.3 Minimum duration of an interval period in an interval
scheme/plan shall be 15 days.
12.27.2.4 Investments shall be permitted only in such securities which
mature on or before the opening of the immediately following
specified transaction period.
Explanation: In case of securities with put and call options the
residual time for exercising the put option of the securities shall
not be beyond the opening of the immediately following
transaction period.
12.28 CDS – mutual funds as users (protection buyers)500
12.28.1 Mutual funds have been permitted to participate in CDS market, as
per the guidelines issued by RBI from time to time, subject to the
following conditions:
12.28.1.1 Mutual funds shall participate in CDS transactions only as users
(protection buyer). Thus, mutual funds are permitted to buy
credit protection only to hedge their credit risk on corporate
bonds they hold. They shall not be allowed to sell protection and
hence not permitted to enter into short positions in the CDS
contracts. However, they shall be permitted to exit their bought
CDS positions, subject to Paragraph 12.28.1.4 below.
500 SEBI Circular No. CIR/IMD/DF/23/2012 dated November 15, 2012 and SEBI Circular No.
SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021.
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12.28.1.2 Mutual funds can participate as users in CDS for the eligible
securities as reference obligations, constituting from within the
portfolio of only Fixed Maturity Plans (FMP) schemes having tenor
exceeding one year.
12.28.1.3 Mutual funds shall buy CDS only from a market maker approved
by the RBI and enter into Master Agreement with the
counterparty as stipulated under RBI Guidelines. Exposure to a
single counterparty in CDS transactions shall not exceed 10% of
the net assets of the scheme.
12.28.1.4 The cumulative gross exposure through equity, debt, derivative
positions (including commodity and fixed income derivatives),
repo transactions and credit default swaps in corporate debt
securities, Real Estate Investment Trusts (REITs), Infrastructure
Investment Trusts (InvITs), other permitted securities/assets and
such other securities/assets as may be permitted by the Board
from time to time should not exceed 100% of the net assets of the
scheme.
12.28.1.5 The total exposure related to premium paid for all derivative
positions, including CDS, shall not exceed 20% of the net assets
of the scheme.
12.28.1.6 Before undertaking CDS transactions, AMCs shall put in place a
written policy on participation in CDS approved by the Board of
the Asset Management Company and the Trustees as per the
guidelines specified by RBI and Securities and Exchange Board
of India (SEBI). The policy shall be reviewed by AMCs, at least
once a year.
12.28.1.7 To enable the investors in the mutual funds schemes to take an
informed decision, the concerned Scheme Information Document
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Master Circular for Mutual Funds as on March 31, 2024
(SID) shall disclose the intention to participate in CDS
transaction in corporate debt securities in accordance with
directions issued by RBI and SEBI from time to time, and related
information as appropriate in this regard.
12.28.1.8 AMCs shall also disclose the details of CDS transactions of the
scheme in corporate debt securities in the monthly portfolio
statements as well as in the half yearly trustee report, as per the
format501. Further, AMCs shall disclose the scheme wise details
of CDS transactions in the notes to the accounts of annual report
of the mutual fund as per the format502 .
12.28.2 AMCs participating in CDS transactions, as users, shall be required
to comply with the guidelines issued by RBI, vide notification no.
IDMD.PCD. No.5053/14.03.04/2010-11 dated May 23, 2011 and
subsequent guidelines issued by RBI and SEBI from time to time.
12.29 Trade execution and Allocation503:
12.29.1 AMCs shall put in place a written down policy which inter-alia,
detail the specific activities, role and responsibilities of various
teams engaged in fund management, dealing, compliance, risk
management, back-office etc. with regard to order placement,
execution of order, trade allocation amongst various schemes and
other related matters.
12.29.2 The aforesaid policy shall ensure that all the schemes and its
investors are treated in a fair and equitable manner. Further, the
policy shall be approved by the Board of AMC and the Trustees and
they shall ensure compliance with following:
501 Please refer to format no. 2.C, 3.C & 7.G.A under the section on Formats
502 Please refer to format no. 7.G.B under the section on Formats
503 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2020/175 dated September 17, 2020
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12.29.3 For orders pertaining to equity and equity related instruments:
a. AMCs shall use an automated Order Management System
(hereinafter referred to as ‘OMS’), wherein the orders for equity
and equity related instruments of each scheme shall be placed
by the fund manager(s) of the respective schemes. 504However,
a fund manager may authorise an employee of the AMC for
order placement on his behalf, subject to adherence to the
following:
I. The order instructions to such employee by the fund
manager shall be through electronic mode i.e. either
through e-mail or other electronic utility, wherein scheme
wise audit trail of such orders starting from the instruction
of the fund manager is maintained along with time stamping
of each stage of the process.
II. The employee placing the order shall be bound by the same
requirements of maintaining confidentiality and the code of
conduct as applicable to the fund manager in this regard i.e.
in respect of order placement.
b. Further, the orders in case of arbitrage transactions, stock
lending and borrowing transactions, passive schemes (such as
Index Funds and ETFs) and schemes investing primarily based
on pre-defined rules and models, where the discretion of the
fund manager is not required for placement of order, is not
mandated to be placed through OMS, subject to the following:
I. The AMC shall document and demonstrate that no
judgement and discretion of the fund manager is required
for placement of such orders;
504 SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2020/253 dated December 31, 2020
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II. The AMCs shall ensure that orders in breach of applicable
regulatory limits and allocation limits as specified in Scheme
Information Documents (SIDs), should not be placed and
executed;
III. The fund manager shall provide the scheme wise details as
required for order placement such as value of transaction(s),
nature of transaction(s), etc. to the dealer;
IV. The scheme wise audit trail of placement of orders (including
the information provided by the fund manager), order
execution and trade allocation shall be maintained along
with time stamping of each stage of the process.
c. At all points of time, the responsibility associated with order
placement shall continue to vest with the fund manager.
d. In case a fund manager is managing multiple schemes, the fund
manager shall necessarily place scheme wise order.
e. All regulatory limits and allocation limits as specified in SID
shall be in-built in the OMS to ensure that orders in breach of
such limits are not accepted by the OMS. AMCs may further
place soft limits for internal control and risk management based
on its internal policy. Further, any change in limits specified in
OMS shall be subject to the approval of Compliance and Risk
Officer.
f. All orders of fund manager(s) shall be received by dedicated
dealer(s) responsible for order placement and execution.
However505, in case order(s) for arbitrage transactions, stock
lending and borrowing transactions, passive schemes (such as
505 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2020/253 dated December 31, 2020
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Index Funds and ETFs) and schemes investing primarily based
on pre-defined rules and models the requirement of a dedicated
dealer shall not be mandatory.
g. The internal policy of AMC may also provide certain scenarios
within the regulatory limits, wherein, prior approval of
Compliance or Risk Officer would be required through OMS
before the order is received by the dealer
12.29.4 Requirements with respect to investment in all instruments506
a. AMC shall ensure that the dealing desk is suitably staffed and
comply with the following:
I. All conversations of the dealer shall be only through the
dedicated recorded telephone lines
II. No mobile phones or any other communication devices other
than the recorded telephone lines shall be allowed inside the
dealing room
III. Restricted access to internet facilities on computers and
other devices inside the dealing room. It shall be used for
activities related to trade execution only
IV. No sharing of information by dealer through any mode,
except for trade execution under the approved internal
policy
b. Orders by dealer can be placed either for each scheme
individually or pooled on the basis of orders from multiple
schemes. The trade allocation policy of the AMCs shall inter-alia
detail (i) specific situations (not generic) wherein the orders by
dealers shall be placed for each scheme individually or pooled
506 Refer SEBI email dated July 16, 2010
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from multiple schemes, (ii) the timeline to be considered for
pooling of orders in case of multiple schemes.
c. In case of pooled orders, post allocation of trades shall be on
pro-rata basis as per the size of the order placed. The said
allocation shall be based on weighted average price. The policy
shall clearly include scenarios / situations (e.g. redemption
pressure) in which deviation from the allotment of units on pro-
rata basis would be permissible, if at all. Further, the deviations
shall be on account of exigency only and require prior written
approval of Chief Investment Officer, Risk Officer and the
Compliance Officer with detailed rationale for such deviation.
d. In case of scenarios, wherein, the mutual funds are required to
place certain margins /collaterals in order to execute certain
transactions, the policy shall include details on how such
margins / collaterals shall be segregated / placed from amongst
various schemes, without affecting the interest of investors of
any scheme.
12.29.5 Monitoring of Compliance:
a. AMC shall have a system based monitoring mechanism to
ensure compliance with the requirements under Paragraphs
12.29.3 and 12.29.4 above.
b. 507Audit trail of activities as detailed in Paragraph 12.29.3
above related to order placement, trade execution and allocation
shall be available in the system. Further, there should be time
stamping with respect to order placed by fund manager (or the
order placed by the employee of the AMC authorized by the fund
507 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2020/253 dated December 31, 2020
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manager), order placed by dealer, order execution and trade
allocation in the OMS. The audit trail and time stamping of all
other orders (including orders through RFQ platform) not placed
through OMS shall also be adequately maintained.
c. Any non-compliance and all material information in this regard
shall be reported to trustees on quarterly basis. Trustees shall
inform the same to SEBI in their half yearly trustee report.
12.30 508Inter Scheme Transfer of Securities (“IST”):
12.30.1 Transfers of securities from one scheme to another scheme in the
same mutual fund is allowed only if such transfers are done at the
prevailing market price for quoted instruments on spot basis and
the securities so transferred are in conformity with the investment
objective of the scheme to which such transfer has been made.
12.30.2 In order to ensure that such Inter Schemes Transfers (ISTs) of
securities are in conformity with the above objective, the following
additional safeguards have been prescribed:
12.30.2.1 In case of Close Ended Schemes, IST purchases would be allowed
within “three” business days of allotment pursuant to New Fund
Offer (NFO) and thereafter, no ISTs shall be permitted to/from
Close Ended Schemes.
12.30.2.2 In case of Open Ended Schemes, ISTs may be allowed in the
following scenarios:
a. For meeting liquidity requirement in a scheme in case of
unanticipated redemption pressure:
508 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2020/202 dated October 08, 2020
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AMCs shall have an appropriate Liquidity Risk Management
(LRM) Model at scheme level, approved by trustees, to ensure
that reasonable liquidity requirements are adequately
provided for. Recourse to ISTs for managing liquidity will only
be taken after the following avenues for raising liquidity have
been attempted and exhausted:
I. Use of scheme cash & cash equivalent
II. Use of market borrowing
III. Selling of scheme securities in the market
IV. After attempting all the above, if there is still a scheme
level liquidity deficit, then out of the remaining securities,
outward ISTs of the optimal mix of low duration paper
with highest quality shall be effected.
The use of market borrowing before ISTs will be optional
and Fund Manager may at his discretion take decision on
borrowing in the best interest of unitholders. The option
of market borrowing or selling of security as mentioned at
Paragraphs 12.30.2.2.a.II & 12.30.2.2.a.III above may be
used in any combination and not necessarily in the above
order. In case option of market borrowing and/or selling
of security is not used, the reason for the same shall be
recorded with evidence.
b. For Duration/Issuer/Group rebalancing:
I. ISTs shall be allowed only to rebalance the breach of
regulatory limit.
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II. ISTs can be done where any one of duration, issuer, sector
and group balancing is required in both the transferor
and transferee schemes. Different reasons cannot be cited
for transferor and transferee schemes except in case of
transferee schemes is being a Credit Risk scheme.
III. In order to guard against possible mis-use of ISTs in
Credit Risk scheme, trustees shall ensure to have a
mechanism in place to negatively impact the performance
incentives of Fund Managers, Chief Investment Officers
(CIOs), etc. involved in process of ISTs in Credit Risk
scheme, in case the security becomes default grade after
the ISTs within a period of one year. Such negative impact
on performance shall mirror the existing mechanism for
performance incentives of the AMC.
12.30.2.3 No ISTs of a security shall be allowed, if there is negative news or
rumors in the mainstream media or an alert is generated about
the security, based on internal credit risk assessment in terms of
Paragraph 4.3 of this Master Circular during the previous four
months.
12.30.2.4 AMC shall ensure that Compliance Officer, Chief Investment
Officer and Fund Managers of transferor and transferee schemes
have satisfied themselves that ISTs undertaken are in
compliance with the regulatory requirements. Prescribed
“Template”509 and documentary evidence in this regard shall be
maintained by the AMC for all ISTs.
509 Please refer to format no. 11 under the section on formats
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Master Circular for Mutual Funds as on March 31, 2024
12.30.2.5 If security gets downgraded following ISTs, within a period of four
months, Fund Manager of buying scheme has to provide detailed
justification /rationale to the trustees for buying such security.
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CHAPTER 13: ADVERTISEMENTS510
13.1 Advertisement shall be in terms of Sixth Schedule511.
13.2 In addition to the provisions of the Sixth Schedule, AMCs shall comply
with the following:512
13.2.1 While advertising pay out of dividends, all advertisements shall
disclose the dividends declared or paid in rupees per unit along with
the face value of each unit of that scheme and the prevailing NAV at
the time of declaration of the dividend.
13.2.2 Further, for pay out of dividends at maturity of closed-ended
scheme(s)/ at completion of the interval period of interval scheme(s),
AMC shall advertise that “the entire distributable surplus at the time
of maturity or at the completion of the interval period shall be
distributed
13.2.3 Pay out of Dividend/ Bonus: While advertising pay outs, all
advertisements shall disclose, immediately below the pay out figure
(in percentage or in absolute terms) that the NAV of the scheme,
pursuant to pay out would fall to the extent of payout and statutory
levy (if applicable).
13.3 Disclosing performance related information in Mutual Fund
advertisements513
510SEBI Circular No. Cir/IMD/DF/13/2011 dated August 22, 2011 and SEBI Circular No.
Cir/IMD/DF/6/2012 dated February 28, 2012 and SEBI Circular No. SEBI/IMD/CIR
No.1/64057/06 dated April 04, 2006, Refer SEBI email dated May 03, 2017, Refer SEBI letter
No. IMD/DF2/RS/2017/10751 dated May 12, 2017, Refer SEBI letter No.
IMD/SEC4/OW/P/2023/9448/1 dated March 03, 2023
511 Sixth Schedule of SEBI (Mutual Funds) Regulations, 1996
512 SEBI Circular No. Cir/IMD/DF/6/2012 dated February 28, 2012 and Circular No.
SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021, Refer SEBI email dated June
02, 2010
513 SEBI Circular No. Cir/IMD/DF/23/2017 dated March 15, 2017
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Master Circular for Mutual Funds as on March 31, 2024
13.3.1 In performance advertisements of Mutual Fund schemes:
13.3.1.1 Performance of the Mutual Fund scheme shall be advertised in
terms of CAGR for the past 1 year, 3 years, 5 years and since
inception.
13.3.1.2 In order to provide ease of understanding to retail investors, point-
to-point returns on a standard investment of Rs. 10,000/- shall
also be provided in addition to CAGR of the scheme.
13.3.1.3 Performance advertisements of Mutual Fund schemes should
provide information based on period computed from the last day
of month-end preceding the date of advertisement.
13.3.1.4 It should be specifically mentioned whether performance so
disclosed, is of regular or direct plan of the Mutual Fund scheme
along-with a footnote mentioning that different plans have a
different expense structure.
13.3.1.5 If a Mutual Fund scheme has not been managed by the same fund
manager for the full period of the information being published in
the advertisement, the same should be disclosed in a footnote
13.3.2 Where the scheme has been in existence for less than six months past
performance shall not be provided. Further, if the scheme has been in
existence for more than six months but less than one year, then
simple annualized growth rate of the scheme for the past 6 months
from the last day of month-end preceding the date of advertisement
shall be provided514.
514 SEBI Circular No. Cir/IMD/DF/13/2011 dated August 22, 2011 and SEBI Circular No.
SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
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13.3.3 515In case of Overnight funds, Liquid funds and Money Market funds,
wherein investors have very short investment horizon, the
performance can be advertised by simple annualisation of yields if a
performance figure is available for at least 7 days, 15 days and 30
days provided it does not reflect an unrealistic or misleading picture
of the performance or future performance of the scheme.
13.3.4 For the sake of standardization, a similar return in INR and by way of
CAGR must be shown for the following apart from the scheme
benchmarks:
Sr.No. Category of Schemes Additional
Benchmark
1 All Equity Scheme Sensex/ Nifty
2 All Debt Schemes having 1-year T-Bill
duration / maturity upto 1
year and Arbitrage Funds
3 All Debt Schemes which are 10 year dated GOI
not covered in Point 2 Security
4 Conservative Hybrid Fund 10 year dated GOI
Security
5 Balanced Hybrid Fund / Sensex / Nifty
Aggressive Hybrid Fund /
Dynamic Asset Allocation or
Balanced Advantage / Multi
Asset Allocation
6 Equity Savings 10 year dated GOI
Security
7 Retirement Fund / Children's Sensex/Nifty
Fund
8 Index Funds / ETFs & FoFs Appropriate
(Overseas/ Domestic) benchmark based on
the underlying asset
515 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
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allocation as per
above
These disclosures shall form a part of the Statement of Additional
Information and all advertisements of Mutual Funds.
13.3.5 Any disclosure regarding quarterly/ half yearly/ yearly performance
shall pertain to respective calendar quarterly/ half yearly/ yearly only.
13.3.6 516When the performance of a particular Mutual Fund scheme is
advertised, the advertisement shall also include the performance data
of all the other schemes managed by the fund manager/s of that
particular scheme. Such performance data of the other schemes
managed by the fund manager shall be provided as follows:
13.3.6.1 Performance of other schemes managed by the fund manager,
along-with their respective scheme’s benchmark, shall be provided
in terms of CAGR for a period of 1 year, 3 years and 5 years. The
period referred here shall be computed in the same manner as that
of the scheme being advertised.
13.3.6.2 In case the number of schemes managed by a fund manager is
more than six, then the AMC may disclose the total number of
schemes managed by that fund manager along with the
performance data of top 3 and bottom 3 schemes (in addition to
the performance data of the scheme for which the advertisement
is being made) managed by that fund manager in all
performance related advertisements. However, in such cases,
AMCs shall ensure that true and fair view of the performance of
the fund manager is communicated by providing additional
disclosures, if required.
516 SEBI Circular No. Cir/IMD/DF/23/2017 dated March 15, 2017
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13.3.6.3 If a Mutual Fund scheme has not been managed by the same fund
manager for the full period of information being published in the
advertisement, the same should be disclosed in a footnote.
13.3.6.4 Further, for advertisement published in internet-enabled media,
Mutual Funds shall be permitted to provide an exact website link
to such summarized information of performance of other schemes
managed by the concerned fund manager.
13.3.6.5 An indicative format517 of disclosure of performance of other
schemes managed by the concerned fund manager is provided.
13.4 Disclosure of Performance of Schemes post-merger518 :
13.4.1 Disclosure of performance of schemes post-merger shall be as given
below
13.4.1.1 When two schemes, for example, Scheme A (Transferor Scheme) &
Scheme B (Transferee Scheme), having similar features, get
merged and the merged scheme i.e., surviving scheme also has
the same features, the weighted average performance of both the
schemes needs to be disclosed.
13.4.1.2 When Scheme A (Transferor Scheme) gets merged into Scheme B
(Transferee Scheme) and the features of Scheme B are retained,
the performance of the scheme whose features are retained needs
to be disclosed.
13.4.1.3 When Scheme A (Transferor Scheme) gets merged into Scheme B
(Transferee Scheme) and the features of Scheme A (Transferor
517 Please refer to format no. 7.A under the section on Formats
518 SEBI Circular No- SEBI/HO/IMD/DF3/CIR/P/2018/69 dated April 12, 2018
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Master Circular for Mutual Funds as on March 31, 2024
scheme) are retained, the performance of the scheme whose
features are retained needs to be disclosed.
13.4.1.4 When Scheme A (Transferor Scheme) gets merged with Scheme B
(Transferee Scheme) and a new scheme, Scheme C emerges after
such consolidation or merger of schemes, the past performance
need not be provided.
13.4.2 In addition to disclosing the performance of the scheme as mentioned
above, past performance of such scheme(s) whose features are not
retained post-merger may also be made available on request with
adequate disclaimer.
13.5 Filing of Advertisements519
13.5.1 Regulation 30 of SEBI (Mutual Funds) Regulations, 1996 (MF
Regulations) on Advertisement material, requires Mutual Funds to
submit to SEBI, the advertisements issued by them, within 7 days
from the date of issue.
13.5.2 In continuation to the various Go Green initiatives in Mutual Funds,
the AMCs are advised to submit links to access the advertisements to
be filed under the MF Regulations by sending the same through e-
mail to SEBI at mf_advertisement@sebi.gov.in. However,
advertisement materials like pamphlets may be submitted as
attachment along with e-mail, if the size of the attachment does not
exceed 250 KB.
13.5.3 AMCs shall however, maintain copy of advertisements for future
references.
519 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/34 dated March 08, 2019, Refer
SEBI email dated March 29, 2010
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Master Circular for Mutual Funds as on March 31, 2024
13.5.4 While sending the e-mail, the compliance officer of respective Mutual
Fund shall expressly confirm that the advertisement is in compliance
with the Advertisement code specified in the sixth schedule of the MF
Regulations.
13.6 Indicative portfolios and yields in mutual funds schemes520
13.6.1 Mutual Funds, AMCs and distributors shall not offer any indicative
portfolio and indicative yield. No communication regarding the same
in any manner whatsoever shall be issued by any Mutual Funds,
AMCs or distributors of its products. The compliance of the same shall
be monitored by the AMC and Trustees of Mutual Funds and reported
in their respective reports to SEBI.
13.6.2 Indicative portfolio or yield in close ended debt oriented mutual
fund schemes521
Mutual Funds (MFs)/AMCs may make following additional
disclosures in the SID/SAI and KIM without indicating the portfolio
or yield, directly or indirectly:
13.6.2.1 MFs/AMCs shall disclose their credit evaluation policy for the
investments in debt securities.
13.6.2.2 MFs/AMCs shall also disclose the list of sectors they would not be
investing.
13.6.2.3 AMCs shall disclose the type of instruments which the schemes
propose to invest viz. CPs, CDs, Treasury bills etc.
13.6.2.4 AMCs shall disclose the floors and ceilings within a range of 5%
of the intended allocation (in %) against each sub asset
520 SEBI Circular No. IMD/CIR No. 14/151044/09 dated January 19, 2009
521 SEBI Circular No. CIR/IMD/DF/12/2011 dated August 01, 2011
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Master Circular for Mutual Funds as on March 31, 2024
class/credit rating. For example, it may be disclosed that x-y %
would be in AAA rated bank CD as per the sample matrix below:
13.6.2.5 After the closure of NFO, the AMCs will report in the next meeting
of AMCs and Trustees the publicized percentage allocation and the
final portfolio. Variations between indicative portfolio allocation
and final portfolio will not be permissible.
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 14: INVESTOR RIGHTS & OBLIGATIONS
PART I – INVESTOR RIGHTS
14.1 Transfer of Redemption or Repurchase Proceeds522
14.1.1 The transfer of redemption or repurchase proceeds to the unitholders
shall be made within three working days from the date of redemption
or repurchase.
14.1.2 Paragraph 12.19.2 of this Master Circular prescribes a list of
permissible investments for the purpose of overseas investments. For
schemes investing at least 80% of total assets in such permissible
overseas investments, the transfer of redemption or repurchase
proceeds to the unitholders shall be made within five working days
form the date of redemption or repurchase.
14.1.3 AMFI, in consultation with SEBI, has published a list of exceptional
circumstances for schemes unable to transfer redemption or
repurchase proceeds to investors within time as stipulated at
Paragraph 14.1.1 and 14.1.2 above, along with applicable time frame
for transfer of redemption or repurchase proceeds to the unitholders
in such exceptional circumstances. The said list is available on AMFI
website.
14.2 Payment of interest for delay in dispatch of redemption and/or
repurchase proceeds and/or dividend523
14.2.1 In the event of failure to dispatch:
522 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 dated November 25,
2022
523 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 dated November 25,
2022 & SEBI Circular No. SEBI/MFD/CIR/2/266/2000 dated May 19, 2000.
,
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Master Circular for Mutual Funds as on March 31, 2024
a. Redemption or repurchase proceeds within three524 working days
from the date of receipt of such requests and/ or
b. Dividend within the stipulated seven working days525 period526,
Interest for the period of delay in transfer of redemption or
repurchase or dividend shall be payable to unitholders at the rate
of 15% per annum along with the proceeds of redemption or
repurchase or dividend, as the case may be. Such Interest shall
be borne by AMCs. The details of such payments shall be sent to
SEBI as part of Compliance Test Reports in the prescribed
format. Investors shall also be informed about the rate and
amount of interest paid to them.
14.3 Unclaimed Redemption and Dividend Amount527
14.3.1 528The unclaimed redemption and dividend amounts, that are
currently allowed to be deployed only in call money market or money
market instruments, shall also be allowed to be invested in a separate
plan of Overnight scheme / Liquid scheme/ Money Market Mutual
Fund scheme floated by Mutual Funds specifically for deployment of
the unclaimed amounts.
Provided that such schemes where the unclaimed redemption and
dividend amounts are deployed shall be only those Overnight scheme/
Liquid scheme / Money Market Mutual Fund schemes which are
524 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 dated November 25,
2022
525 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 dated November 25,
2022
526 Regulation 53(a), SEBI Circular No. SEBI / IMD / CIR No 14 / 187175/ 2009 dated
December 15,2009
,5 27SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000 &
SEBI/HO/IMD/DF2/CIR/P/2016/37 dated February 25, 2016
528SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/608 dated July 30, 2021
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Master Circular for Mutual Funds as on March 31, 2024
placed in A-1 cell (Relatively Low Interest Rate Risk and Relatively Low
Credit Risk) of Potential Risk Class matrix.
14.3.2 AMCs shall not be permitted to charge any exit load in this plan and
TER (Total Expense Ratio) of such plan shall be capped as per the TER
of direct plan of such scheme or at 50 bps, whichever is lower.
14.3.3 Further, for the Unclaimed redemption and dividend amounts
deployed by Mutual Funds in Call Money Market or Money Market
instruments, the investment management and advisory fee charged
by the AMC for managing unclaimed amounts shall not exceed 50
basis points.
14.3.4 Investors who claim the unclaimed amounts during a period of three
years from the due date shall be paid initial unclaimed amount along-
with the income earned on its deployment. Investors, who claim these
amounts after 3 years, shall be paid initial unclaimed amount along-
with the income earned on its deployment till the end of the third year.
After the third year, the income earned on such unclaimed amounts
shall be used for the purpose of investor education.
14.3.5 The AMC shall make a continuous effort to remind the investors
through letters to take their unclaimed amounts.
14.3.6 Further, to ensure Mutual Funds play a pro-active role in tracing the
rightful owner of the unclaimed amounts:
a. AMCs shall be required to provide on their website, the list of
names and addresses of investors in whose folios there are
unclaimed amounts.
b. AMFI shall also provide on its website, the consolidated list of
investors across Mutual Fund industry, in whose folios there are
unclaimed amounts. The information provided herein shall
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Master Circular for Mutual Funds as on March 31, 2024
contain name of investor, address of investor and name of Mutual
Fund/s with whom unclaimed amount lies.
c. Information at Paragraph (a) & (b) above may be obtained by
investor only upon providing his appropriate credentials (like
PAN, date of birth, etc.) along-with adequate security control
measures being put in place by Mutual Fund / AMFI.
d. The website of Mutual Funds and AMFI shall also provide
information on the process of claiming the unclaimed amount
and the necessary forms / documents required for the same.
e. Further, the information on unclaimed amount along-with its
prevailing value (based on income earned on deployment of such
unclaimed amount), shall be separately disclosed to investors
through the periodic statement of accounts / Consolidated
Account Statement sent to the investors.
14.3.7 Disclosures on above provisions shall be made in the SAI /SID.
Disclosure on the unclaimed amounts and the number of such
investors for each scheme shall be made in the Annual Report also.529
14.4 Dispatch of Statement of Accounts530
14.4.1 AMCs shall allot the units to the applicant whose application has been
accepted and also send confirmation specifying the number of units
allotted to the applicant by way of email and/or SMS’s to the
applicant’s registered email address and/or mobile number as soon
as possible but not later than five working days from the date of
529 Please refer to Schedule XI of SEBI (Mutual Funds) Regulations, 1996
530SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000, SEBI Circular No.
IMD/CIR/12/80083/2006 dated November 20, 2006 and SEBI Circular No.
Cir/IMD/DF/16/2011 dated September 08, 2011
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closure of the initial subscription list and/or from the date of receipt
of the request from the unitholders.
14.4.2 Option to hold units in demat form531
a. Mutual Funds/AMCs are advised to invariably provide an option
to the investors to mention demat account details in the
subscription form, in case they desire to hold units in demat form
while subscribing to any scheme (open ended/close
ended/Interval).
b. Mutual Funds/AMCs shall ensure that above mentioned option
is provided to the investors in all their schemes (existing and
new).
c. Mutual Funds/AMCs are advised to obtain ISIN for each option
of the scheme and quote the respective ISIN along with the name
of the scheme, in all Statement of Account/Common Account
Statement (CAS) issued to the investors.
d. Dematerialization of existing units held by investors
In case investors desire to convert their existing physical units
(represented by statement of account) into dematerialized form,
mutual funds / AMCs shall take such steps in coordination with
Registrar and Transfer Agents, Depositories and Depository
participants (DPs) to facilitate the same.
e. Where investor desires to hold units in dematerialised form,
demat statement given by depository participant would be
531 SEBI circular no. CIR/IMD/DF/9/2011, dated May 19, 2011
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Master Circular for Mutual Funds as on March 31, 2024
deemed to be adequate compliance with requirements for
account statement prescribed by SEBI532.
14.4.3 Consolidated Account Statement533
14.3.3.1 As per Regulation534, AMCs shall ensure that the consolidated
account statement for each calendar month, is issued 535on or
before fifteenth day of the succeeding month.
14.3.3.2 536The AMC shall ensure that the CAS for the half year is issued
on or before twenty first day of the succeeding month.
14.3.3.3 As per Regulation537, the asset management company shall
ensure that a consolidated account statement every half yearly
(September/ March) is issued, detailing holding at the end of the
six month, across all schemes of all mutual funds, to all such
investors in whose folios no transaction has taken place during
that period.
14.3.3.4 Further, in order to increase transparency of information to
investors, it has been decided that538
a. Each CAS issued to the investors shall also provide the total
purchase value / cost of investment in each scheme.
b. Further, CAS issued for the half-year (ended September/
March) shall also provide.
532 For details on dispatch of statement of accounts. refer to Chapter 15- Investor Rights and
Obligations
533 SEBI Circular No. Cir/IMD/DF/16/2011 dated September 08, 2011
534 Regulation 36(4) of SEBI (Mutual Funds) Regulations, 1996
535 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
536 SEBI Circular No SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
537 Regulation 36(4) of SEBI (Mutual Funds) Regulations, 1996
538 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016 and
SEBI/HO/IMD/DF2/CIR/P/2016/89 dated September 20, 2016
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Master Circular for Mutual Funds as on March 31, 2024
i. 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. Further,
a mention may be made in such CAS indicating that the
commission disclosed is gross commission and does
not exclude costs incurred by distributors such as
service tax (wherever applicable, as per existing rates),
operating expenses, etc.
ii. The scheme’s average Total Expense Ratio539 (in
percentage terms) along with the break up between
Investment and Advisory fees, Commission paid to the
distributor and Other expenses for the period for each
scheme’s applicable plan (regular or direct or both) where
the concerned investor has actually invested in.”
iii. Trustees and AMCs shall ensure compliance of the
provisions mentioned above at Paragraph 14.3.3.4.(b).(ii)
above and trustees shall confirm the same to SEBI in the
half yearly trustee report.
c. Such half-yearly CAS shall be issued to all MF investors,
excluding those investors who do not have any holdings in
MF schemes and where no commission against their
investment has been paid to distributors, during the
concerned half-year period.
539 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/137 dated October 22, 2018
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Master Circular for Mutual Funds as on March 31, 2024
d. Further, an indicative format540 providing guidance on the
key components which shall be reflected in half-yearly CAS
may be referred.
14.4.4 Transferability of Mutual Fund units541
a. Regulations542 states that “a unit unless otherwise restricted or
prohibited under the scheme, shall be freely transferable by act of
parties or by operation of law.” The spirit and intention of this
regulation is not to prohibit transferability of units as a general
rule or practice.
b. All AMCs shall clarify by way of an addendum that units of all
mutual fund schemes held in demat form shall be freely
transferable from the date of the issue of said addendum.
However, restrictions on transfer of units of ELSS schemes during
the lock-in period shall continue to be applicable as per the ELSS
Guidelines.
14.5 AMC’s Annual Reports for unitholders543
14.5.1 The annual report containing accounts of the AMCs should be
displayed on the website of Mutual Fund. It should also be mentioned
in the Annual Report of Mutual Funds schemes that the unitholders,
if they so desire may request for the Annual Report of the AMC.
540 Please refer to Format no. 3.F under the section on Formats
541 SEBI Circular No - CIR/IMD/DF/10/2010 dated August 18, 2010, Refer SEBI email dated
February 02, 2011
542 Regulation 37(1) of SEBI (Mutual Fund) Regulations, 1996
543 SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000
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Master Circular for Mutual Funds as on March 31, 2024
14.6 Treatment and disposal of illiquid securities or securities
classified as default at the time of maturity / closure of schemes544
545
14.6.1 In case of close-ended schemes, some of the investments made by
Mutual Funds may become default at the time of maturity of schemes.
Further, at the time of winding up of a scheme, some of the
investments made by Mutual Funds may become default or illiquid.
In due course of time i.e. after the maturity or winding up of the
schemes, such investments may be realised by the Mutual Funds. It
is advised to distribute such amount, if it is substantial, to the
concerned investors. In case the amount is not substantial, it may be
used for the purpose of investor education. The decision as to the
determination of substantial amount shall be taken by the Trustees
of Mutual Funds after considering the relevant factors including
number of investors, amount recovered, cost of transferring funds to
investors; among others.
14.7 Change of Mutual Fund Distributor546
14.7.1 In case an investor wishes to change his distributor or wishes to go
direct, Mutual Funds/AMC’s shall ensure compliance with the
instruction of the investor informing his desire to change his
distributor and / or go direct, without compelling that investor to
obtain a ‘No Objection Certificate’ from the existing distributor.547
544 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
545 SEBI Circular No. MFD/CIR/05/432/2002 dated June 20, 2002.
,5 46 Refer SEBI email dated August 12, 2010
547 SEBI Circular No -SEBI/IMD/CIR No./ 13/187052 /2009 December 11, 2009
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14.8 Additional mode of payment through Applications Supported by
Blocked Amount (hereinafter referred to as “ASBA”) in Mutual
Funds548
14.8.1 ASBA facility which investors have been using for subscription to
public issue of equity capital of companies has been extended to the
investors subscribing to New Fund Offers (NFOs) of mutual fund
schemes. It shall co-exist with the current process, wherein cheques/
demand drafts are used as a mode of payment.
14.8.2 The banks which are in SEBI’s list shall extend the same facility in
case of NFOs of mutual fund schemes to all eligible investors in
Mutual Fund units.
14.8.3 AMCs shall ensure that adequate arrangements are made by Registrar
and Transfer Agents for the implementation of ASBA. Mutual
Funds/AMCs shall make all relevant disclosures in this regard in the
SAI.
14.8.4 SEBI circulars549 related to ASBA shall be followed to the extent
applicable.
14.8.5 The Mutual Funds/AMCs have to compulsorily provide ASBA facility
to the investors for all NFOs launched.
14.9 Instant Access Facility (IAF) 550
14.9.1 IAF facilitates credit of redemption proceeds in the bank account of
the investor on the same day of redemption request. In order to further
548 SEBI Circular No. SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15, 2010
549 SEBI Circular No. SEBI/CFD/DIL/DIP/31/2008/30/7 dated July 30, 2008,
SEBI/CFD/DIL/2008/25/09dated September 25, 2008,
SEBI/CFD/DIL/MB/IS/5/2009/05/08 dated August 5, 2009 and
SEBI/CFD/DIL/ASBA/1/2009/30/12 dated December 30, 2009 and CIR/CFD/DIL/7/2010
dated July 13, 2010, Cir / IMD / DF / 6 / 2010 dated July 28, 2010
550 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/39 dated May 08, 2017
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enhance the reach of Mutual Funds (MFs) towards the retail investors,
it has been decided to issue guidelines for extending IAF. MFs/AMCs
may offer IAF subject to the following conditions:
a. Eligibility -IAF shall be allowed through online mechanism and
only for resident individual investors.
b. Applicability
i. NAV: While observing the extant cut-off timings with respect to
repurchase (i.e. Redemption), under IAF the following NAVs shall
be applied:
 where the IAF application is received up to 3.00pm–the lower
of (i) NAV of previous calendar day and (ii) NAV of calendar
day on which application is received;
 where the IAF application is received after 3.00 pm –the lower
of (i) NAV of calendar day on which such application is
received, and (ii) NAV of the next calendar day.
ii. Scheme551–MFs/ AMCs can offer Instant Access Facility (IAF)
only in Overnight and Liquid Schemes of the MF.
iii. Monetary Limit-The monetary limit under IAF shall be INR
50,000/-or 90% of latest value of investment in the scheme,
whichever is lower. This limit shall be applicable per day per
scheme per investor.
c. Liquidity
i. Liquidity for IAF has to be provided out of the available funds
with the scheme and MFs/ AMCs should put in place a
551 SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/608 dated July 30, 2021
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mechanism so that adequate balance is available in the bank
account of the scheme to meet liquidity/ redemption
requirements under IAF. Such mechanism may be based on
historical trends of instant access. For example, AMCs offering
IAF may set aside in cash at least 3 times of –the higher of, last
one month’s or three month’s daily average of redemptions under
instant access on a rolling day basis. AMCs should also lay down
robust processes for continuous monitoring and for funding the
redemptions under the IAF.
ii. MFs/ AMCs cannot borrow to meet the redemption requirements
under IAF.
d. Disclosures
i. AMCs shall make appropriate disclosures in the scheme related
documents about IAF and ensure that no mis-selling is done on
the pretext of instant availability of funds to the investors.
ii. Appropriate disclosures shall be made to the investors
mentioning the scenarios under which IAF may be suspended
and that IAF request would be processed as a normal redemption
request in such circumstances.
e. Approvals and Controls
i. MFs/ AMCs shall offer IAF only after obtaining approvals from
the AMC Board and the Trustees and keep in place
adequate safeguards in the system to implement this facility.
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ii. IAF shall also be considered while carrying out stress testing of
the schemes.
14.10 Use of e-wallet for investment in MFs 552
14.10.1 With an objective to promote digitalization, MFs/AMCs can accept
investment by an investor through e-wallets (Prepaid Payment
Instruments (PPIs)) subject to the following:
a. MFs/ AMCs shall ensure that extant regulations such as
cut-off timings, time stamping, etc., are complied with for
investment in MFs using e-wallets.
b. MFs/ AMCs shall enter into an agreement / arrangement
with issuers of PPIs for facilitating payment from e-wallets
to MF schemes.
c. Redemption proceeds should be made only to the bank
account of the investor/ unit holder.
d. MFs/ AMCs shall ensure that total subscription through e-
wallets for an investor is restricted to INR 50,000/-per MF
per financial year. Further, the limit of INR 50,000/-would
be an umbrella limit for investments by an investor through
both e-wallet and/or cash, per Mutual Fund per financial
year.
552 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/39 dated May 08, 2017
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e. In context of e-wallets, it should be ensured that all e-
wallets are fully compliant with KYC norms as prescribed
by Reserve Bank of India.553
f. MFs/ AMCs shall ensure that e-wallet issuers shall not offer
any incentives such as cashback, vouchers, etc., directly or
indirectly for investing in MF schemes.
g. MFs/ AMCs shall ensure that only amounts loaded into e-
wallet through cash or debit card or net banking, can be
used for subscription to MF schemes.
h. MFs/ AMCs shall ensure that amount loaded into e-wallet
through credit card, cash back, promotional scheme etc.
should not be allowed for subscription to MF schemes.
i. MFs/ AMCs shall also comply with the requirement of no
third party payment norm for investment made using e-
wallets.
553 Paragraph 14.10.1.(e) is applicable with effect from May 01, 2023, SEBI Circular No.
SEBI/HO/IMD/IMD-PoD-2/P/CIR/2023/40 dated March 23, 2023,
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Master Circular for Mutual Funds as on March 31, 2024
PART II – INVESTOR’S OBLIGATIONS
14.11 Mandatory mentioning of PAN Number554
14.11.1 For the requirement of mentioning PAN Number by investors of
mutual fund schemes, the applicable SEBI guidelines may be
referred.555
14.12 Mandatory mentioning of Bank Account by Investors556
14.12.1 It shall be mandatory for the investors of the Mutual Funds schemes
to mention their bank account numbers in their
applications/request for redemption. For this purposes Mutual
Funds shall provide space in applications and redemption request
forms.
554 SEBI Circular No. MRD/DoP/Cir-05/2007 dated April 27, 2007, SEBI Circular No.
MRD/DoP/Cir-08/2007 dated June 25, 2007, SEBI Circular No. MRD/DoP/MF/Cir-08/2008
dated April 3, 2008, SEBI Circular No. MRD/DoP/Cir-20/2008 dated June 30, 2008, Refer
SEBI Letter No. MRD/Policy/PAN/AT/97151/2007 dated June 25, 2007, Refer SEBI letter
No. SEBI/HO/IMD/DF2/OW/P/2016/6768/1 dated March 08, 2016, Refer SEBI letter No.
IMD/DF2/MSD/OW/P/2016/ 20426/1 dated July 20, 2016, Refer SEBI letter No.
SEBI/HO/OW/IMD /PoD/P/2022/48112 /1 dated September 12, 2022
, 5 ,, 55 SEBI Circular No. MRD/DoP/MF/Cir`-08/2008 dated April 3, 2008, SEBI Circular No.
SEBI/IMD/CIR No. 6/ 4213/04 dated March 1, 2004, Refer SEBI letter No. OW/ 16541 /2012
dated July 24, 2012
< 5 , 56 SEBI Circular No. IIMARP/MF/CIR/07/826/98 dated April 15, 1998. Refer SEBI letter No.
SEBI/HO/OW/IMD/IMD-SEC1/P/2024/7541/1 dated February 09, 2024
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Master Circular for Mutual Funds as on March 31, 2024
PART III– INVESTOR EDUCATION
14.13 SEBI Investors Education Programme – Investments in Mutual
Funds557
14.13.1 SEBI has prepared a brochure in question-answer format explaining
the fundamental issues pertaining to mutual funds. The same is
available on SEBI website https://www.sebi.gov.in under the "FAQs"
section. The details for accessing the same are enclosed at Annexure
4.
14.13.2 AMCs are advised to circulate copies of the brochure among their
distributors and agents (including brokers, banks, post offices) and
the investors.
14.13.3 AMCs may publish the same as small booklets. In such a case, while
the booklets must bear SEBI name and logo, AMC may give their
name as publisher. This may also be displayed prominently on their
websites
14.13.4 AMFI may consider including the brochure as a part of study
material for their training programmes for investors and for their
certification programme conducted for agents and distributors.
14.13.5 SEBI may be kept informed about the steps taken by the AMCs in
this regard from time to time.
14.14 Financial Inclusion558:
14.14.1 In context of Mutual Funds, financial inclusion implies that the
concept of Mutual Fund products is understood by all and are
accessible to anyone who wishes to make an investment in them.
557 SEBI Cir No. MFD/CIR NO -13/370/02 dated January 16,2002
558 SEBI Cir No. CIR/IMD/DF/05/2014 dated March 24, 2014
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Master Circular for Mutual Funds as on March 31, 2024
Also, investors should be capable of figuring out which Mutual Fund
scheme is appropriate for their financial objectives. Towards this, it
has been decided that:
a. AMCs shall mandatorily also make available printed
literature on mutual funds in regional languages for investor
awareness and education.
b. AMCs to introduce Investor awareness campaign in regional
languages both in print and electronic media
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 15: CERTIFICATION AND REGISTRATION OF
INTERMEDIARIES559, 560
15.1 No AMC shall deal with any intermediary (i.e. distributors, agents,
brokers, sub brokers or called by any other name, whether individuals
or belonging to any other organization structure) in relation to selling
and marketing of Mutual Fund units unless they have cleared the
certification examination561.
15.2 Exemption for Senior Citizens: Senior citizens with experience in
distributing Mutual Funds units are exempt from the mandatory
certification examination if they have completed 50 years of age and have
experience of at least 5 years as on September 30, 2003. They are also
required to follow the guidelines prescribed by the Board and AMFI. They
had to attend a mutual fund training programme and a certificate to that
effect endorsed by a mutual fund should be submitted to AMFI.
15.3 No AMC shall engage/employ employee(s) interacting with investors (i.e.
those working in investors relations, call centers, employees engaged in
sales and marketing etc.) unless they have cleared the certification
examination.
559 SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001, SEBI Circular No.
MFD/CIR/20/23230/2002 dated November 28, 2002, SEBI Circular No. SEBI/MFD/CIR
No.01/6693/03 dated April 3, 2003, SEBI Circular No. SEBI/IMD/CIR No.2/254/04 dated
February 4, 2004, SEBI Circular No. MFD/CIR/06/210/2002 dated June 26, 2002.
< 5 60 Exemption for Senior Citizens: Senior citizens with experience in distributing Mutual
Funds units are exempt from the mandatory certification examination if they have completed
50 years of age and have experience of at least 5 years as on September 30, 2003. They are
also required to follow the guidelines prescribed by the Board and AMFI. They had to attend a
mutual fund training programme and a certificate to that effect endorsed by a mutual fund
should be submitted to AMFI.
<
5
<
61 Refer SEBI letter No.– OW / 14970 / 2012 dated July 5, 2012
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Master Circular for Mutual Funds as on March 31, 2024
15.4 Further, such intermediaries and employees shall also adhere to the
Guidelines specified by the Board and AMFI.562
15.5 Distributors of Mutual Fund products563
15.5.1 The AMCs shall regulate the distributors by putting in place a due
diligence process as follows:
15.5.1.1 The due diligence of distributors is solely the responsibility of
mutual funds/AMCs. This responsibility shall not be delegated to
any agency. However, mutual funds/AMCs may take assistance of
an agency of repute while carrying out due diligence process of
distributors.564
15.5.1.2 The due diligence process shall be initially applicable for
distributors satisfying one or more of the following criteria:
a. Multiple point presence (More than 20 locations)
b. AUM raised over Rs.100 Crore across industry in the non-
institutional category but including high net worth individuals
(HNIs)
c. Commission received of over Rs.1 Crore p.a. across industry
d. Commission received of over Rs.50 Lakh from a single Mutual
Fund
562 SEBI Circular No. MFD/CIR No.10/310/01 dated September 25, 2001, SEBI Circular No.
MFD/CIR/20/23230/2002 dated November 28, 2002, Refer SEBI email dated September 22,
2020 & October 14, 2020
563 SEBI Circular No. CIR/IMD/DF/13/2011 dated August 22, 2011, Refer SEBI email dated
February 17, 2011.
564 SEBI Circular No. Cir/IMD/DF/7/2012 dated February 28, 2012, Refer SEBI letter no.
IMD/RB/35057/2011 dated November 16, 2011
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Master Circular for Mutual Funds as on March 31, 2024
15.5.1.3 At the time of empaneling distributors and during the period i.e.
review process, Mutual Funds/AMCs shall undertake a due
diligence process to satisfy ‘fit and proper’ criteria that
incorporate, amongst others, the following factors:
a. Business model, experience and proficiency in the business.
b. Record of regulatory / statutory levies, fines and penalties,
legal suits, customer compensations made; causes for these
and resultant corrective actions taken.
c. Review of associates and subsidiaries on above factors.
d. Organizational controls to ensure that the following processes
are delinked from sales and relationship management
processes and personnel:
i. Customer risk / investment objective evaluation.
ii. MF scheme evaluation and defining its appropriateness
to various customer risk categories.
15.5.1.4 In this respect, customer relationship and transactions shall be
categorized as:
a. Advisory - where a distributor represents to offer advice while
distributing the product, it will be subject to the principle of
‘appropriateness’ of products to that customer category.
Appropriateness is defined as selling only that product
categorization that is identified as best suited for investors
within a defined upper ceiling of risk appetite. No exception
shall be made.
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Master Circular for Mutual Funds as on March 31, 2024
b. Execution Only - in case of transactions that are not booked as
‘advisory’, it shall still require:
i. The distributor has information to believe that the
transaction is not appropriate for the customer, a written
communication be made to the investor regarding the
unsuitability of the product. The communication shall
have to be duly acknowledged and accepted by investor.
ii. A customer confirmation to the effect that the transaction
is ‘execution only notwithstanding the advice of in-
appropriateness from that distributor be obtained prior to
the execution of the transaction.
iii. That on all such ‘execution only’ transactions, the
customer is not required to pay the distributor anything
other than the standard flat transaction charge.
c. There shall be no third categorization of customer relationship
/ transaction.
d. While selling Mutual Fund products of the
distributors’ group/ 565associates, the distributor shall make
disclosure to the customer regarding the conflict of interest
arising from the distributor selling of such products.
15.5.1.5 Compliance and risk management functions of the distributor
shall include review of defined management processes for:
a. The criteria to be used in review of products and the
periodicity of such review.
b. The factors to be included in determining the risk appetite
565 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
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Master Circular for Mutual Funds as on March 31, 2024
of the customer and the investment categorization and
periodicity of such review.
c. Review of transactions, exceptions identification, escalation
and resolution process by internal audit.
d. Recruitment, training, certification and performance review
of all personnel engaged in this business.
e. Customer on boarding and relationship management process,
servicing standards, enquiry / grievance handling
mechanism.
f. Internal/ external audit processes, their comments /
observations as it relates to MF distribution business.
g. Findings of ongoing review from sample survey of investors.
15.5.1.6 Mutual Funds/AMCs may implement additional measures as
deemed appropriate to help achieve greater investor protection.
15.6 Code of Conduct566:
15.6.1 AMCs are required to monitor the activities of their distributors,
agents, brokers to ensure that they do not indulge in any malpractice
or unethical practice while selling or marketing Mutual Funds units.
Any noncompliance with the Mutual Funds Regulations and
Guidelines pertaining to Mutual Funds especially guidelines on
advertisements and/ or sales literature and/or Code of Conduct shall
be reported in the periodic meetings of the Board of the AMC and the
Trustee(s) and shall also be reported to the Board by the AMC(s) in
their CTR(s) and by the Trustees in their Half Yearly Reports.
566 Refer SEBI letter No. SEBI/HO/IMD/IMD-I DOF5/P/OW/2022/2463/1 dated March 21,
2022 & SEBI letter No. SEBI/HO/IMD/IMD-I DOF5/P/OW/2022/14567/1 dated April 04,
2022
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Master Circular for Mutual Funds as on March 31, 2024
15.6.2 AMFI has prescribed a Code of Conduct for Mutual Fund
intermediaries which is available on AMFI Website567. All
intermediaries shall follow the Code of Conduct strictly and not
indulge in any practice contravening it directly or indirectly568.
15.6.3 Noncompliance with the Code of Conduct shall be reported by the
AMC of Mutual Fund to the Board and AMFI. Further, no Mutual
Fund shall deal with intermediaries contravening the prescribed Code
of Conduct.
15.7 Empanelment of Intermediaries by Mutual Funds569
15.7.1 Empanelment of intermediaries by AMCs, payment of commissions,
brokerage and/or sub-brokerage etc. shall be in accordance with
parameters and guidelines specified by the Board and AMFI from time
to time. AMCs shall monitor the compliance of these guidelines and
Code of Conduct by their intermediaries in terms of business done
across all Mutual Funds. In case of non-compliance, AMCs shall
suspend further business and payment of commissions, etc. until full
compliance by the empaneled intermediary.
15.8 Certification Programme for sale and/ or distribution of mutual
fund products570
15.8.1 With effect from June 01, 2010, the certification examination for
distributors, agents or any other persons employed or engaged or to
be employed or engaged in the sale and/or distribution of mutual fund
567 Also refer SEBI Circulars - MFD/CIR/ 06/210/2002 dated June 26, 2002;
MFD/CIR/20/23230/02 dated November 28, 2002 and SEBI/IMD/08/174648/2009 dated
August 27, 2009.
568 Refer SEBI letter No. SEBI/HO/OW/IMD/SEC-DIV-3/P/2022/44787/1 dated August 24,
2022
569 Refer SEBI letter No. IMD/SM/10 dated June 02, 2010
570 SEBI Circular No. Cir/IMD/DF/5/2010 dated June 24, 2010
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Master Circular for Mutual Funds as on March 31, 2024
products, would be conducted by the National Institute of Securities
Markets (NISM)571. The text of notification in this regard is enclosed
herewith as Annexure 5.
15.8.2 Under the existing instructions, the agent/ distributor was exempted
from the AMFI certification examination if he had completed fifty years
of age and had at least five years of experience in distribution of
mutual fund units. As per regulation 4(3) of the Certification
Regulations, persons who have attained the age of fifty years or who
have at least ten years’ experience in the securities markets in the sale
and/ or distribution of mutual fund products as on May 31, 2010, will
be given the option of obtaining the certification either by passing the
NISM certification examination or qualifying for Continuing
Professional Education (CPE) by obtaining such classroom credits as
may be specified by NISM from time to time.
15.8.3 The Certification Regulations require the persons referred to in
Paragraph 15.8.1 above to comply with the requirements for CPE as
specified by NISM within the validity period of the certificate obtained
by passing the certification examination.
15.8.4 An associated person holding a valid AMFI/NISM certification whose
validity expires any time after December 31, 2010, would be required
to comply with the CPE requirements as laid down by NISM under the
relevant clauses of the Certification Regulations, prior to the expiry of
the validity of the certification.
571 For Notification under regulation 3 of the Securities and Exchange Board of India
(Certification of Associated Persons in the Securities Markets) Regulations, 2007 please refer
to section on Annexures)
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Master Circular for Mutual Funds as on March 31, 2024
15.8.5 The requirement of obtaining registration from AMFI after obtaining
certification, as per Chapter 15 of this Master Circular, would
continue.
15.9 New cadre of distributors572
15.9.1 A new cadre of distributors, such as postal agents, retired
government and semi-government officials (class III and above or
equivalent) with a service of at least 10 years, retired teachers with
a service of at least 10 years, retired bank officers with a service
of at least 10 years, and other similar persons (such as Bank
correspondents) as may be notified by AMFI/AMC from time to time,
shall be allowed to sell units of simple and performing mutual
fund schemes.
15.9.2 Simple and performing mutual fund schemes shall comprise of
diversified equity schemes, fixed maturity plans (FMPs), index
schemes, Retirement benefit schemes having tax benefits and Liquid
schemes/ Money Market Mutual Fund schemes573 and should have
returns equal to or better than their scheme benchmark returns
during each of the last three years.
15.9.3 These new cadre of distributors would require a simplified form of
NISM certification and AMFI Registration.
15.10 Developing alternative distribution channels574
15.10.1 In order to increase penetration of Mutual Fund products and to
energize the distribution network while protecting the interest of
investors, SEBI had permitted additional expense ratio of 30 bps for
572 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012, Refer SEBI Letter
No. IMD/OW/24/2013dated January 02, 2013
573 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/37 February 25, 2016.
574 SEBI Circular No. CIR/IMD/DF/05/2014 dated March 24, 2014
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Master Circular for Mutual Funds as on March 31, 2024
garnering funds from B-30 cities. This development would lead to
setting up of distribution infrastructure by AMCs. However, in order
to achieve participation from all parts of the country in Mutual Funds
there is greater need for developing additional distribution channels.
Therefore, it has been decided that:
a. Distribution through PSU banks: PSU banks which have wide
bank branches network and have distribution reach in the nook
and corner of the country, could play a key role in Mutual Funds
distribution. In order to leverage the PSU banks infrastructure,
Mutual Funds/ AMCs need to develop a system for active
support to PSU banks to distribute Mutual Fund products
through them. Such active support would also encourage PSU
banks to distribute products of all Mutual Funds.
b. 575Online distribution: Online distribution not only increases
customer convenience, but also significantly improves
distributor economics. The online phenomenon is increasing
rapidly and it is observed that more and more people especially
younger generation prefers online transactions. Therefore, it has
been decided that all Mutual Funds should enhance the online
investment facility and tap the internet savvy users to invest in
Mutual Funds by providing an online investment facility on their
websites. Mutual Funds also need to tap the burgeoning mobile-
only internet users for direct distribution of Mutual Fund
products.
15.11 Unique Identity Number
15.11.1 AMFI shall create a unique identity number of the employee/
relationship manager/ sales person of the distributor interacting
575 Refer SEBI emails dated June 04, 2010 and July 28, 2010
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Master Circular for Mutual Funds as on March 31, 2024
with the investor for the sale of mutual fund products, in addition to
the AMFI Registration Number (ARN) of the distributor.
15.11.2 The application form for mutual fund schemes shall have
provision for disclosing the unique identity number of such sales
personnel along with the ARN of distributor.
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Master Circular for Mutual Funds as on March 31, 2024
CHAPTER 16: TRANSACTION IN MUTUAL FUNDS UNITS
16.1 Maintenance of documents576
16.1.1 As per the requirements specified by Board in respect of “Anti Money
Laundering (AML) Standards/Combating Financing of Terrorism
(CFT) / Obligations of Securities Market Intermediaries under
Prevention of Money Laundering Act, 2002 and Rules framed there-
under”577, maintenance of all documentation pertaining to the
unitholders/ investors is the responsibility of the AMC.
16.1.2 Accordingly, AMCs were advised to confirm whether all the investor
related documents were maintained/ available with the AMC. If not,
and to the extent of and relating to such investor accounts/folios
where investor related documentation was
incomplete/inadequate/not available or was stated to be maintained
by the distributors, then the Trustees were advised to ensure the
following:
16.1.2.1 No further payment of any commissions, fees and / or payments
in any other mode should be made to such distributors till full
compliance/ completion of the steps enumerated herein.
16.1.2.2 Take immediate steps to obtain all investor/ unit holders
documents in terms of the AML/ CFT, including KYC documents/
PoA as applicable.
16.1.2.3 Take immediate steps to obtain all supporting documents in
respect of the past transactions.
576 SEBI Circular No - SEBI/IMD/CIR No.12 /186868 /2009 dated December 11, 2009, Refer
SEBI letter No. IMD/AT/2868/10 dated April 27, 2010 and SEBI email dated August 20, 2010,
Refer SEBI letter No. SEBI/HO/lMD2/DoF4/OW/P/19402/2019 dated July 30, 2019, Refer
SEBI letter No. SEBI/HO/OW/IMD-II/DOF3/P/27993/2022 dated July 08, 2022 and SEBI
letter No. SEBI/HO/OW/IMD-II/DOF3/P/27989 dated July 08, 2022
577 SEBI Circular No ISD/AML/CIR-1/2008 dated December 19, 2008
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Master Circular for Mutual Funds as on March 31, 2024
16.1.2.4 On a one-time basis, send statement of holdings and all
transactions since inception of that folio in duplicate to the
investor and seek confirmation from the unit holders on the
duplicate copy.
16.1.2.5 Set up a separate customer services mechanism to handle/
address queries and grievance of the above mentioned
unitholders.
16.1.3 Pending completion of documentation, exercise great care and be
satisfied of investor bonafides before authorizing any transaction,
including redemption, on such accounts/ folios.
16.1.4 The Trustees were required forthwith to confirm to Board that the
steps had been taken to address the above and also send a status to
the Board as and when process was completed to their satisfaction.
16.1.5 All mutual funds/ AMCs are directed that578:
16.1.5.1 All new folios/ accounts shall be opened only after ensuring that
all investor related documents including account opening
documents, PAN, KYC, PoA (if applicable), specimen signature are
available with AMCs/RTAs and not just with the distributor.
16.1.5.2 For existing folios, AMCs shall be responsible for updation of the
investor related documents including account opening
documents, PAN, KYC, PoA (if applicable), specimen signature.
578 SEBI Circular No Cir /IMD/DF/9 / 2010 dated August 12, 2010, Refer SEBI email dated
January 10, 2020
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Master Circular for Mutual Funds as on March 31, 2024
16.2 Facilitating transactions in Mutual Fund schemes through the
Stock Exchange infrastructure579
16.2.1 Stock Exchange terminals can be used for facilitating transactions
in mutual fund schemes. The Stock Exchange mechanism would
also extend the present convenience available to secondary market
investors to mutual fund investors.
16.2.2 Units of mutual fund schemes may be permitted to be transacted
through registered stock brokers of recognized stock exchanges and
such stock brokers will be eligible to be considered as official points
of acceptance580.
16.2.3 The respective stock exchange would provide detailed operating
guidelines to facilitate the above.
16.2.4 In this regard, Mutual Funds/AMC are advised that:
16.2.4.1 Empanelment and monitoring of Code of Conduct for brokers
acting as mutual fund intermediaries-
a. The stock brokers intending to extend the transaction in
Mutual Funds through stock exchange mechanism shall be
required to comply with the requirements of passing the AMFI
certification examination581.All such stock brokers would then
be considered as empaneled distributors with mutual
fund/AMC.
579 SEBI Circular No - SEBI /IMD / CIR No.11/183204/ 2009 dated November 13,2009, Refer
SEBI letter No. SEBI/HO/IMD/DF5/OW/P/2020/11567/1 dated July 10, 2020, Refer SEBI
letter no. SEBI/HO/IMD/IMD-I DOF5/P/OW/2022/8536/1 dated February 25, 2022
580 SEBI Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006, Refer SEBI
email dated February 07, 2011
581 Please refer Chapter 16 on Certification and Registration of Mutual Funds intermediaries
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Master Circular for Mutual Funds as on March 31, 2024
b. These stock brokers shall also comply with Code of Conduct582
for intermediaries of Mutual Funds, and applicable SEBI
guidelines583, applicable to intermediaries engaged in selling
and marketing of mutual fund units.
c. It is clarified that, stock exchanges shall monitor the
compliance of the code of conduct specified regarding
empanelment of intermediaries by mutual funds584.
16.2.4.2 Time stamping
a. Time stamping as evidenced by confirmation slip given by stock
exchange mechanism to be considered sufficient compliance
with clause for cut–off timing for liquid scheme and plans, cut-
off timing for other schemes and plans and time stamping
provisions mandated by the Board585.
16.2.4.3 Investor grievance mechanism
a. Stock exchanges shall provide for investor grievance handling
mechanism to the extent they relate to disputes between
brokers and their client.
16.2.4.4 Know your client (KYC)
a. Where investor desires to hold units in dematerialised form, the
KYC performed by DP in terms of SEBI requirements586 would
582 For Code of Conduct, please refer to AMFI website
583 Please refer Chapter 16 on Certification and Registration of Mutual Funds intermediaries
584 Please refer Chapter 16 on Certification and Registration of Mutual Funds intermediaries
,5, 85 Please refer to Chapter 8 – Net Asset Value for details on cut off timing provisions
586 SEBI Circular No - MRD/DoP/Dep/Cir-29/2004 dated August 24, 2004 and
SEBI/IMD/CIR No.11/183204/2009 dated November 13, 2009
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Master Circular for Mutual Funds as on March 31, 2024
be considered compliance with applicable requirements
specified in this regard587 by Mutual Funds/AMCs.
b. The Mutual Funds/AMC shall take necessary steps to do KYC
requirements of all investors as per the prescribed
guidelines588.
16.2.4.5 Stock exchanges and mutual funds/AMCs, based on the
experience gained may improve the mechanism in the interest of
investors.
16.2.4.6 In addition to the existing facilities of purchasing and redeeming
directly with the Mutual Funds and Stock Brokers, the following
be noted589:
a. Units of mutual funds schemes may be permitted to be
transacted through clearing members of the registered Stock
Exchanges.
b. Permit Depository participants of registered Depositories to
process only redemption request of units held in demat form.
16.2.4.7 The following be noted with respect to investors having demat
account and purchasing and redeeming mutual funds units
through stock brokers and clearing members for transactions up
to June 30, 2022. (For transactions from July 1, 2022 refer
Paragraph 16.3 below):
a. Investors shall receive redemption amount (if units are
redeemed) and units (if units are purchased) through
587 SEBI Circular No - ISD/AML/CIR-1/2008 dated December 19, 2008
588 SEBI Circular No. MIRSD/SE/Cir-21/2011, dated October 5, 2011, SEBI Circular No.
MIRSD/Cir-23/2011 dated December 2, 2011 and SEBI Circular No. MIRSD/Cir- 26 /2011
dated December 23, 2011
589 SEBI Circular No CIR/IMD/DF/17/2010 dated November 9, 2010
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Master Circular for Mutual Funds as on March 31, 2024
broker/clearing member’s pool account. Mutual Funds(MF)/
Asset management Companies(AMC) would pay proceeds to
the broker/clearing member (in case of redemption) and
broker/clearing member in turn to the respective investor and
similarly units shall be credited by MF/AMC into
broker/clearing member’s pool account (in case of purchase)
and broker/clearing member in turn to the respective investor.
b. Payment of redemption proceeds to the broker/clearing
members by MF/AMC shall discharge MF/AMC of its
obligation of payment to individual investor. Similarly, in case
of purchase of units, crediting units into broker/clearing
member pool account shall discharge MF/AMC of its obligation
to allot units to individual investor.
16.2.4.8 The following may be noted in this regard:
a. Clearing members and Depository participants will be eligible
to be considered as official points of acceptance590 and
conditions stipulated591 Viz. AMFI /NISM certification, code of
conduct prescribed by SEBI for Intermediaries of Mutual
Fund, shall be applicable for such Clearing members and
Depository participants as well.
b. Stock exchanges and Depositories shall provide investor
grievance handling mechanism to the extent they relate to
disputes between their respective regulated entity and their
client and shall also monitor the compliance of code of conduct
590 SEBI Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006
591 SEBI Circular dated November 13, 2009 for stock brokers
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Master Circular for Mutual Funds as on March 31, 2024
specified592 regarding empanelment and code of conduct for
intermediaries of Mutual Funds.
16.2.4.9 The respective stock exchanges and Depositories would provide
detailed operating guidelines to facilitate the above and ensure
that timelines prescribed593 shall be adhered to with regard to
allotment of units and receipt of redemption proceeds at the
investor’s level.
16.2.5 Stock exchanges and mutual funds/AMCs, based on the experience
gained may further improve the mechanism in the interest of
investors. Necessary clarifications, if any, would be issued at
appropriate time by SEBI in this regard.
16.2.6 594SEBI Registered Investment Advisors (RIAs) has been allowed
to use infrastructure of the recognised stock exchanges to
purchase and redeem mutual fund units directly from Mutual
Fund/Assets Management Companies on behalf of their clients,
including direct plans.
16.2.7 595A mutual fund Distributor registered with Association of Mutual
Funds in India (AMFI) and who has been permitted by the concerned
recognised stock exchange, (MF distributor) shall be eligible to use
recognised stock exchanges' infrastructure to purchases and redeem
mutual fund units directly from Mutual Fund/Assets Management
Companies.
592SEBI Circulars MFD/CIR/20/23230/02 dated November 28, 2002 and
SEBI/IMD/08/174648/2009 dated August 27, 2009
593 SEBI (Mutual Funds) Regulations, 1996
594 SEBI Circular No. SEBI/HO/MRD/DSA/CIR/P/2016/113 dated October 19, 2016
595 SEBI Circular No. CIR/MRD/DSA/32/2013 dated October 04, 2013
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Master Circular for Mutual Funds as on March 31, 2024
16.2.8 The recognised stock exchange shall grant permission on a request
made by a AMFI registered mutual fund distributor on the basis of
criteria including fee, code of conduct, etc. as laid down by it.
16.2.9 The MF distributors shall not handle payout and pay in of funds as
well as units on behalf of investor. The recognised stock exchange
shall put necessary system in place to ensure that pay in will be
directly received by recognised clearing corporation and payout will
be directly made to investor account. In the same manner, units
shall be credited and debited directly from the demat account of
investors, where held in demat mode.
16.2.10 In order to broad base the reach of this platform, it is decided to
permit non demat transactions also in the Mutual fund through
stock exchange platform596.
16.2.11 The respective recognised stock exchanges, recognised clearing
corporations and depositories shall provide detailed operating
guidelines for MF distributor to facilitate the above.
16.2.12 597Investors have been allowed to directly access infrastructure of the
recognised stock exchanges to purchase and redeem mutual fund
units directly from Mutual Fund/ Asset Management Companies.
16.3 Discontinuation of usage of pool accounts for transactions in units
of Mutual Funds on the Stock Exchange Platforms598
596 SEBI Circular No. CIR/MRD/DSA/33/2014 dated December 09, 2014
597 SEBI Circular No. SEBI/HO/MRD1/DSAP/CIR/P/2020/29 dated February 26, 2020
598 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2021/635 dated October 4, 2021,
Refer SEBI letter No. SEBI/HO/IMD/IMD-I DOF5/P/OW/2022/10847/1 dated March 15,
2022
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Master Circular for Mutual Funds as on March 31, 2024
The following has been decided with respect to transactions on stock
exchange platform for units of Mutual Funds:
16.3.1 Pooling of funds and/ or units by stock brokers / clearing members
in any form or manner shall be discontinued for mutual fund
transactions.
16.3.2 Similar to mechanisms for transactions in mutual fund units by
MFDs and IAs, stock exchanges shall put necessary mechanisms in
place for stock brokers / clearing members also, to ensure that funds
pay-in is directly received by the clearing corporation from the
investor account and funds pay-out is directly made to the investor
account. Pay-in / pay-out of funds shall not be handled by the stock
brokers / clearing members. In the same manner, for both demat
and non-demat mode transactions, the units shall be credited and
debited directly to/ from the investors’ demat account/ folio account
without routing it through the pool account of the stock brokers /
clearing members. However, for redemption of units held in
dematerialised mode, the practice of issuance of Delivery Instruction
Slip (‘DIS’) (physical or electronic) to the Depository Participant to
debit the units for delivery to clearing corporation may continue.
16.3.3 It is further clarified that stock brokers / clearing members
facilitating mutual fund transactions shall:
16.3.3.1 not accept mandates for SIPs or Lumpsum transactions in their
name;
16.3.3.2 accept cheque payments from investors issued in favor of the
respective SEBI recognized Clearing Corporations or mutual fund
scheme(s) only;
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Master Circular for Mutual Funds as on March 31, 2024
16.3.3.3 not accept or handle funds or units of investors in their proprietary
accounts or pool accounts in any form or manner; and
16.3.3.4 not accept payment through one-time mandate or issuance of
mandates/ instruments in their name for mutual fund
transactions. However, one-time mandates in favour of SEBI
recognized Clearing Corporations may be accepted. 599 In this
regard, it is clarified that:
a. Existing mandates being used for Mutual Fund transactions
can continue to remain in the name of the stock brokers /
clearing members, subject to Stock Exchanges/ Clearing
Corporations ensuring that Payment Aggregators (“PA”) puts in
place mechanisms wherein beneficiary of the mandate can
only be an Approved Account (which shall only be the bank
account of the Clearing Corporation) such that:
i. PA shall directly credit the monies collected from the bank
account of the investor only into an Approved Account; and
ii. PA shall not act on instructions of the stock brokers /
clearing members to alter or modify the list of Approved
Accounts and in no case the monies shall be credited to
the bank account of the stock brokers / clearing members.
b. With respect to processing mutual fund transactions under the
above mentioned mandates, Stock Exchanges/ Clearing
Corporations shall:
599 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/29 dated March 15, 2022
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Master Circular for Mutual Funds as on March 31, 2024
i. ensure that PA has put in place adequate checks and
balances, inter alia, to ensure such Approved Account is
that of a Clearing Corporation;
ii. enter into an agreement with the concerned PA to ensure
that only those mutual fund transactions are processed
through them which are in compliance with these
guidelines.
iii. have adequate checks and balances to monitor and govern
the receipt of payments through the PA, including by way
of third party audits (at least on an annual basis), to verify
the compliance with these provisions which shall form part
of the agreement with the PA.
16.3.4 Stock Exchanges/ Clearing Corporations shall provide investor
grievance redressal / arbitration mechanism to clients against stock
brokers/ clearing members (as is applicable for other segment of
Stock Exchange transactions), in case of breach of these conditions
or misuse of funds by the PA appointed by the stock brokers/
clearing members or by the stock brokers/clearing members with
respect to mandates accepted in respect of Mutual Fund
transactions.
16.3.5 600On or after July 01, 2022, new mandates shall be accepted only
in favor of SEBI recognized Clearing Corporations and those
mandates shall exclusively be for subscriptions to units of Mutual
Fund schemes and not for any other purpose.
16.3.6 The onus of compliance with PMLA provisions and not permitting
transactions with third party bank account continues to lie with the
600 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/41 dated March 31, 2022
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Master Circular for Mutual Funds as on March 31, 2024
AMCs. AMCs may avail the services of SEBI recognized Clearing
Corporations to validate the investors’ source bank account
information. In such cases, Clearing Corporation shall make the
necessary source account details available to AMCs.
16.3.7 Further, to facilitate investor servicing and parity in information
dissemination, Stock Exchanges, Depositories, AMCs, RTAs, and
other entities involved in mutual fund transactions, shall ensure the
following:
16.3.7.1 Relevant information shall be made available to all the
stakeholders involved in the transactions, including the investor,
banks, payment aggregators, stock brokers, clearing members,
clearing corporations, RTAs and AMCs in line with the Operating
Guidelines issued by the Stock Exchanges in this regard.
16.3.7.2 The information sharing as above, shall be system generated and
adequately secured. Cost towards system development /
improvement in this regard, if any, shall not be passed on to the
investors.
16.3.8 Stock Exchanges and AMFI shall jointly, in consultation with SEBI,
issue Operating Guidelines to stock brokers/ clearing members and
AMCs respectively, to facilitate the mutual fund transactions on
stock exchange platforms. The Operating Guidelines shall include,
inter-alia, roles and responsibilities of various stakeholders,
timelines with respect to activities specified in Paragraph 16.3 of this
Master Circular, sharing of system generated information among
various stakeholders at relevant stage of the transaction in a secured
environment, sharing of relevant information with concerned entities
to perform functional, tax and regulatory obligations, etc. All the
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Master Circular for Mutual Funds as on March 31, 2024
concerned intermediaries shall comply with the aforesaid Operating
Guidelines553.
16.3.9 It is reiterated that in terms of Regulation 4 (g) of SEBI (Investment
Advisers) Regulations, 2013, stock brokers are required to comply
with general obligations and responsibilities specified in Chapter III
of SEBI (Investment Advisers) Regulations, 2013, which, inter-alia,
provide that client level segregation of advisory and distribution
activities needs to be ensured at the entity and group level.
16.3.10 For the purpose of provisions in this Chapter, the term:
“mandate” includes instrument, authorisation or order in any form,
including electronic means, to effect a payment by a person for the
purpose of mutual fund investment; and
“Payment Aggregators” includes Payment Aggregators authorized /
permitted by RBI and scheduled commercial banks acting in the
capacity of Payment Aggregators.
16.3.11 Timelines given by AMFI in consultation with various stakeholders
to implement discontinuation of pooling of funds and/or units in
mutual funds and Two Factor Authentication:
a) Stock Exchange (‘SE’) Platforms:
Parameters Timeline
1. Discontinuation of Pooling of Funds and 1st July 2022
Units
2. Other processes including Third Party 1st July 2022
Verification (TPV), Two Factor
Authentication (2FA), and verification of
key investor details as applicable to the SE
platforms
3. Standardizing the recipients and 1st July 2022
contents of information at various stages of
transaction processing
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Master Circular for Mutual Funds as on March 31, 2024
16.4 Discontinuation of usage of pool accounts by entities including
online platforms other than stock exchanges for transactions in
the units of Mutual Funds 601
The following has been decided with respect to transactions in the units
of Mutual Funds undertaken through service providers/platforms other
than stock exchanges:
16.4.1 AMCs shall ensure that the transactions (financial/ non-financial)
can be executed only if there is a service agreement between the AMC
and the service provider / platform.
16.4.2 AMCs shall ensure that intermediate pooling of funds and/or units
in any manner by MFDs, IAs, MFU, channel partners or any other
service providers/ platforms, by whatsoever name called, are
discontinued for MF transactions. However, this requirement shall
not apply to the SEBI registered Portfolio Managers subject to
compliance with SEBI (Portfolio Managers) Regulations, 2020 and
circulars issued thereunder.
601 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2021/634 dated October 4, 2021,
Refer SEBI letter No. SEBI/HO/IMD/IMD-I DOF5/P/OW/2022/10847/1 dated March 15,
2022.
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Master Circular for Mutual Funds as on March 31, 2024
16.4.3 AMCs shall put necessary systems in place to ensure the
following:For subscription, funds should be credited directly from
the investors’ account into the MF scheme account without any
intermediate pooling. For ease of transactions, funds can be routed
through payment aggregators authorized by RBI or SEBI recognized
clearing corporations, as the case may be.
b) For redemption, funds should be directly credited to the investor’s
registered bank account from the MF scheme account without any
intermediate pooling.
c) For subscription, units should be directly credited into the
investor’s account by the mutual fund for both demat and non-
demat modes without any intermediate pooling.
d) For redemption, units should be directly transferred from
investor’s account to the mutual fund without any intermediate
pooling, in both demat and non-demat modes.
e) MFDs / IAs, MFU, channel partners and other entities (including
online platforms) facilitating MF transactions shall not accept
payment through one-time mandate or issuance of mandates/
instruments in their name for mutual fund transactions. 602 In this
regard, it is clarified that:
i. Existing mandates being used for Mutual Fund transactions
can continue to remain in the name of such OTM holders,
subject to AMCs ensuring that the PA puts in place
mechanisms wherein beneficiary of the mandate can only be
an Approved Account (which shall only be the bank account of
602 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/29 dated March 15, 2022
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Master Circular for Mutual Funds as on March 31, 2024
a mutual fund pool account or mutual fund scheme account)
such that:
I. PA shall directly credit the monies collected from the bank
account of the investor only into an Approved Account,
with the credit being made as per the mandate/ instruction
given to the OTM holder by the client; and
II. PA shall not act on instructions of the OTM holder to alter
or modify the list of Approved Accounts and in no case the
monies shall be credited to the bank account of the OTM
Holder.
ii. With respect to processing mutual fund transactions under the
above mentioned mandates, AMCs shall:
I. ensure that PA has put in place adequate checks and
balances, inter alia, such that Approved Account is that of
a mutual fund scheme or mutual fund registered with
SEBI;
II. enter into an agreement with the concerned PA to ensure
that only those mutual fund transactions are processed
through them which are in compliance with these
provisions.
III. have adequate checks and balances to monitor and govern
the receipt of payments through the PA, including by way
of third party audits (at least on an annual basis), to verify
the compliance with these provisions which shall form part
of the agreement with the PA.
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Master Circular for Mutual Funds as on March 31, 2024
iii. AMCs shall be liable to the unit holders for breach of these
conditions or misuse of funds by PA or OTM holder with
respect to mandates covering Mutual Fund transactions.
iv. On or after April 01, 2022, new Mandates may be accepted in
the name of the OTM holders, subject to compliance with
conditions mentioned in Paragraph 16.4.3.e) above and those
mandates shall exclusively be for subscriptions to units of
Mutual Fund schemes and not for any other purpose.
f) Cheque payments from investor shall be made in favor of the
respective MF Schemes only.
g) For better investor experience and faster transfer of funds, AMCs
shall provide different methods of payment through RBI
recognized modes of payment.
h) AMFI, in consultation with SEBI, shall issue guidelines for AMCs
with regard to mitigating risks of co-mingling of funds at the level
of Payment Aggregators/Payment Gateways involved in mutual
fund transactions. It shall be mandatory for all AMCs to follow
such guidelines.
i) AMCs shall ensure that for the purpose of investor servicing:
i. Detailed information at each stage of the relevant transaction,
including rejection, shall be made available at the same time
to all the stakeholders of the same category involved in the
transactions, as applicable, including investors, Registrar
and Transfer Agents (‘RTAs’), MFDs, IAs, etc. Only payment
related information required to ensure reconciliation and
traceability shall be made available to the Payment
Aggregators.
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Master Circular for Mutual Funds as on March 31, 2024
ii. Information sharing shall be system generated and
adequately secured.
iii. 603The information sharing with respect to direct plans of
mutual fund schemes shall be in line with the clarifications
issued by SEBI to AMFI vide letter dated September 6, 2021
(can be accessed from AMFI website at
https://www.amfiindia.com/Themes/Theme1/downloads/c
irculars/SEBIClarificationw.r.t.transactionsunderDirectPlan
.PDF)
iv. Cost towards system development / improvement in this
regard, if any, shall not be passed on to the investors.
16.4.4 For the purpose of these provisions, the term:
a) “mandate” includes instrument, authorisation or order in any
form, including electronic means, to effect a payment by a person
for the purpose of mutual fund investment; and
b) “Payment Aggregators” includes Payment Aggregators authorized
/ permitted by RBI and scheduled commercial banks acting in
the capacity of Payment Aggregators.
16.4.5 Timelines given by AMFI in consultation with various stakeholders
to implement discontinuation of pooling of funds and/or units in
mutual funds and Two Factor Authentication:
Non SE Platforms:
Parameters / Task Timeline
1. All intermediate pooling will stop from --
1st April 2022
603 Refer SEBI letter No. SEBI/IMD1/DoF-1/SK/2021/25517/1 dated September 06, 2021
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Master Circular for Mutual Funds as on March 31, 2024
2. Signing of Agreements with Payment 1st May 2022
Aggregators (PAs) and Banks
3. Verification / validation of email and 1st May 2022
mobile for new folios / new email IDs and
mobile numbers. Validation of the entire
existing database of email IDs and / or
mobile numbers will be taken up
progressively w.e.f. 1st May 2022
4. Enhanced TPV with independent 1st June 2022
traceability of source bank account
information
5. 2FA for online redemptions 1st June 2022
6. Standardizing the recipients and 1st July 2022
contents of information at various stages of
transaction processing
16.5 Other measures to prevent third-party payments and to safeguard
the interest of unitholders
16.5.1 For mitigation of the risk of third party payments:
16.5.1.1 The onus of compliance with PMLA provisions and not permitting
usage of third party bank account payments continues to lie with
the AMCs.
16.5.1.2 In order to ensure that the folio and source bank account belong
to the same person, AMCs shall make sure that payment for MF
transactions are accepted through only such modes where
independent traceability of end investor can be ensured and
source account details are available as audit trail without relying
on any other intermediary’s records. However, the investment in
MF by way of cash/ through e-wallets (Prepaid Payment
Instruments) shall be in compliance with Paragraph 16.7 (for cash)
and Paragraph 14.10 (for e-wallets) of this Master Circular,
respectively.
16.5.1.3 AMCs shall ensure that payment is credited directly to the
registered and verified bank account of the investor mapped with
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Master Circular for Mutual Funds as on March 31, 2024
the concerned folio, after due verification. The process carried out
by AMCs to verify bank account details i.e. investor name, bank
account number, bank name, etc. shall be available as audit trail.
16.5.1.4 604In case of subscription605 and redemption of units, Two-Factor
Authentication (for online transactions) and signature method (for
offline transactions) shall be used for authentication. One of the
Factors for such Two-Factor Authentication for non demat
transactions shall be a One-Time Password sent to the unit holder
at his/her email/ phone number registered with the AMC/RTA. In
case of demat transaction, process of Two-Factor authentication
as laid down by the Depositories shall be followed606. It is also
clarified that in case of mandates/systematic transactions the
requirement of Two-Factor Authentication shall be applicable only
at the time of registration of mandate/systematic transactions607.
16.5.1.5 AMFI’s best practice guidelines issued for AMCs with regard to
Two-Factor authentication for redemption transactions of Mutual
Funds shall be revised suitably to include subscription
transactions of Mutual Funds. It shall be mandatory for all AMCs
to follow such guidelines.
16.5.2 AMC would be liable to compensate for losses, if any, occurred to a
unit holder, where unauthorised transaction(s) occur(s) in unit
holder’s folio due to fraud/ negligence/ deficiency on the part of the
AMC, employee of AMC or persons/ entities whose services have
been availed by the AMC including the platform providers, MFDs,
604 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/29 dated March 15, 2022
605 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/132 dated September 30,
2022
606 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/41 dated March 31, 2022
607 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/132 dated September 30,
2022
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Master Circular for Mutual Funds as on March 31, 2024
RTAs, MFU, and channel partners, irrespective of whether or not the
fraud is reported by the unit holder. For this purpose, it is clarified
that any unauthorised transaction(s) performed by the Investment
Advisors while providing services to the unit holder(s) would not be
considered as a liability of the AMC.
16.5.3 To strengthen control with respect to verification of key details of
investors like Bank account details, email id, mobile number and
address etc., AMFI shall, in consultation with SEBI, issue guidelines.
It shall be mandatory for all AMCs to follow such guidelines558.
16.6 RTA inter-operable Platform for enhancing investors’ experience in
Mutual Fund transactions / service requests608
16.6.1 In order to make it more convenient to the existing and future
investors to transact and avail services while invested in Mutual
Funds and pursuant to discussions with various stakeholders
including AMFI, Depositories and the RTAs, the following has been
decided:
16.6.1.1 RTAs shall implement standardized practices, system
interoperability amongst themselves to jointly develop a common
industry wide platform that will deliver an integrated, harmonized,
elevated experience to the investors across the industry. AMCs
and Depositories shall facilitate the RTAs for development of the
proposed platform
16.6.1.2 The aforesaid platform shall, inter alia in phases, enable a user-
friendly interface for investors for execution of mutual fund
transactions viz. purchase, redemption, switch etc., initiation and
tracking of service requests viz. change of email id / contact
608 SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/604 dated July 26, 2021.
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Master Circular for Mutual Funds as on March 31, 2024
number / bank account details etc., initiation and tracking of
queries and complaints, access investment related reports viz.
mutual fund holdings (both in demat and standard Statement of
Account), transactions reports (including historic transactions),
capital gains/loss report, details of unclaimed
dividend/redemption etc. Through this platform, investors will be
able to access these services for all Mutual Funds in an integrated
manner. In this regard, AMCs, RTAs and Depositories shall take
necessary measures to provide data via APIs on a real time basis
to the proposed platform. Additionally, RTAs and Depositories
shall also share their respective data feeds between themselves for
generation of investment related reports.
16.6.1.3 The platform may also over time, provide services to the
distributors, registered investment advisors, AMCs, Stock
Exchange platforms and digital platforms for transacting in
mutual funds to further augment ease of investing and servicing
of investors through the above stakeholders in consultation with
SEBI.
16.6.1.4 AMCs, RTAs and Depositories shall review and agree to harmonize
the processes across the industry to provide a single-window,
integrated, simplified investment and service experience for the
investors.
16.6.1.5 AMCs, RTAs, and Depositories shall adopt the data definitions and
standards as provided / recommended by SEBI for data exchange
amongst various participants.
16.6.1.6 The Platform should be scalable with robust cyber security
protocols and supported through an API-based architecture. In
this regard, the platform shall adopt the Cyber Security and Cyber
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Master Circular for Mutual Funds as on March 31, 2024
Resilience framework specified by SEBI from time to time to “MIIs”
(Market Infrastructure Institutions such as Stock Exchanges,
Depositories and Clearing Corporations) and “Qualified RTAs”
(QRTAs). Further, on request basis, APIs could be exposed to other
industry stakeholders such as distributors, registered investment
advisors, Stock Exchange platforms and digital platforms etc. with
due approval of the concerned Mutual Fund on mutually agreed
terms609.
16.6.1.7 The RTAs are jointly and severally responsible for compliance with
all the applicable regulations including system audit and cyber
security audit. Further, RTAs shall ensure that the platform
complies with the guidelines for Business Continuity Plan (BCP)
and Disaster Recovery (DR) specified by SEBI from time to time to
“MIIs”.
16.6.1.8 All the stakeholders are advised to collaborate and work together
towards the development and implementation of the proposed
investor-friendly platform.
16.6.1.9 AMCs and Depositories shall facilitate and RTAs shall make the
aforesaid platform operational in a phased manner (starting with
non-financial transactions) and shall be fully operational by
December 31, 2021.
16.6.1.10 AMCs, RTAs, Depositories, AMFI and key stakeholders are
advised to create awareness about this initiative amongst the
investors.
609 Refer SEBI email dated April 28, 2015
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16.6.1.11 Any RTA providing its services to Mutual Fund(s), shall follow the
above guidelines or amendments thereto as may be intimated by
SEBI from time to time.
16.7 Cash Investments in mutual funds610
16.7.1 In order to help enhance the reach of mutual fund products
amongst small investors, who may not be tax payers and may not
have PAN/bank accounts, such as farmers, small
traders/businessmen/workers, cash transactions in mutual funds to
the extent of 50,000/-611 per investor, per mutual fund, per financial
year shall be allowed subject to (i) compliance with Prevention of
Money Laundering Act, 2002 and Rules framed there under; the
SEBI Circular(s) on Anti Money Laundering (AML) and other
applicable AML rules, regulations and guidelines and (ii) sufficient
systems and procedures in place.
16.7.2 Repayment in the form of redemptions, dividend, etc. with respect to
aforementioned investments shall be paid only through banking
channel.
16.8 Usage of pool accounts by Mutual Funds612
16.8.1 Mutual Funds may use pool accounts, only for such transactions
which are executed at mutual fund level owing to certain
operational and regulatory requirements, subject to the following
conditions:
16.8.1.1 AMCs shall have internal policies approved by the Board of AMC
and Trustees to ensure that adequate operational processes and
610 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012.
611 SEBI Circular No. CIR/IMD/DF/10/2014 dated May 22, 2014
612 SEBI/HO/IMD/DF2/CIR/P/2021/683 dated December 10, 2021
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internal controls are in place to segregate and ring-fence the
assets and liabilities of each scheme along with segregation and
ring-fencing of securities & bank accounts.
16.8.1.2 In such cases, at the end of day, the assets and liabilities of
each scheme shall be segregated and ring-fenced from other
schemes of the mutual fund; and bank accounts and securities
accounts of each scheme shall be segregated and ring-fenced.
The pool accounts for both securities and funds should have nil
balance at end of the day.
Provided that if the funds lying in the pool bank account of the
mutual fund are not identified, due to the reasons beyond the
control of the AMC, the same shall be transferred to the
respective scheme account not later than one business day from
the day such transactions are identified.
16.8.1.3 At no point of time, the securities or funds of one schemes shall
be used for other scheme(s) and there shall be any conflict of
interest amongst investors of various schemes.
16.8.1.4 The responsibility to ensure segregation and ring-fencing of the
assets and liabilities of each scheme along with segregation and
ring-fencing of bank accounts & securities accounts shall lie
with the Board of AMC and Trustees. Trustees in their Half
Yearly Trustee Report (HYTR) to SEBI shall confirm that the
assets and liabilities of each scheme along with their bank
accounts & securities accounts are segregated and ring-fenced
on daily basis, except the unidentified transactions of funds as
mentioned in Paragraph 16.8.1.2 above, during the half-year
period.
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16.8.1.5 The whole mechanism shall be audited on half yearly basis by
the auditor appointed by the trustees.
16.8.2 Further, with regard to the margin or collateral requirement for
execution of certain transactions, which are carried out only at
Mutual Fund level by various schemes, the following has been
stipulated:
16.8.2.1 In terms of Clause (5) of the Fifth Schedule of MF Regulations,
the AMC shall ensure that margins or collaterals for such
transactions are placed from the assets of the respective
schemes only, without co-mingling with the assets of other
schemes.
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CHAPTER 16A: CORPORATE DEBT MARKET DEVELOPMENT FUND
(CDMDF)
16A.1 Framework for Corporate Debt Market Development Fund
(CDMDF)613
16A.1.1 Chapter III-C has been inserted vide amendments to SEBI
(Alternative Investment Funds) Regulations, 2012 vide Gazette
notification no. SEBI/LAD-NRO/GN/2023/132 dated June 15, 2023
in order to facilitate constitution of an Alternative Investment Fund
namely, Corporate Debt Market Development Fund (“CDMDF” or “the
Fund”), to act as a Backstop Facility for purchase of investment grade
corporate debt securities, to instil confidence amongst the
participants in the Corporate Debt Market during times of stress and
to generally enhance secondary market liquidity by creating a
permanent institutional framework for activation in times of market
stress.
16A.1.2 CDMDF shall comply with the Guarantee Scheme for Corporate Debt
(GSCD) as notified by Ministry of Finance vide notification no. G.S.R.
559(E) dated July 26, 2023, which includes the Framework for
Corporate Debt Market Development Fund.
16A.1.3 In addition to the abovementioned scheme as mentioned at para
16A.1.2 above, CDMDF shall comply with following:
16A.1.3.1 The fund shall deal only in following securities during normal
times:
 Low duration Government Securities
 Treasury bills
613 Inserted by SEBI Circular No. SEBI/HO/IMD/PoD2/P/CIR/2023/128 dated July 27, 2023.
Refer SEBI letter No. SEBI/HO/IMD/IMD-POD-2/P/OW/2023/20790/1 dated May 23, 2023
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 Tri-party Repo on G-sec
 Guaranteed corporate bond repo with maturity not
exceeding 7 days.
16A.1.3.2 The fees and expenses of the Fund shall be as follows:
 During Normal times: (0.15% + tax) of the Portfolio Value
charged on daily pro-rata basis.
 During Market stress: (0.20% + tax) of the Portfolio Value
charged on daily pro-rata basis.
 “Portfolio Value” means the aggregate amount of portfolio of
investments including cash balance without netting off of
leverage undertaken by the Fund.
Clarification:
i. The taxes as mentioned above shall include all kinds of
taxes.
ii. Transaction costs on securities such as brokerage, clearing
charges etc. shall be charged within the limit of fees and
expenses.
iii. Financing charges pertaining to borrowings made by
CDMDF (such as interest, guarantee fees, other fees like
bank charges, processing fees etc.) may be separate from
fees and expenses of the fund as provided above.
16A.1.3.3 Corporate debt securities to be bought by CDMDF during market
dislocation include listed money market instruments. The long
term rating of issuers shall be considered for the money market
instruments. However, if there is no long term rating available for
the same issuer, then based on credit rating mapping of CRAs
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between short term and long term ratings, the most conservative
long term rating shall be taken for a given short term rating.
16A.1.3.4 CDMDF shall follow the Fair Pricing document as placed at
Annexure 16A while purchase of corporate debt securities during
market dislocation.
16A.1.3.5 CDMDF shall follow the loss waterfall accounting, as prescribed at
Annexure 16B.
16A.1.3.6 CDMDF shall disclose Net Asset Value (NAV) of the fund by 9:30
PM on all business days on website of its Investment Manager and
AMFI. For times when CDMDF would have exposure to corporate
debt, such NAV shall be disclosed by 11 PM on all business days.
16A.1.3.7 Purchase allocation and trade settlement of corporate debt
securities bought by CDMDF during market dislocation:
 Keeping in view the prudential limits and various other
guidelines as prescribed in scheme as mentioned at para
16A.1.2 above, AMFI has specified the detailed guidelines for
purchase of securities by CDMDF in consultation with SEBI.
Stock exchanges shall provide a separate window on the
existing Request for Quote (RFQ) platform to facilitate the
purchase as per AMFI issued guidelines.
 Clearing Corporations shall provide required infrastructure
to facilitate the trade settlement of corporate debt trades by
CDMDF during market dislocation, within 3 months of
issuance of this circular.
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16A.2 Investment by Mutual Fund Schemes and AMCs in units of
Corporate Debt Market Development Fund614
16A.2.1 With the objective of development of the corporate debt market from
the perspective of Mutual Funds, the Mutual Fund Advisory
Committee (MFAC) of SEBI had constituted a Working Group
consisting of representatives of various Mutual Funds, Clearing
Corporation of India Limited (CCIL) and AMFI for detailed
deliberation. The Working Group inter-alia recommended creation of
an entity to buy corporate debt securities from MF schemes with
support from Government of India.
16A.2.2 Based on consultation with various stakeholders and as proposed as
part of the Union Budget 2021-22, Chapter III-C has been inserted
in SEBI (Alternative Investment Funds) Regulations, 2012 vide
Gazette notification no. SEBI/LAD-NRO/GN/2023/132 dated June
15, 2023 and regulation 43A has been inserted in SEBI (Mutual
Funds) Regulations, 1996 vide Gazette notification no. SEBI/LAD-
NRO/GN/2023/134 dated June 26, 2023 to facilitate constitution of
Corporate Debt Market Development Fund (“CDMDF” or “the fund”),
as a backstop facility for purchase of investment grade corporate debt
securities, to instil confidence amongst the participants in the
Corporate Debt Market during times of stress and to generally
enhance secondary market liquidity by creating a permanent
institutional framework for activation in times of market stress.
Further, Guarantee Scheme for Corporate Debt (GSCD) was notified
by Ministry of Finance vide notification no. G.S.R. 559(E) dated July
26, 2023, which includes the Framework for Corporate Debt Market
Development Fund.
614 Inserted by SEBI Circular No. SEBI/HO/IMD/PoD2/P/CIR/2023/129 dated July 27, 2023
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16A.2.3 CDMDF shall be launched as a close ended scheme with an initial
tenure of 15 years (extendable) from the date of its initial closing (date
on which contribution from all AMCs and specified schemes is
received by CDMDF).
16A.2.4 Accordingly, the following has been decided:
16A.2.4.1 The units of CDMDF shall be subscribed by AMCs of Mutual
Funds and “specified debt-oriented MF Schemes” (i.e., Open ended
Debt oriented Mutual Fund schemes excluding Overnight funds
and Gilt funds and including Conservative Hybrid funds).
Contribution from specified debt-oriented MF schemes and AMCs,
including the appreciations on the same, if any, shall be locked-in
till winding up of the Fund. However, in case of winding up of
contributing MF Schemes, inter-scheme transfers within the same
Mutual Fund or across Mutual Funds may be undertaken.
Clarification: Specified debt-oriented MF schemes exclude Index
funds and ETFs. Further, the Gilt funds as mentioned above shall
mean both Gilt Fund and Gilt Fund with 10 year constant maturity.
16A.2.4.2 Specified debt-oriented MF Schemes shall invest 25 bps of their
Assets Under Management (AUM) in the units of CDMDF. The
specified MF schemes shall provide additional incremental
contribution to CDMDF as their AUM increases, every six months
to ensure 25 bps of scheme AUM is invested in units of CDMDF.
However, if AUM decreases there shall be no return or redemption
from CDMDF. New schemes from existing MFs under the specified
categories or such schemes of new MFs shall also contribute 25
bps of their respective AUM and make incremental contribution.
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16A.2.4.3 AMCs shall make a one-time contribution equivalent to 2 bps of
the AUM of specified debt-oriented MF Schemes managed by them.
Further, AMCs of new Mutual Funds shall also make a one-time
contribution equivalent to 2 bps of their specified debt-oriented MF
schemes, based on the AUM at the end of the financial year
following the one in which the specified scheme(s) are launched.
16A.2.4.4 The initial contribution, as mandated above shall be based on AUM
of the specified MF schemes as on December 31, 2022.
16A.2.4.5 AMFI shall calculate and inform contribution to be made by each
MF Scheme and AMC, to CDMDF and the AMCs. The initial
contribution shall be made within 10 working days of request from
CDMDF. The Half-yearly contributions shall start from December
2023 onwards, which shall be made within 10 working days from
end of each half year.
16A.2.4.6 In case of delay in contribution by Mutual Fund Schemes and
AMCs, the respective AMCs shall be liable to pay interest at fifteen
percent (15%) per annum for the period of delay. Such interest
shall be credited to the fund of CDMDF.
16A.2.4.7 In times of market dislocation, CDMDF shall purchase listed
corporate debt securities from the specified debt-oriented MF
schemes. The trigger and period for which the Backstop Facility
will be open shall be as decided by SEBI.
Clarification: Corporate debt securities include listed money market
instruments for the above purpose.
16A.2.4.8 During market dislocation, the securities purchased by CDMDF
would be from secondary market, having investment grade credit
rating and residual maturity not exceeding 5 years on the date of
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purchase. CDMDF shall not buy any unlisted or below investment
grade or defaulted debt securities or securities in respect of which
there is a material possibility of default or adverse credit news or
views. As a principle, CDMDF shall buy at a fair price (adjusted for
liquidity risk, interest rate risk and credit risk) but not at distress
price. The utilization of such facility by specified debt-oriented MF
schemes shall be voluntary.
16A.2.4.9 The sellers of debt securities shall be paid 90% of the consideration
in cash and 10% in terms of units of CDMDF. Such units paid as
consideration (different class of units than units allotted in lieu of
contribution made) shall bear the risk of first loss, if any to
CDMDF, and can be redeemed during the tenure of scheme,
subject to certain conditions.
16A.2.4.10 Access to the fund: The respective Mutual Funds shall have
access to sell corporate debt securities during market dislocation,
held in the portfolio of contributing schemes, to the CDMDF.
Access to the Fund shall be in proportion to the contribution
made to the Fund at a Mutual Fund level (i.e., in the ratio of total
units of CDMDF held by all specified debt schemes of each
Mutual Fund).
16A.2.5 Further, the following has been decided in respect to investment of
Mutual Fund Schemes in CDMDF:
16A.2.5.1 Corporate debt securities sold by MF schemes to CDMDF during
market dislocation shall be treated as trade executed on Request
for Quote (RFQ) platform.
16A.2.5.2 In case Net Asset Value of CDMDF units is not available by 9:30
PM, NAV declaration timing for Mutual Fund Schemes holding
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units of CDMDF shall be 10 am on next business day instead of
11 pm on same day.
16A.2.5.3 It is clarified that the CDMDF shall not be considered as an
“associate” of any Mutual Fund and investment made in units of
CDMDF in accordance with this circular shall not be considered
as investment in associate or group company of any Mutual Fund.
16A.2.5.4 AMCs shall ensure that the net worth as prescribed under
Regulation 21(1)(f) of SEBI (Mutual Funds) Regulations, 1996 shall
be maintained over and above the contribution made towards
CDMDF.
16A.2.5.5 The calculations of Potential Risk Class (PRC) Matrix, Risk-o-
meter, Stress testing and Duration for various purposes shall be
done after excluding investments in units of CDMDF. Further, the
investments in CDMDF units shall not be considered as violation
while considering maturity restriction as applicable for various
purposes.
16A.2.5.6 The relevant changes in the Scheme Information Document shall
be incorporated by AMCs by way of issuing an addendum prior to
contributing to CDMDF. Such changes shall not be considered as
a Fundamental Attribute Change of the scheme in terms of
regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996.
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CHAPTER 16B: EXECUTION ONLY PLATFORMS (EOP)615
16B.1 Execution Only Platforms for facilitating transactions in direct
plans of schemes of Mutual Funds
16B.1.1 It was observed that various SEBI registered Investment
Advisors/Stock Brokers provided execution services in direct plans of
Mutual Fund schemes through their technology/digital platforms.
Such platforms were often availed by investors who are not their clients
in terms of SEBI (Investment Advisers) Regulations, 2013 or SEBI
(Stock Brokers) Regulations, 1992.
16B.1.2 There was no specific framework available for technology/digital
platforms (including platforms provided by Investment Advisers/Stock
Brokers to non-clients) to provide execution-only services in direct
plans of Mutual Fund schemes and to obtain data feeds with respect
to such transactions. Thus, while the investors might have found it
convenient to avail the services of such online platforms, investors who
were not clients of such intermediaries under the above specified
Regulations might not had recourse or protection for the risks
associated with respect to such transactions. Therefore, a need was felt
to strike a balance between investor convenience and investor
protection.
16B.1.3 Pursuant to public consultation and discussions in the Mutual Funds
Advisory Committee, it was decided to prescribe a framework for
Execution Only Platforms for transacting in direct plans of schemes of
Mutual Funds. In this regard, the SEBI (Stock Brokers) Regulations,
1992 were amended and notified on January 17, 2023.
615 Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/86 dated June 13,
2023
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16B.2 Applicability and Scope
16B.2.1 An EOP for facilitating transactions in direct plans of schemes of Mutual
Funds, shall mean:
“Any digital or online platform which facilitates transactions such as
subscription, redemption and switch transactions in direct plans of
schemes of Mutual Funds.”
16B.2.2 The platforms provided by SEBI registered Investment Advisors and
Stock Brokers to their advisory or broking clients shall not be covered
under the EOP framework.
16B.2.3 No entity shall operate as an EOP without obtaining registration from
SEBI or the AMFI, as the case may be and in the manner specified
herein.
16B.2.4 The entity shall also facilitate non-financial transactions including
change of email id or contact number or bank account details on its
platform with respect to Mutual Funds.
16B.2.5 The entity shall not provide services related to regular plans of schemes
of Mutual Funds on its platform.
16B.2.6 Any entity providing digital or online platform which facilitates
transactions in direct plans of schemes of Mutual Funds, on or prior to
September 01, 2023, shall apply for the relevant
registration/membership, as the case may be, within 3 months from
September 01, 2023.
16B.3 Categories of EOP
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Any entity desirous of operating as an EOP shall obtain registration
under one of the following two categories:
16B.3.1 Category 1 EOP
a) The entity shall obtain registration from AMFI.
b) The entity shall be a body corporate.
c) The entity shall act as an agent of AMCs and integrate its systems
with AMCs and/or RTAs authorized by such AMCs, to facilitate
transactions in Mutual Funds.
d) The entity may act as an aggregator of the transactions in direct
plans of schemes of Mutual Funds and provide services to
investors/other intermediaries.
16B.3.2 Category 2 EOP
a) The entity shall obtain registration as a Stock Broker in terms of
the SEBI (Stock Brokers) Regulations, 1992 under the EOP
segment of the Stock Exchanges.
b) The entity shall be a body corporate.
c) The entity shall operate as an agent of investor and operate only
through the platforms provided by the Stock Exchanges.
d) The entity shall not act as an aggregator of the transactions in
direct plans of schemes of Mutual Funds and shall provide
services to investors directly.
16B.4 Eligibility Criteria
16B.4.1 Any entity desirous of obtaining registration as a Category 2 EOP shall
ensure compliance with the following requirements, on a continuous
basis:
16B.4.1.1 The entity has appointed a compliance officer.
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16B.4.1.2 The entity has appointed at least two qualified key managerial
personnel with experience of at least three years each in the securities
market;
Explanation I. – For the purposes of this Chapter, “Key managerial
personnel” shall have the same meaning as assigned to it in the
Companies Act, 2013.
Explanation II. – For the purposes of this Chapter, a person shall be said
to be ‘qualified’ if he/she possesses a professional qualification in
finance, accountancy, law, engineering, company secretaryship or
management from a university or an institution recognized by the
Central Government or any State Government or a foreign university or
post-graduation in the Securities Market from National Institute of
Securities Markets (NISM) of a duration not less than one year.
16B.4.1.3 The entity shall fulfill the “fit and proper person” criteria as prescribed
under Schedule II of the SEBI (Intermediaries) Regulations, 2008.
16B.4.1.4 The entity shall comply with the requirement of base net-worth
applicable for Trading Member, as specified under Schedule VI of
SEBI (Stock Brokers) Regulations, 1992
16B.4.2 As Category 1 EOP, the entity shall fulfill the criteria, as specified by
AMFI.
16B.5 On-boarding and integration
16B.5.1 On-boarding of investors
16B.5.1.1 As Category 2 EOP, the entity shall:
a) comply with Know Your Client (KYC) requirements at the time of
on-boarding investors on its platform and take necessary steps
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including verifying the identity of its investors by requiring them
to submit necessary documents.
b) have access to the KYC data of the investors available with the
KYC Registration Agencies (KRAs) for on-boarding of investors.
c) carry out necessary due diligence and ensure that investor signs
a “Rights and Obligation” document as specified by Stock
Exchanges before availing its services.
16B.5.1.2 For Category 1 EOPs, the requirements with respect to on-boarding of
investors shall be as specified by AMFI.
16B.5.1.3 The responsibility of ensuring compliance with KYC requirements, with
respect to transactions executed through both categories of EOPs by
investors in Mutual Funds, shall lie with the AMCs.
16B.5.2 Rights and obligations
16B.5.2.1 As Category 1 EOP, the entity shall enter into agreement(s) with the
AMCs which should clearly define their rights and obligations relating
to EOP services. Further the entity shall have an objective, fair and
transparent policy for providing execution services for products of
AMCs.
16B.5.2.2 As Category 2 EOP, the entity shall enter into necessary arrangements
with the Stock Exchanges which should clearly define their rights and
obligations relating to the EOP services.
16B.6 Transaction and on boarding fees
16B.6.1 As Category 1 EOP, the entity may levy a flat transaction fee (not ad-
valorem), if any, which shall be borne by AMCs, within the upper limit
as specified by AMFI. On-boarding fees, if levied, shall be borne by the
AMCs.
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16B.6.2 As Category 2 EOP, the entity may levy a flat transaction fee (not ad-
valorem), if any, which shall be borne by the investors, within the upper
limit as specified by the Stock Exchanges. Further, On-boarding fees, if
levied, shall be borne by the AMCs and/or investors.
16B.6.3 AMCs shall not charge any fees/charges paid to the EOPs, to the
schemes of the Mutual Funds.
16B.7 Operational Risk Management
16B.7.1 The entities under both categories of EOPs shall:
16B.7.1.1 ensure that they have a comprehensive risk management framework
covering all aspects of their operations and shall also ensure that risks
associated with their operations are identified and managed.
16B.7.1.2 ensure access control for their clients and prevent unauthorized access
to their platform.
16B.7.1.3 ensure that all transactions on their platform, without exception, are
dealt with in a fair, non-discriminatory and orderly manner.
16B.7.1.4 formulate data governance, protection and dissemination policy which
is fair and non-discriminatory.
16B.7.1.5 facilitate only such transactions that are in compliance with the
prevailing legal or regulatory requirements and shall establish
appropriate controls to reduce the likelihood of erroneous
transactions.
16B.7.1.6 maintain all data relating to their activities in an easily retrievable
media. Also, maintain confidentiality and security of all data relating
to their activities and strictly control access to such data.
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16B.7.1.7 ensure data integrity and privacy.
16B.7.1.8 establish necessary systems and frame suitable policies, in writing, for
onboarding of investors on their platform, execution of transactions,
rights and obligations/terms and conditions for the investor and the
EOP, risk management and control, liability framework for EOP in case
of breach of the policies, restrictions or other requirements that may
apply for accessing the platform.
16B.7.2 The entities under both categories of EOPs may share investors’ data
with their other departments/divisions, their group entities and/or with
any third party, only with the specific consent of the investors.
16B.7.3 As Category 1 EOP, the entity shall ensure compliance with cyber
security and cyber resilience requirements, as specified by AMFI. As
Category 2 EOP, the entity shall ensure compliance with the cyber
security and cyber resilience framework for Stock Brokers, as prescribed
by SEBI from time to time.
16B.8 Grievance Redressal
16B.8.1 For Category 1 EOPs, the grievance redressal mechanism shall be as
prescribed by AMFI.
16B.8.2 For Category 2 EOPs, the grievance redressal mechanism shall be as
prescribed for Stock Brokers from time to time i.e., through SCORES,
mediation and arbitration mechanism.
16B.9 Handing conflict of interest
The entities under both categories of EOPs shall ensure compliance with
the following:
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16B.9.1 Maintain arm’s length relationship, if performing multiple activities
within the same entity, so as to avoid conflict of interest.
16B.9.2 Maintain investor level segregation between EOP services and
distribution services for Mutual Fund products, at the entity’s group
level. Thus, an investor at the EOP’s group level may either avail EOP
services for transacting in direct plans or distribu-tion services for
regular plans of Mutual Funds.
16B.9.1.1 For this purpose, the family of the investor shall be reckoned as a
single in-vestor. The definition of “group” shall have the same meaning
as defined un-der SEBI (Investment Advisers) Regulations, 2013.
16B.9.1.2 The PAN of each investor shall be the control record for identification
and in-vestor level segregation at the entity’s end. In case of an
individual investor, “family of investor” shall be reckoned as a single
investor and PAN of all mem-bers in “family of investor” shall jointly
and severally be the control record.
16B.9.1.3 “family of investor” shall include individual investor, dependent
spouse, de-pendent children and dependent parents. The dependent
family members shall be those members whose investments through
EOP originates from in-come of a single entity i.e. earning individual
investor in the family. The inves-tor shall provide an annual
declaration or periodic updation as the case maybe in respect of such
dependent family members.
16B.9.3 Use SEBI/AMFI registration as an EOP, as the case may be, only for the
purpose of providing execution only services in direct plans of Mutual
Fund schemes and not use the said registration for undertaking any
unregulated activity
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16B.9.4 Undertake services regulated or permitted by other sectoral regulators,
only with specific disclosure regarding such services not being covered
under the ambit of entity’s registration as an EOP and also disclose the
details of registration/permis-sions by other sectoral regulators in such
cases.
16B.9.5 Undertake to identify and disclose on their platform, possible conflict(s)
of interest, if any, including those arising from their transactions or
dealings with related parties.
16B.10 Technology related requirements
16B.10.1 Execution of transactions
16B.10.1.1 The orders of investors placed through Category 1 EOPs shall be routed
directly to the AMCs and/or RTAs authorized by such AMCs.
16B.10.1.2 The orders of investors placed through Category 2 EOPs shall be routed
through the platforms provided by the Stock Exchanges.
16B.10.1.3 The order of the investors placed through both categories of EOPs shall
be executed on immediate basis.
16B.10.2 The entities under both categories of EOPs shall
16B.10.2.1 maintain robust technology infrastructure with a high degree of
reliability, availability, scalability and security in respect of their
systems, data and network, to appropriately support their operations
and manage the associated risks.
16B.10.2.2 have adequate and suitable systems in place to disseminate
information to investors pertaining to orders placed on a real-time or a
near real-time basis.
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16B.10.2.3 have the organizational capabilities, technology and systems and
safeguards for maintaining data privacy and preventing unauthorized
sharing of data.
16B.10.2.4 establish appropriate safeguards and procedures to deal with
exigencies including malfunctions or erroneous use of their systems,
or other unforeseen situations
16B.10.2.5 make their platforms available for transactions at all times, on a
continuous basis
16B.11 Disclosure related requirements
16B.11.1 Display of advertisements
16B.11.1.1 The entity under both categories of EOPs shall not display any
advertisement regarding any Mutual Fund scheme on their platform.
Further, they shall not display any proxy/surrogate/common brand
related advertisement on their platform.
16B.11.1.2 With respect to advertisements of the EOPs on other
websites/applications/portals/media/channels, the entity registered
as Category 1 EOP shall ensure compliance with the advertisement
code prescribed by AMFI and the entity registered as Category 2 EOP
shall ensure compliance with the advertisement code prescribed by the
Stock Exchanges.
16B.11.2 Issuance of transaction receipt and alerts to the clients
The entities under both categories of EOPs shall ensure the following:
16B.11.2.1 On placement of transactions by investors, issue or display without
delay, an electronic order receipt which shall include details such as
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date and time of order, quantity of units and/or amount proposed to
be invested/redeemed.
16B.11.2.2 The status of transactions is provided to the investors on a continuous
basis.
16B.11.3 Access to transaction data
16B.11.3.1 The entities under both categories of EOPs shall have access to the
investors’ transaction data feeds from AMCs or RTAs authorized by
AMCs for the transactions executed through their platforms.
16B.11.4 Disclosures regarding Mutual Fund schemes
16B.11.4.1 The entities under both categories of EOPs shall comply with the
following:
a) Display in a user-friendly manner, the factual information
pertaining to Mutual Funds as available on public domain
including past performance of Mutual Fund schemes and ensure
compliance with the minimum disclosure requirements as
specified at Annexure 13A.
b) Provide an interactive tool for the investors to screen or filter
various schemes based on the criteria selected by the investor
including past performance, AUM, etc. and ensure that there is
no auto display of recommendation or ranking of any of the
schemes. If the criteria for selection includes research reports or
opinions, the same shall be only by SEBI registered
intermediaries along with suitable disclosures regarding the
source. Such research reports or opinions should disclose the
methodology used for such recommendations. The aforesaid tool
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Master Circular for Mutual Funds as on March 31, 2024
shall not itself provide any research reports or opinions or
perform any research based or investment advisory activity.
16B.11.4.2 As Category 1 EOPs, the entities shall submit information or reports
as may be specified by AMFI.
16B.11.4.3 As Category 2 EOPs, the entities shall submit information or reports
as may be specified by SEBI or Stock Exchanges.
16B.11.5 The entities under both categories shall keep the AMCs and Stock
Exchanges or AMFI, as the case may be, informed of events resulting in
disruption of activities or market abuse without undue delay.
16B.11.6 The Stock Exchanges or AMFI and AMCs (directly or through AMFI)
shall ensure periodic monitoring of the EOPs under their supervision
with respect to compliance with the requirements mentioned in this
chapter and also bring to the notice of SEBI, any instances of non-
compliance.
16B.11.7 As Category 1 EOP, the entity shall follow the code of conduct as
specified by AMFI.
16B.12 Pooling of Funds
16B.12.1 The entities under both categories of EOPs shall ensure compliance with
relevant provisions including Chapter 16 of this Master Circular
regarding discontinuation of usage of pool accounts for transactions in
units of Mutual Funds.
16B.13 Maintenance of books of accounts, records, etc.
16B.13.1 Regulation 17(1A) of the SEBI (Stock Brokers) Regulations, 1992
provides that a Stock Broker in the EOP segment shall keep and
maintain the books of account, records and documents, as may be
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specified by SEBI. Accordingly, as Category 2 EOP, the entity shall keep
and maintain records as specified at Annexure 13B for a minimum
period of five years. As Category 1 EOP, the entity shall keep and
maintain the books of account, records and documents, in the form and
manner specified by AMFI.
16B.14 Existing platforms
16B.14.1 Existing platforms which are providing services similar to Category 1
EOPs such as platforms viz, MF Utilities India Pvt. Ltd., MF Central,
platforms provided by RTAs etc., shall obtain suitable registration under
one of the categories of EOPs within 3 months from September 01, 2023.
16B.14.2 As regards the platforms by Market Infrastructure Institutions such as
the Stock Exchanges, which are mandated by SEBI, although
registration as an EOP shall not be mandatory, such platforms shall
ensure compliance with the applicable requirements under the
framework for EOP, within 3 months from September 01, 2023.
16B.15 Implementation
16B.15.1 The Stock Exchanges shall enact appropriate framework for EOP
segment wherein the following requirements shall not be applicable for
Category 2 EOP:
a) trading rules applicable for equity, equity derivative and other
segments
b) Investor Protection Fund.
c) rules applicable for clearing and settlement of trades relating to
equity, equity derivative and other segments.
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d) pooling of client’s funds by Trading Member.
e) membership and other related requirements as a Self-Clearing
Member (SCM) or requirement of Trading Member – Clearing Member
agreement.
f) risk management framework and settlement related polices applicable
for equity, equity derivative and other segments where the Clearing
Corporation provides novation and guarantee for settlement of trades.
g) issuance of contract notes and issuance of funds & securities
statement.
16B.15.2 The Stock Exchanges desirous of providing an EOP segment had been
directed to:
a) make necessary arrangements to their relevant bye-laws, rules and
regulations for the implementation of the aforesaid directions and
provide status of implementation regarding the same to SEBI on a
monthly basis; and
b) monitor the operations carried out by EOPs who have obtained
membership under EOP segment
16B.15.3 The AMFI had been directed to:
a) make necessary amendments for the implementation of the aforesaid
directions and provide status of implementation regarding the same to
SEBI on a monthly basis; and
b) issue necessary guidelines for Category 1 EOP before September 01,
2023.
c) monitor the operations carried out by EOPs registered with AMFI.
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CHAPTER 17: MISCELLANEOUS
17.1 Online Registration Mechanism for Mutual Funds616
17.1.1 It has been decided to operationalize SEBI Intermediary Portal
(https://siportal.sebi.gov.in) for the entities to submit the mutual
funds registration applications online. For registration of mutual
funds, the SEBI Intermediary Portal shall include online application
for registration, processing of application, grant of in-principle
approval, grant of final registration etc. Link for SEBI Intermediary
Portal is also available on SEBI website - www.sebi.gov.in.
17.1.2 SEBI Intermediary Portal for application of registration of Mutual
Funds has been made operational from June 01, 2017. Thereafter, all
applications for registration of Mutual Fund is required to be made
through SEBI Intermediary Portal only.
17.1.3 In case of any queries and clarifications with regard to the SEBI
Intermediary Portal, intermediaries may contact on 022-26449364 or
may write at portalhelp@sebi.gov.in.
17.2 Clarification617 to Regulation 24618
17.2.1 The amended Regulation mandates that AMCs shall appoint separate
fund manager for each separate fund managed by it unless the
investment objectives and assets allocations are the same and the
portfolio is replicated across all the funds managed by the fund
manager.
17.2.2 The replication of minimum 70% of portfolio value shall be considered
as adequate for the purpose of said compliance, provided that AMC
616 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/52 dated June 01, 2017
617 SEBI Circular No. Cir/IMD/DF/7/2012 dated February 28, 2012
618 SEBI (Mutual Funds) Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
has in place a written policy for trade allocation and it ensures at all
points of time that the fund manager shall not take directionally
opposite positions in the schemes managed by him.
17.2.3 Wherein a fund manager is common across mutual fund schemes and
schemes/products under other permissible activities of AMC, then the
AMC shall:
17.2.3.1 Disclose on their websites, the returns provided by the said
manager for all the schemes (mutual fund, pension funds,
offshore funds etc.) on a monthly basis.
17.2.3.2 In case of any performance advertisement is issued by the
AMC for any scheme, then the details of returns of all the
schemes (mutual fund, pension funds, offshore funds etc.)
managed by that fund manager shall be provided.
17.2.3.3 In case the difference between the annual returns provided
by the schemes managed by the same fund manager is more
than 10% then the same shall be reported to the trustee and
explanation for the same shall be disclosed on the website
of the AMC.
17.3 Management and advisory services by AMCs to Foreign Portfolio
Investors619
17.3.1 AMCs may provide management and advisory services in terms of
Regulation 24(b) of MF Regulations to FPIs falling under the following
categories of FPIs as specified in FPI Regulations:
619 SEBI Circular No. SEBI/HO/IMD/IMD-POD1/P/CIR/2023/005 dated January 06, 2023
& SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/155 dated December 16, 2019
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17.3.1.1 Government and Government related investors such as central
banks, sovereign wealth funds, international or multilateral
organizations or agencies including entities controlled or at least
75% directly or indirectly owned by such Government and
Government related investor(s);
17.3.1.2 Appropriately regulated entities such as pension funds,
insurance or reinsurance entities, banks and mutual funds;
17.3.1.3 Appropriately regulated FPIs wherein (a) or (b) above hold more
than 50% of shares/ units.
17.3.2 As per above paragraph, AMCs may also provide management and
advisory services to FPIs operating from International Financial
Centres (IFSC) and regulated by International Financial Services
Centres Authority (IFSCA) and falling under the aforesaid categories.
17.3.3 In consultation with IFSCA and based on the requests received from
AMCs, it has been decided that, AMCs may also provide management
and advisory services to FPIs operating from IFSC and regulated by
IFSCA, not falling under the categories of FPIs specified under
Paragraph 17.3.1 above, subject to the following:
17.3.3.1 Such FPIs shall be allowed to invest in Mutual Fund schemes
other than the schemes in the category of “thematic” as defined
in Part IV of Chapter 2 on “Categorization and Rationalization of
Mutual Fund Schemes” of this Master Circular.
17.3.3.2 For investment in equity and equity derivative securities listed on
recognized stock exchanges in India, such FPI shall not take
contra-position for a period of six months from the date of
purchase or sale of such securities.
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Master Circular for Mutual Funds as on March 31, 2024
17.3.4 The proviso to clause (vi) of regulation 24(b) of MF Regulations shall
be applicable for the categories of FPIs as mentioned under Paragraph
17.3.1 above.
17.4 Product Labeling in Mutual Funds620
17.4.1 All the mutual funds shall ‘Label’ their schemes on the parameters as
mentioned under:
a) Nature of scheme such as to create wealth or provide regular
income in an indicative time horizon (short/ medium/ long
term).
b) A brief about the investment objective (in a single line sentence)
followed by kind of product in which investor is investing
(Equity/Debt).
c) The depiction of risk shall be through pictorial meter named
"Riskometer" and this meter would appropriately depict the level
of risk in any specific scheme.
d) Risk-o-meter shall have following six levels of risk for mutual
fund schemes:621
i. Low risk
ii. Low to Moderate risk
iii. Moderate risk
iv. Moderately High risk
620 SEBI Circular No. CIR/IMD/DF/5/2013 dated March 18, 2013
621 SEBI Circular No. CIR/IMD/DF/4/2015 dated April 30, 2015 and Circular No.
SEBI/HO/IMD/DF3/CIR/P/2020/197 Dated October 05, 2020
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Master Circular for Mutual Funds as on March 31, 2024
v. High - risk and
vi. Very High risk.
e) Riskometer: Risk level of a scheme shall be depicted by “Risk-
o-meter”, as shown below:
For example, the risk depicted in the above risk-o-meter is
Moderately High
f) The detailed guidelines for evaluation of risk levels of a scheme
along with few examples are provided at Annexure 9622.
Pursuant to a calculation of risk value of the scheme portfolio
based on the methodology specified in Annexure 9, risk level of
a scheme as mentioned at Table 11 of Annexure 9 shall be
depicted by risk-o-meter shown above at Paragraph 17.4.1.(e).
g) Based on the scheme characteristics, Mutual Funds shall
assign risk level for schemes at the time of launch of
scheme/New Fund Offer.
h) Any change in risk-o-meter shall be communicated by way of
Notice cum Addendum and by way of an e-mail or SMS to
unitholders of that particular scheme.
622 SEBI Circular no. SEBI/HO/IMD/DF3/CIR/P/ 2020/197 dated October 05, 2020, Refer
SEBI letter no. SEBI/HO/IMD-II/DOF3/OW/P/2021/1566/1 dated January 19, 2021
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Master Circular for Mutual Funds as on March 31, 2024
i) Risk-o-meter shall be evaluated on a monthly basis and Mutual
Funds/AMCs shall disclose the Risk-o-meter along with
portfolio disclosure for all their schemes on their respective
website and on AMFI website within 10 days from the close of
each month.
j) Mutual Funds shall disclose the risk level of schemes as on
March 31 of every year, along with number of times the risk
level has changed over the year, on their website and AMFI
website.
k) Mutual Funds shall publish the following table of scheme wise
changes in Risk-o-meter in scheme wise Annual Reports and
Abridged summary:
Scheme Risk-o-meter Risk-o-meter Number of
name level at start level at end changes in
of the of the Risk-o-meter
financial financial during the
year year financial
year
l) A disclaimer that investors should consult their financial
advisers if they are not clear about the suitability of the product.
17.4.2 Risk value of commodities for risk-o-meter:623
17.4.2.1 For evaluation of risk value of commodities in which mutual
funds are permitted to invest, in terms of Paragraph 17.4.1.(f) of
this Master Circular, investment in commodities by mutual fund
schemes shall be assigned a risk score corresponding to the
annualized volatility of the price of the said commodity. The
annualized volatility shall be computed quarterly based on past
623 SEBI Circular no. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/49 dated April 11, 2022
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Master Circular for Mutual Funds as on March 31, 2024
15 years’ prices of benchmark index of the said commodity and
risk score for the commodity shall be in terms of the following
table:
Annualized volatility Risk value on risk-o-meter
(Risk)
<10% 3 (Moderate)
10-15% 4 (Moderately High)
15-20% 5 (High)
>20% 6 (Very high)
Illustration: If price of gold has annualized volatility of 18% based
on price of gold of past 15 years, then Gold and gold related
instruments will have risk value of 5 (High) on risk-o-meter.
17.4.3 Product label shall be disclosed in:
a. Front page of initial offering application forms, Key Information
Memorandum (KIM) and Scheme Information Documents
(SIDs).
b. Common application form – along with the information about
the scheme.
c. The product label with respect to Paragraph 17.4.3.(a) &
17.4.3.(b) shall be placed in proximity to the caption of the
scheme and shall be prominently visible.
d. Scheme advertisements-placed in manner so as to be
prominently visible to investors.
17.4.4 Change in risk-o-meter will not be considered as a Fundamental
Attribute Change of the scheme in terms of regulation 18(15A) of SEBI
(Mutual Fund) Regulations, 1996
17.5 Potential Risk Class Matrix624
624 SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/573 dated June 07, 2021
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Master Circular for Mutual Funds as on March 31, 2024
17.5.1 All the debt mutual funds shall be classified in terms of a Potential
Risk Class matrix consisting of parameters based on maximum
interest rate risk (measured by Macaulay Duration (MD) of the
scheme) and maximum credit risk (measured by Credit Risk Value
(CRV) of the scheme).
17.5.2 While the AMCs will continue to retain the same category of their
schemes as per Part IV of Chapter 2 on ‘Categorization and
Rationalization of Mutual Fund schemes’ they have full flexibility to
place single/multiple schemes in any cell of the Potential Risk Class
matrix (PRC).
17.5.3 For the purpose of alignment of the existing schemes with these
provisions, each scheme shall be placed in one of the 9 cells specified
at Table No. 2 under Paragraph 17.5.10 below, while retaining their
existing scheme category as per Part IV of Chapter 2 of this Master
Circular on ‘Categorization and Rationalization of Mutual Fund
Schemes’. This would not be considered as a change in fundamental
attribute.
17.5.4 However, subsequently, once a PRC cell selection is done by the
scheme, any change in the positioning of the scheme into a cell
resulting in a risk (in terms of credit risk or duration risk) which is
higher than the maximum risk specified for the chosen PRC cell, shall
be considered as a fundamental attribute change of the scheme in
terms of regulation 18(15A) of SEBI (Mutual Fund) Regulations, 1996.
17.5.5 Further, the Mutual Funds shall inform the unitholders about the
abovementioned classification in one of the 9 cells and subsequent
changes, if any, through SMS and by providing a link on their website
referring to the said change.
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Master Circular for Mutual Funds as on March 31, 2024
17.5.6 For new debt schemes, the AMC shall choose the PRC cell at the time
of filing of Scheme Information document (SID) with SEBI.
17.5.7 Each scheme will continue to comply with the requirements specified
in Part IV of Chapter 2 of this Master Circular on ‘Categorization of
schemes’.
17.5.8 The thresholds for the values of the interest rate risk and the credit
risk dimensions would progress in a flexible manner for drawing out
the categorization matrix. The thresholds across the matrix would
determine the maximum interest rate risk and the maximum credit
risk which the scheme would be permitted to take but the scheme
would have the flexibility to move downwards on the risk scale. The
thresholds along with an illustration of the concept outlined above are
given below:
Thresholds
i. Maximum Weighted Average Interest Rate Risk of the scheme
(measured in terms of Macaulay Duration):
1. Class I: MD<= 1 year;
2. Class II: MD<=3 years;
3. Class III: Any Macaulay duration
ii. Maximum Weighted Average Credit Risk of the scheme (measured
in terms of Credit Risk Value as specified at Table 1 below):
1. Class A: CRV >=12
2. Class B: CRV >=10
3. Class C: CRV <10625
625 Investments by mutual funds are permitted only in investment grade securities in terms of
regulation 44(1) read with Schedule VII of SEBI Mutual Fund Regulations, 1996
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Master Circular for Mutual Funds as on March 31, 2024
a. The Credit Risk Value of the scheme shall be the weighted average
of the credit risk value of each instrument in the portfolio of the
scheme, the weights based on their proportion to the AUM.
Similarly, Macaulay Duration at the scheme level shall be the
weighted average of the Macaulay Duration of each instrument in
the portfolio with the weights being based on their proportion to
the AUM. The value of the debt instrument to be considered for
calculating AUM shall include the accrued interest i.e. dirty price
of the instrument.
17.5.9 The debt securities of schemes are to be assigned a value for credit
risk in the following manner:
TABLE 1
Instrument CREDIT RISK
VALUE (CRV)
G-Sec/ State development 13
loans/ Repo on Government
Securities/TREPS / Cash
AAA 12
AA+ 11
AA 10
AA- 9
A+ 8
A 7
A- 6
BBB+ 5
BBB 4
BBB- 3
Unrated 2
Below investment grade 1
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Master Circular for Mutual Funds as on March 31, 2024
a. For investment by mutual funds in instruments having short term
ratings, the credit risk value shall be based on the lowest long
term rating of an instrument of the same issuer as shown above
(in order to follow a conservative approach) across credit rating
agencies. However, if there is no long term rating of the same
issuer, then based on credit rating mapping of CRAs between
short term and long term ratings, the most conservative long term
rating shall be taken for a given short term rating.
17.5.10 For the purpose of nomenclature, the 3 x 3 matrix shall have the
following syntax for each matrix cell:
TABLE 2
Max Credit
Risk of
scheme→ Class A(CRV Class B (CRV Class C (CRV
Max Interest >=12) >=10) <10)
Rate Risk of
the scheme ↓
Relatively Low
Relatively Low interest rate
Class I: (MD<=1 Interest Rate Relatively Low risk and
year) Risk and interest rate risk Relatively
Relatively Low and moderate High Credit
Credit Risk Credit Risk Risk
Moderate interest Moderate
Class II: Moderate rate risk and interest rate
(MD<=3 years) interest rate moderate Credit risk and
risk and Risk Relatively
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Master Circular for Mutual Funds as on March 31, 2024
Relatively Low High Credit
Credit Risk Risk
Relatively
Relatively High High interest
Class III: Any
interest rate Relatively High rate risk and
Macaulay
risk and interest rate risk Relatively
duration
Relatively Low and moderate High Credit
Credit Risk Credit Risk Risk
17.5.11 For example, if an open ended Short Duration Fund wants to invest
in securities such that its Weighted Average Macaulay Duration is
less than or equal to 3 years and its Weighted Average Credit Risk
Value is 10 or more, it would be classified as a scheme with ‘Moderate
Interest Rate Risk and Moderate Credit Risk’. The position of the
scheme in the matrix shall be displayed by the AMCs as under:
TABLE 3
Potential Risk Class
Credit Risk Relatively Moderate Relatively
→ Low (Class B) High
Interest (Class A) (Class C)
Rate Risk↓
Relatively
Low (Class I)
Moderate
B-II
(Class II)
Relatively
High (Class
III)
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Master Circular for Mutual Funds as on March 31, 2024
17.5.12 The maximum interest rate risk which the aforesaid scheme can take
would be in terms of the Weighted Average Macaulay Duration of the
scheme and the same shall be ≤ 3 years. The maximum Weighted
Average Credit Risk which the aforesaid scheme can take would have
Credit Risk Value of 10 or more. Both the maximum interest rate
risk and maximum credit risk would be reflected in the above matrix.
By virtue of its placement in this position, the scheme would have
the flexibility to take interest rate risk and credit risk below the
maximum risk as stated above in Table 2.
17.5.13 The type of the scheme shall be modified to include the above cell
selection. For the above example, it shall be as under:
An open ended short term debt scheme investing in instruments
with Macaulay duration between 1 year and 3 years (please refer
to page no.__)#. A moderate interest rate risk and moderate
Credit Risk.
17.5.14 For a scheme placing itself in Class I (i.e. MD <=1 year), the
maximum residual maturity of each instrument held by the scheme
shall be three years. For a scheme placing itself in Class II (i.e. MD
<=3 years), the maximum residual maturity of each instrument held
by the scheme shall be seven years. A scheme placing itself in Class
III can invest in instruments of any maturity. For securities issued
by central government and state governments, the cap pertaining to
maximum residual maturity of each instrument for Class I and Class
II shall not be applicable.
17.5.15 With regards to existing holding of perpetual bonds by debt schemes
as on June 07, 2021, (including debt instruments with special
features viz. subordination to equity which absorbs losses before
equity capital and /or convertible to equity upon trigger of a pre-
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Master Circular for Mutual Funds as on March 31, 2024
specified event for loss absorption, for instance Additional Tier I
bonds issued under Basel III framework), it has been decided that
AMCs shall:
a. Reckon such bonds as having residual maturity as outlined in
Paragraphs 4.4.4, 9.4 & 12.2 of this Master Circular.
b. Grand-father existing investments in such instruments with the
following provision:
i. Calculation of Macaulay Duration of the scheme to follow
the guidelines in terms of Paragraphs 4.4.4, 9.4 & 12.2 of
this Master Circular.
ii. If the scheme places itself in Class I or II, and the MD
exceeds the stipulated level, then it would be treated as a
passive breach and a suitable period may be permitted for
regularizing the passive breach. Until regularization, the
scheme cannot make any investments that would effectively
increase the MD of the portfolio. Calculation of MD for this
purpose shall be post exclusion of such instruments having
special features. To clarify, if a scheme AUM is INR 100
crores, of which INR 10 crores is in such instruments with
special features, the base for calculation of MD for the
purpose of PRC will be INR 90 crores. The scheme will
continue to maintain the threshold of the cell in which it is
positioned on INR 90 crores in line with Class I &/or Class
II categorization in line with these provisions.
17.5.16 AMCs shall update their SIDs to reflect the fact that placement of the
scheme in one of the cells of PRC matrix does not reflect the scheme
holdings pertaining to the aforementioned perpetual bonds with
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Master Circular for Mutual Funds as on March 31, 2024
respect to the MD and maturity thresholds specified above, till the
time such bonds are held by the scheme, for pre-existing holding of
aforementioned perpetual bonds by debt schemes as on June 07,
2021.
17.5.17 Fresh investments in perpetual bonds (including Additional Tier 1
bonds) can only be made in schemes that are in Class III.
17.5.18 For the debt instruments with call / put options, the deemed
maturity will be in terms of Paragraph 9.3 of this Master Circular.
For instruments with interest rate reset dates, the interest rate reset
date shall not be treated as deemed maturity.
17.5.19 The dynamic aspect of the risk of each scheme would be separately
reflected in the Risk-o-Meter of the scheme, which would be
published on a monthly basis.
17.5.20 Mutual Funds shall publish the aforesaid matrix in their scheme
wise Annual Reports and Abridged Summary.
17.5.21 The aforesaid matrix along with the mark for the cell in which the
scheme resides shall be disclosed on:
a. front page of initial offering application form, Scheme
Information Documents (SID) and Key Information
Memorandum (KIM).
b. common application form – along with the information about
the scheme.
the PRC matrix with appropriate mark with respect to
Paragraphs 17.5.21.(a) & 17.5.21.(b) above shall be placed in
proximity to the caption of the scheme and shall be prominently
visible and in bold.
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Master Circular for Mutual Funds as on March 31, 2024
c. Scheme advertisements – placed in manner by the Mutual
Fund and its distributors so as to be prominently visible to
investors.
17.6 Investment in units of Mutual Funds in the name of minor through
guardian and ease of process for transmission of units626
17.6.1 Process for Investments made in the name of a Minor through a
Guardian
a. [Payment for investment by any mode shall be accepted from
the bank account of the minor, parent or legal guardian of the
minor, or from a joint account of the minor with parent or legal
guardian. For existing folios, the AMCs shall insist upon a
Change of Pay-out Bank mandate before redemption is
processed.]627
aa. [Irrespective of the source of payment for subscription, all
redemption proceeds shall be credited only in the verified bank
account of the minor, i.e. the account the minor may hold with
parent/legal guardian after completing all KYC formalities.] 628
b. Upon the minor attaining the status of major, the minor in
whose name the investment was made, shall be required to
provide all the KYC details, updated bank account details
including cancelled original cheque leaf of the new account.
626 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2019/166 dated December 24, 2019. Refer
SEBI letter No. SEBI/HO/IMD/IMD-POD-I/P/OW/2023/51245/1 dated December 19, 2023
627 Substituted by SEBI Circular No. SEBI/HO/IMD/POD-II/CIR/P/2023/0069 dated May
12, 2023. Prior to substitution, clause 17.6.1(a) read as under:
“Payment for investment by means of Cheque, Demand Draft or any other mode shall be
accepted from the bank account of the minor or from a joint account of the minor with the
guardian only. For existing folios, the AMCs shall insist upon a Change of Pay-out Bank mandate
before redemption is processed.”
628 Inserted vide SEBI Circular No. SEBI/HO/IMD/POD-II/CIR/P/2023/0069 dated May 12,
2023.
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Master Circular for Mutual Funds as on March 31, 2024
No further transactions shall be allowed till the status of the
minor is changed to major.
c. AMCs shall build a system control at the account set up stage
of Systematic Investment Plan (SIP), Systematic Transfer Plan
(STP) and Systematic Withdrawal Plan (SWP) on the basis of
which, the standing instruction is suspended when the minor
attains majority, till the status is changed to major.
17.6.2 Process for transmission of Units
a. In order to improve the processing turnaround time for
transmission requests, AMCs shall implement image based
processing wherever the claimant is a nominee or a joint holder in
the investor folio.
b. AMCs shall have a dedicated, Central Help Desk and a webpage
carrying relevant information and instructions in order to provide
assistance on the transmission process.
c. AMCs shall adopt a common Transmission Request Form
(common fields) and NOC form. All such forms and formats shall
be made available on the website of the AMCs, RTAs and AMFI.
d. AMCs shall implement a common set of document requirements
for transmission of units to claimant who are nominees or joint
holders in the investor account.
e. AMCs shall implement a uniform process for treatment of
unclaimed funds to be transferred to the claimant including the
unclaimed dividends.
f. AMCs shall not accept requests for redemption from a claimant
pending completion of the transmission of units in his / her favor.
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Master Circular for Mutual Funds as on March 31, 2024
g. The Stamp duty payable by the claimant with respect to the
indemnity bond and affidavit, shall be in accordance with the
stamp duty prescribed by law.
h. AMCs and AMFI shall promote the importance of nomination as a
part of its investor education and awareness programmes.
17.6.3 To ensure uniformity across the industry, AMFI is advised to prescribe
the forms and formats referred in Paragraph 17.6.2.(c), common set
of documents referred in Paragraph 17.6.2.(d) and uniform process
for treatment of unclaimed funds referred in Paragraph 17.6.2.(e), and
shall mandatorily be followed by all Mutual Funds/AMCs.
17.7 629Limited Purpose Clearing Corporation (“LPCC”) by AMCs:
17.7.1 SEBI Board in its meeting held on September 29, 2020 approved a
proposal to facilitate setting up a LPCC for clearing and settling repo
transactions in corporate debt securities and accordingly Securities
Contracts (Regulation) (Stock Exchanges and Clearing Corporations)
Regulations, 2018 (SECC Regulations), have been amended vide
gazette notification no. SEBI/LAD-NRO/GN/2020/32 dated October
08, 2020.
17.7.2 AMCs shall contribute INR 150 Cr. towards share capital of LPCC in
proportion to the Asset Under Management (AUM) of open ended debt
oriented mutual fund schemes (excluding overnight, gilt fund and gilt
fund with 10 year constant duration but including conservative hybrid
schemes) managed by them.
17.7.3 The contribution shall be based on Average AUM of debt oriented
schemes as detailed above for the Financial Year (FY) 2020-21630. In
629 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/17 dated February 2, 2021
630 SEBI Circular No. SEBI/HO/IMD/IMD-1 DOF2/P/CIR/2021/0548 dated April 6, 2021
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Master Circular for Mutual Funds as on March 31, 2024
this regard, AMFI shall calculate contribution per AMC based on the
Average AUM of aforementioned schemes for the FY 2020-21 and
inform all AMCs. Accordingly, it will be obligatory on the part of
AMC(s) to contribute towards the share capital of LPCC.
17.7.4 The setting up of LPCC and making the aforesaid contribution shall
be in compliance with the networth requirements, other conditions
and timelines, if any, as per SECC Regulations and circulars issued
thereunder from time to time.
17.7.5 AMCs shall ensure that the networth as prescribed under Regulation
21(f) of SEBI (Mutual Funds) Regulations, 1996 shall be maintained
over and above the contribution made towards setting up of the LPCC.
17.8 631Procedure for change in control of AMC:
The procedure for change in control of the AMC is given below:
17.8.1 Requirement of Regulations:
According to Regulation 22(e) of MF Regulations, no change in the
control of the AMC, directly or indirectly, can be made unless the
following conditions are complied with:
I. Prior approval of the trustees and the Board is obtained;
II. A written communication about the proposed change is sent to
each unitholder (for those unitholders whose e-mail IDs are
registered with the mutual funds, the communication can be
sent through e-mail) and an advertisement is given in one
English daily newspaper having nationwide circulation and in a
631 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021, Refer
SEBI letter No. SEBI/HO/OW/IMD/RAC2/P/2022/51980/1 dated October 12, 2022, Refer
SEBI letter No. SEBI/HO/OW/IMD/RAC2/P/2022/ 58081/1 dated November 16, 2022
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Master Circular for Mutual Funds as on March 31, 2024
newspaper published in the language of the region where the
Head Office of the mutual fund is situated; and
III. [The unitholders are given an option to exit on the prevailing Net
Asset Value (NAV) without any exit load within a time period not
less than 15 calendar days from the date of communication.
However, in case of change in control resulting in consolidation
or merger of schemes, the unitholders are given an option to exit
on the prevailing Net Asset Value (NAV) without any exit load
within a time period not less than 30 calendar days from the
date of communication.]632
17.8.2 New Sponsor(s):
In case the applicant proposing to take the control of an AMC is not
an existing sponsor of a mutual fund registered with SEBI, it shall
apply to the Board for approval of taking over control of an existing
AMC under MF Regulations. The process for making such application
is same as application for registration under MF Regulations. The
entire procedure for registration as Mutual Fund is given on the SEBI
website under the heading "How to get registered as a mutual fund"
in the “Mutual Fund” section.
17.8.3 Undertakings by new Trustee(s)/Sponsor(s):
In case of new sponsor(s) or in case of taking over of the schemes by
an existing mutual fund, the undertakings on the following lines are
required to be given to the Board and to the unitholders:
632 Substituted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-2/P/CIR/2023/142 dated
August 11, 2023. Prior to substitution para 17.8.1.III read as under:
“The unitholders are given an option to exit on the prevailing Net Asset Value (NAV) without
any exit load within a time period not less than 30 calendar days from the date of
communication.”
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Master Circular for Mutual Funds as on March 31, 2024
I. Taking full responsibility of the management and the
administration of the schemes including the matters relating to the
reconciliation of accounts (as if the schemes had been floated by
the new trustees on the date of taking over).
II. Assumption of the trusteeship of the assets and liabilities of the
schemes including outstanding borrowings, unclaimed dividends
and unclaimed redemptions, if any.
III. Assuming all responsibilities and obligations relating to the investor
grievances, if any, in respect of the schemes taken over, in
accordance with and pursuant to MF Regulations and various
circulars issued thereunder.
17.8.4 Disclosures to Unitholders:
While seeking the approval of the Board for change in the control of
the AMC, the mutual fund handing over the control to another person,
should also file the draft letter / email to be sent to the unitholders
along with draft advertisement to be published in the newspaper. The
draft letter / email to the unitholders should, inter-alia, include the
following information:
I. The activities of the new sponsor and its financial track record and
performance as prescribed in the standard offer document;
II. In case of taking over of the schemes by an existing mutual fund
registered with SEBI, the draft letter should also include the
condensed financial information of all the schemes in the format
prescribed in the standard offer document;
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Master Circular for Mutual Funds as on March 31, 2024
III. The amount of unclaimed redemption and dividend and also the
procedure for claiming such amount by the unitholders.
17.8.5 Revision of all Standard Offer Documents:
The information given in all the offer documents of existing schemes
shall be revised and updated pursuant to the change in control of the
AMC / mutual fund. Such addendum shall also be filed with the
Board, as required under MF Regulations and various circulars issued
thereunder.
17.8.6 Other Situations:
In case of any other situation like indirect change in control of the
AMC or indirect change in the promoters of the sponsor(s), which was
beyond the control of the sponsor(s), etc., the mutual fund should
provide the full details of the information to the Board for further
course of action.
17.8.7 Change in control of the asset management company involving
scheme of arrangement under Companies Act, 2013633
To streamline the process of providing approval to the proposed
change in control of an AMC involving scheme of arrangement which
needs sanction of National Company Law Tribunal (“NCLT”) in terms
of the provisions of the Companies Act, 2013, following has been
decided:
a) The application seeking approval for the proposed change in
control of the AMC under Regulation 22(e) of MF Regulations shall
be filed with SEBI prior to filing the application with the NCLT;
b) Upon being satisfied with compliance of the applicable regulatory
requirements, an in-principle approval will be granted by SEBI;
633 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/10 dated January 31, 2022
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Master Circular for Mutual Funds as on March 31, 2024
c) The validity of such in-principle approval shall be three months
from the date of issuance, within which the relevant application
shall be made to NCLT;
d) Within 15 days from the date of order of NCLT, applicant shall
submit the following documents to SEBI for final approval:
i. Application for the final approval;
ii. Copy of the NCLT Order approving the scheme;
iii. Copy of the approved scheme;
iv. Statement explaining modifications, if any, in the approved
scheme vis-à-vis the draft scheme and the reasons for the
same; and
v. Details of compliance with the conditions/ observations
mentioned in the in-principle approval provided by SEBI.
17.9 634Postal Ballot:
17.9.1 As per the existing provisions of MF Regulations and various circulars
issued thereunder, wherever consent or approval of unitholders is
required, an option should be given to unitholders. In this regard, it
is clarified that the same can also be done through Postal Ballot
mechanism;
17.9.2 For this purpose, voting through Postal Ballot shall mean voting by
post or through any electronic mode
17.10 635Exit period for Unitholders:
634 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
635 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
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Master Circular for Mutual Funds as on March 31, 2024
17.10.1 In order to bring uniformity, wherever exit option is required to be
given to unitholders under MF Regulations and circulars issued
thereunder, unitholders shall be given a time period of atleast 30
calendar days for the purpose of exercising the exit option.
17.11 636Rajiv Gandhi Equity Savings Scheme (RGESS):
17.11.1 Since, Rajiv Gandhi Equity Savings Scheme (RGESS) has been
phased out from the assessment year 2018-19, the references of
RGESS have become redundant from all places in MF Regulations
and circulars issued thereunder and therefore all provisions related
to RGESS issued through various circulars stands deleted.
17.11.2 However, for existing RGESS, if any, the rules and regulations
pertaining to RGESS prior to deletion of the provisions shall be
applicable.
17.12 637Mode of Payments and Despatch:
17.12.1 AMCs may also use instruments or payment channels such as
RTGS, NEFT, IMPS, direct credit, etc. or any other mode allowed by
Reserve Bank of India from time to time, for payments including
refunds to unitholders in addition to the cheque, demand draft or
dividend warrants;
17.12.2 Further, AMCs may also use modes of dispatch such as speed post,
courier etc. for payments including refunds to unitholders in
addition to the registered post with acknowledgement due.
17.13 638Maintenance of Current Accounts in multiple banks by Mutual
Funds:
636 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
637 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
638 SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/610 dated August 04, 2021
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Master Circular for Mutual Funds as on March 31, 2024
17.13.1 Mutual funds currently maintain current accounts in multiple banks
including in banks having presence beyond the top 30 cities (“B-30
cities”), for receiving subscription amount and for payment of
redemption proceeds / dividend / brokerage/ commission etc. This
enables investors to transact with banks of their choice and
facilitates faster transfer of funds.
17.13.2 Mutual fund industry has informed that the Reserve Bank of India
(“RBI”) has instructed that banks shall not open current accounts
for customers who have availed credit facilities in the form of cash
credit / overdraft from the banking system. On a review, however,
RBI has provided an indicative list of accounts stipulated under
various statutes and instructions of other regulators that can be
opened without such restriction, including accounts for the purpose
of New Fund Offerings (“NFOs”)/ dividend payment/ share buyback,
etc.
17.13.3 Mutual fund industry has represented that subscription in units of
open ended mutual fund schemes is akin to continuous NFO and
redemption of units of mutual fund schemes is akin to buy back or
repurchase of shares. Considering the above, industry has requested
SEBI to issue instructions for mutual funds in respect of
maintenance of current accounts in multiple banks.
17.13.4 Based on the request of mutual fund industry, it is clarified that
mutual funds should maintain current accounts in an appropriate
number of banks for the purpose of receiving subscription amount
and for payment of redemption / dividend / brokerage / commission
etc. to facilitate financial inclusion, convenience of investors and
ease of doing business.
427
Master Circular for Mutual Funds as on March 31, 2024
17.14 639Guidelines on Accounting with respect to Indian Accounting
Standards (IND AS):
SEBI vide notification dated January 25, 2022 amended SEBI (Mutual Funds)
Regulations, 1996 (MF Regulations), which, inter-alia, mandated that the
AMCs shall prepare the Financial Statements and Accounts of the Mutual
Fund Schemes in accordance with IND AS with effect from April 01, 2023.
Accordingly, the following requirements are specified:
17.14.1 Mutual Fund Schemes shall prepare the opening balance sheet as
on date of transition and the comparatives as per the requirements
of IND AS.
17.14.2 Perspective historical per unit statistics mentioned in Clause 6 of
Eleventh Schedule of MF Regulations requires disclosure of scheme
wise per unit statistics for the past 3 years. In this regard, Mutual
Fund schemes may not be mandatorily required to restate the
previous years published perspective historical per unit statistics as
per requirement of IND AS for the first two years from first time
adoption of IND AS. However, Mutual Fund schemes shall furnish
following additional information in perspective historical per unit
statistics:
a) Label the previous Generally Accepted Accounting Principles
(GAAP) information prominently as not being prepared in
accordance with IND AS; and
b) Disclose the nature of the adjustments that would be required to
make it comply with IND AS. Mutual Funds schemes need not
quantify those adjustments.
639 SEBI circular no SEBI/HO/IMD-II/DOF8/P/CIR/2022/12 dated February 04, 2022
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Master Circular for Mutual Funds as on March 31, 2024
17.14.3 The Financial Statements of the Mutual Fund Schemes shall be
prepared in the Format640.
17.15 641Clearing and Settlement of OTC trades in Commercial Paper
(CPs) & Certificates of Deposit (CDs):
17.15.1 All SEBI regulated entities shall settle their OTC trades in CDs and
CPs on the lines of the process for settlement of OTC trades in
corporate bonds, through National Securities Clearing Corporation
Limited (NSCCL) and Indian Clearing Corporation Limited (ICCL). All
transactions cleared and settled in this regard, will be subject to
such norms as may be specified by NSCCL and ICCL.
17.16 Nomination for Mutual Fund unit holders642
17.16.1 In order to bring uniformity in practices across all constituents in
securities market, the following is decided in case of nomination for
eligible Mutual Fund Unit Holders:
17.16.1.1 Investors subscribing to mutual fund units on or after October
01, 2022643, shall have choice of:
a) Providing nomination in the format specified in fourth
schedule of SEBI (Mutual Funds) Regulations, 1996 (or)
b) Opting out of nomination through a signed declaration
form as provided in Annexure 11.
17.16.1.2 AMC shall provide an option to the unit holder(s) to submit
either the nomination form or the declaration form for opting
out of nomination in physical or online as per the choice of the
640 For format, please refer format no. 3.E under the Section on Formats.
641 SEBI circular no Cir. /IMD/DF/8/2012 dated March 05, 2012, Refer SEBI email dated
December 30, 2009
642 SEBI circular no. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/82 dated June 15, 2022
643 SEBI circular no. SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/105 July 29, 2022
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Master Circular for Mutual Funds as on March 31, 2024
unit holder(s). In case of physical option, the forms shall carry
the wet signature of all the unit holder(s). In case of online
option, instead of wet signature(s) of all the unit holder(s),
AMCs shall validate the forms:
a. Using e-Sign facility recognized under Information
Technology Act, 2000; or
b. Through two factor authentication (2FA) in which one of
the factor shall be a One-Time Password sent to the unit
holder at his/her email/phone number registered with
the AMC.
17.16.1.3 All AMCs shall ensure that adequate systems are in place for
providing the e- Sign facility and take all necessary steps to
maintain confidentiality and safety of client records.
17.16.1.4 All the AMCs are advised to set deadline as June 30, 2024644 for
nomination / opting out of nomination for all the existing individual
unit holder(s) holding mutual fund units either solely or jointly as
mentioned at Paragraph 17.16.1.1 above, failing which the folios
shall be frozen for debits. (Also refer: SEBI Circular No.
SEBI/HO/MIRSD/POD-1/P/CIR/2024/81 dated June10, 2024)
17.16.1.5 Further, AMCs and RTAs shall encourage the unit holder(s) to
fulfil the requirement for nomination/ opting out of
nomination by sending a communication on fortnightly basis
by way of emails and SMS to all such unit holder(s) who are
not in compliance with the requirement of nomination. The
644 SEBI Circular No. SEBI/HO/MIRSD/POD-1/P/CIR/2023/193 dated December 27, 2023,
SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/160 dated September 27 & 2023 SEBI Circular No.
SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/47 dated March 28, 2023
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Master Circular for Mutual Funds as on March 31, 2024
communication shall provide guidance by which the unit
holder(s) can provide nomination or opt out of nomination.645
17.17 Definition of “Associate” & Disclosure requirement for Asset
Management Companies (AMCs)646
17.17.1 SEBI has amended the definition of “associate” as per clause (c) of
sub-regulation (1) of regulation 2 of SEBI (Mutual Funds)
Regulations, 1996 vide Gazette Notification No. SEBI/LAD-
NRO/GN/2022/92 dated August 03, 2022. The revised definition of
Associate is as under:
“associate” includes a person, -
i. who directly or indirectly, by himself, or in combination with
relatives exercises control over the asset management
company or the trustees or the sponsor, as the case may be,
or
ii. in respect of whom the asset management company or the
trustees or the sponsor, directly or indirectly, by itself, or in
combination with other persons exercises a control, or
iii. whose director except an independent director, officer or
employee is a director, officer or employee of the asset
management company:
Provided that the above definition of associate shall not be
applicable to such sponsors, which invest in various companies on
behalf of the beneficiaries of insurance policies or such other
schemes as may be specified by the Board from time to time.
645 SEBI Circular No. SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/47 dated March 28, 2023
646 SEBI Circular No. SEBI/HO/IMD/DOF2/P/CIR/2022/111 dated August 25, 2022
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Master Circular for Mutual Funds as on March 31, 2024
17.17.2 Consequent to the above amendment, it has been decided that
AMCs shall ensure scheme wise disclosure of investments, as on the
last day of each quarter, in securities of such entities that are
excluded from the definition of associate.
17.17.3 Disclosure of Investment shall include ISIN wise value of investment
and value as percentage of AUM of scheme. Such disclosure shall be
made on the websites of respective AMCs and on the website of AMFI,
within one month from the close of each quarter.
17.18 Format for Networth computation
17.18.1 “Networth” is defined under Regulation 2(qa) of SEBI (Mutual Funds)
Regulations, 1996, as the aggregate of the paid up capital and free
reserves after deducting therefrom, miscellaneous expenditure to the
extent not written off or adjusted or deferred revenue expenditure,
intangible assets and accumulated losses.
17.18.2 Hence, during the processing of application of registration of a
mutual fund, wherever there is a requirement of furnishing Networth
certificate with SEBI, the Networth Certificate should be provided by
the applicant in the following format:
Amount (in
Particulars INR crores)
Paid-up capital
Add: Share Premium
Add: Free reserves of the company ((excluding
reserves created out of revaluation)
Less: miscellaneous expenditure to the extent not
written-off or adjusted or deferred revenue
expenditure,
Less: accumulated losses, if any
Less: intangible assets, if any
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Master Circular for Mutual Funds as on March 31, 2024
Less: Minimum Capital Adequacy / Networth
requirement for any other activity undertaken under
other SEBI regulations
Total Net worth for the FY
Profit After Tax for the FY
*********
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Master Circular for Mutual Funds as on March 31, 2024
APPENDIX: LIST OF RESCINDED CIRCULARS
Sr. Circular No. Date Subject
No.
1. SE BI/HO/IMD/IMD-RAC-2/P/CIR/2024/000015 March 12, 2024 Simplification and streamlining of Offer
Documents of Mutual Fund Schemes –
Extension of timelines
2. SE BI/HO/IMD/IMD-RAC-2/P/CIR/2023/000175 November 01, Simplification and streamlining of Offer
2023 Documents of Mutual Fund Schemes
3. SE BI/HO/IMD/PoD2/P/CIR/2023/152 September 27, Clarification regarding investment of Mutual
2023 Fund schemes in units of Corporate Debt
Market Development Fund
4. SE BI/HO/IMD/IMD-I POD1/P/CIR/2023/160 September 06, Nomination for Mutual Fund Unit Holders –
2023 Extension of timelines
5. SE BI/HO/IMD/IMD-PoD-2/P/CIR/2023/142 August 11, 2023 Timeline for the Exit Option Window Period
for Change in Control of AMC
6. SE BI/HO/IMD/PoD2/P/CIR/2023/128 July 27, 2023 Framework for Corporate Debt Market
Development Fund (CDMDF)
7. SE BI/HO/IMD/PoD2/P/CIR/2023/129 July 27, 2023 Investment by Mutual Fund Schemes and
AMCs in units of Corporate Debt Market
Development Fund
8. SE BI/HO/IMD/IMD-I –PoD1/P/CIR/2023/126 July 26, 2023 Resources for Trustees of Mutual Funds
9. SE BI/HO/IMD/IMD-I –PoD1/P/CIR/2023/125 July 20, 2023 New category of Mutual Fund schemes for
Environmental, Social and Governance
(“ESG”) Investing and related disclosures by
Mutual Funds
10. SE BI/HO/IMD/IMD-PoD-2/P/CIR/2023/118 July 07, 2023 Regulatory Framework for Sponsors of a
Mutual Fund
11. SE BI/HO/IMD/IMD-PoD-1/P/CIR/2023/117 July 07, 2023 Roles and responsibilities of Trustees and
board of directors of Asset Management
Companies (AMCs) of Mutual Funds
12. SE BI/HO/IMD/IMD PoD-2/P/CIR/2023/87 June 13, 2023 Corrigendum to Circular on Participation of
Mutual funds in repo transactions on
Corporate Debt Securities dated June 8,
2023
13. SE BI/HO/IMD/IMD-PoD-1/P/CIR/2023/86 June 13, 2023 Regulatory framework for Execution Only
Platforms for facilitating transactions in
direct plans of schemes of Mutual Funds
14. SE BI/HO/IMD/IMD PoD-2/P/CIR/2023/85 June 8, 2023 Participation of Mutual funds in repo
transactions on Corporate Debt Securities
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Master Circular for Mutual Funds as on March 31, 2024
15. SE BI/HO/IMD/POD-II/CIR/P/2023/0069 May 12, 2023 Investment in units of Mutual Funds in the
name of minor through guardian
16. SE BI/HO/IMD/IMD-RAC-2/P/CIR/2023/60 April 25, 2023 Modifications in the requirement of filing of
Offer Documents by Mutual Funds
17. SE BI/HO/IMD/IMD-I POD2/P/CIR/2023/48 March 29, 2023 Review of time limit for disclosure of NAV of
Mutual fund schemes investing overseas
18. SE BI/HO/IMD/IMD-I POD1/P/CIR/2023/47 March 28, 2023 Nomination for Mutual Fund Unit Holders –
Extension of timelines
19. SE BI/HO/IMD/IMD-PoD-2/P/CIR/2023/40 March 23, 2023 E-wallet investments in Mutual Funds
20. SE BI/HO/IMD/IMD-POD1/P/CIR/2023/005 January 06, Management and advisory services by AMCs
2023 to Foreign Portfolio Investors
21. SE BI/HO/IMD/IMD-1 DOF2/P/CIR/2022/164 November 29, Introduction of credit risk based single issuer
2022 limit for investment by mutual fund schemes
in debt and money market instruments
22. SE BI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 November 25, Timelines for transfer of dividend and
2022 redemption proceeds to unitholders
23. SE BI/HO/IMD/DOF2/P/CIR/2022/145 October 28, Addendum to SEBI Circular on Development
2022 of Passive Funds
24. SE BI/HO/IMD/IMD-I DOF1/P/CIR/2022/132 September 30, Two-Factor Authentication for transactions
2022 in units of Mutual Funds
25. SE BI/HO/IMD/DOF2/P/CIR/2022/111 August 25, 2022 Disclosure requirement for Asset
Management Companies (AMCs)
26. SE BI/HO/IMD/IMD-I DOF1/P/CIR/2022/105 July 29, 2022 Nomination for Mutual Fund Unit Holders –
Extension of timelines
27. SE BI/HO/IMD/DF2/CIR/P/2022/102 July 28, 2022 Addendum to SEBI Circular on Development
of Passive Funds
28. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2022/82 June 15, 2022 Nomination for Mutual Fund Unit Holders
29. SE BI/HO/IMD/IMD-I/DOF2/P/CIR/2022/81 June 09, 2022 Modification in Cyber Security and Cyber
Resilience Framework of Mutual Funds/
Asset Management Companies (AMCs)
30. SE BI/HO/IMD/DOF2/P/CIR/2022/69 May 23, 2022 Circular on Development of Passive Funds
31. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2022/49 April 11, 2022 Risk value of commodities for Risk-o-meter
32. SE BI/HO/IMD/IMD-I March 31, 2022 Discontinuation of usage of pool accounts
DOF5/P/CIR/2022/41 for transactions in the units of Mutual Funds,
Two Factor Authentication (‘2FA’) for
redemption and other related requirements:
Extension of timeline
33. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2022/39 March 30, 2022 Timelines for Rebalancing of Portfolios of
Mutual Fund Schemes
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Master Circular for Mutual Funds as on March 31, 2024
34. SE BI/HO/IMD/IMD-I DOF5/P/CIR/2022/29 March 15, 2022 Discontinuation of usage of pool accounts
for transactions in the units of Mutual
Funds: Clarifications with respect to Circulars
dated October 4, 2021
35. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2022/24 February 25, Swing pricing framework for mutual fund
2022 schemes – Extension of timeline
36. SE BI/HO/IMD/IMD-I DOF2/P/CIR/2022/17 February 09, Audit Committee of Asset Management
2022 Companies (AMCs)
37. SE BI/HO/IMD-II/DOF8/P/CIR/2022/12 February 04, Guidelines on Accounting with respect to
2022 Indian Accounting Standards (IND AS)
38. SE BI/HO/IMD/IMD-I DOF5/P/CIR/2022/10 January 31, Change in control of the asset management
2022 company involving scheme of arrangement
under Companies Act, 2013
39. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/698 December 22, Restoration of relaxed timelines w.r.t.
2021 validity of observation letter pertaining to
Mutual Funds
40. SE BI/HO/IMD/DF2/CIR/P/2021/683 December 10, Circular on Mutual Funds
2021
41. SE BI/HO/IMD-II/IMD-II_DOF10/P/CIR/2021/00677 December 10, Publishing Investor Charter and disclosure of
2021 Investor Complaints by Mutual Funds on
their website and AMFI website
42. SE BI/HO/IMD/DF2/CIR/P/2021/668 November 24, Norms for Silver Exchange Traded Funds
2021 (Silver ETFs) and Gold Exchange Traded
Funds (Gold ETFs)
43. SE BI/HO/IMD/IMD-I/DOF5/P/CIR/2021/654 October 28, Investment/ trading in securities by
2021 employees and Board members of AMC(s)
and Trustees of Mutual Funds
44. SE BI/HO/IMD/IMD-II DF3/P/CIR/2021/652 October 27, Guiding Principles for bringing uniformity in
2021 Benchmarks of Mutual Fund Schemes
45. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/641 October 06, Minimum percentage of trades carried out
2021 by Mutual Funds through RFQ platform
46. SE BI/HO/IMD/IMD-I DOF5/P/CIR/2021/634 October 04, Circular on Mutual Funds
2021
47. SE BI/HO/IMD/IMD-I DOF5/P/CIR/2021/635 October 04, Discontinuation of usage of pool accounts
2021 for transactions in units of Mutual Funds on
Stock Exchange platforms
48. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/631 September 29, Swing pricing framework for Mutual Fund
2021 schemes
49. SE BI/HO/IMD/IMD-1 DOF2/P/CIR/2021/630 September 27, Risk Management Framework (RMF) for
2021 Mutual Funds
436
Master Circular for Mutual Funds as on March 31, 2024
50. SE BI/HO/IMD/IMD-I/DOF5/P/CIR/2021/629 September 20, Clarification with respect to Circular dated
2021 April 28, 2021 on 'Alignment of Interest of
Key Employees ('Designated Employees') of
Asset Management Companies (AMCs) with
the Unitholders of the Mutual Fund schemes
51. SE BI/HO/IMD/IMD-IDOF5/P/CIR/2021/624 September 02, Alignment of interest of Key Employees of
2021 Asset Management Companies (AMCs) with
the unitholders of the Mutual Fund schemes
52. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/621 August 31, 2021 Disclosure of Risk-o-Meter of scheme,
benchmark and portfolio details to the
investors
53. SE BI/HO/IMD/IMD-I/DOF5/P/CIR/2021/610 August 04, 2021 Maintenance of current accounts in multiple
banks by Mutual Funds
54. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/608 July 30, 2021 Deployment of unclaimed redemption and
dividend amounts and instant access facility
in Overnight Funds
55. SE BI/HO/IMD/IMD-I/DOF5/P/CIR/2021/0606 July 30, 2021 Intra-Day Net Assets Value (NAV) for
Transactions in Units of Exchange Traded
Funds directly with Asset Management
Companies
56. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/604 July 26, 2021 RTA inter-operable Platform for enhancing
investors' experience in Mutual Fund
transactions/ service requests
57. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/603 July 23, 2021 Timelines related to processing of scheme
related applications filed by AMCs
58. SE BI/HO/IMD/DF4/P/CIR/2021/593 July 09, 2021 Valuation of securities with multiple put
options present ab-initio
59. SE BI/HO/IMD/IMD-I/DOF5/P/CIR/2021/582 June 25, 2021 Alignment of interest of Key Employees of
Asset Management Companies (AMCs) with
the unitholders of the Mutual Fund schemes
60. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/583 June 25, 2021 Prudential norms for liquidity risk
management for open ended debt schemes
61. SE BI/HO/IMD/IMD-I DOF2/P/CIR/2021/580 June 18, 2021 Norms for investment and disclosure by
mutual funds in derivatives
62. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/573 June 07, 2021 Potential Risk Class Matrix for debt schemes
based on Interest Rate Risk and Credit Risk
63. SE BI/HO/IMD/IMD-II/DOF3/P/CIR/2021/571 June 03, 2021 Enhancement of Overseas Investment limits
for Mutual Funds
64. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/566 May 31, 2021 Disclosure of the following only w.r.t
schemes which are subscribed by the
investor:
437
Master Circular for Mutual Funds as on March 31, 2024
a. risk-o-meter of the scheme and the
benchmark along with the performance
disclosure of the scheme vis-à-vis benchmark
and
b. Details of the portfolio
65. SE BI/HO/IMD/IMD-I DOF2/P/CIR/2021/0560 April 30, 2021 Timelines for updation of Scheme
Information Document (SID) and Key
Information Memorandum (KIM)
66. SE BI/HO/IMD/IMD-II DOF3/P/CIR/2021/555 April 29, 2021 Disclosure of the following only w.r.t
schemes which are subscribed by the
investor:
a. risk-o-meter of the scheme and the
benchmark along with the performance
disclosure of the scheme vis-à-vis
benchmark and
b. Details of the portfolio
67. SE BI/HO/IMD/IMD-I/DOF5/P/CIR/2021/553 April 28, 2021 Alignment of interest of Key Employees of
Asset Management Companies (AMCs) with
the unitholders of the Mutual Fund schemes
68. SE BI/HO/IMD/IMD-I DOF2/P/CIR/2021/550 April 12, 2021 Circular on Reporting Formats for Mutual
Funds
69. SE BI/HO/IMD/IMD-1 DOF2/P/CIR/2021/0548 April 06, 2021 Setting Up Limited Purpose Clearing
Corporation (LPCC) by Asset Management
Companies (AMCs) of Mutual Funds
70. SE BI/HO/IMD/DF4/CIR/P/2021/034 March 22, 2021 Clarification on the valution of bonds issued
under Basel III framework
71. SE BI/HO/IMD/DF4/CIR/P/2021/032 March 10, 2021 Review of norms regarding investment in
debt instruments with special features, and
the valuation of perpetual bonds
72. SE BI/HO/IMD/DF4/CIR/P/2021/29 March 05, 2021 Guidelines for votes case by Mutual Funds
73. SE BI/HO/IMD/DF2/CIR/P/2021/024 March 04, 2021 Circular on Mutual Funds
74. SE BI/HO/IMD/DF2/CIR/P/2021/17 February 02, Setting Up Limited Purpose Clearing
2021 Corporation (LPCC) by Asset Management
Companies (AMCs) of Mutual Funds
75. SE BI/HO/IMD/DF3/CIR/P/2021/014 January 29, Revision of Monthly Cumulative Report
2021 (MCR)
76. SE BI/HO/IMD/DF2/CIR/P/2021/10 January 15, Norms for investment and disclosure by
2021 Mutual Funds in Exchange traded
commodity derivatives ("ETCDs")
77. SE BI/HO/IMD/DF2/CIR/P/2020/253 December 31, Circular on Mutual Funds
2020
438
Master Circular for Mutual Funds as on March 31, 2024
78. SE BI/HO/IMD/DF3/CIR/P/2020/228 November 06, Introduction of "Flexi Cap Fund" as a new
2020 category under Equity schemes
79. SE BI/HO/IMD/DF3/CIR/P/2020/229 November 06, Norms regarding holding of liquid assets in
2020 open ended debt schemes & stress testing of
open ended debt schemes
80. SE BI/HO/IMD/DF3/CIR/P/2020/225 November 05, Enhancement of Overseas Investment limits
2020 for Mutual Funds
81. SE BI/HO/IMD/DF4/CIR/P/2020/202 October October 08, Guidelines for Inter-scheme Transfers of
2020 securities
82. SE BI/HO/IMD/DF3/CIR/P/2020/197 October 05, Product Labelling in Mutual Fund schemes -
2020 Risk-o-meter
83. SE BI/HO/IMD/DF3/CIR/P/2020/194 October 05, Review of Dividend options(s)/ Plan(s) in
2020 case of Mutual Fund schemes
84. SE BI/HO/IMD/DF4/CIR/P/2020/192 October 01, Review of provisions regarding valuation of
2020 debt and money market instruments due to
the COVID - 19 pandemic
85. SE BI/HO/IMD/DF4/CIR/P/2020/178 September 23, Resources for Trustees of Mutual Funds
2020
86. SE BI/HO/IMD/DF2/CIR/P/2020/175 September 17, Circular on Mutual Funds
2020
87. SE BI/HO/IMD/DF3/CIR/P/2020/172 September 11, Asset Allocation of Multi Cap Funds
2020
88. SE BI/HO/IMD/DF4/CIR/P/2020/165 September 02, Review of provision regarding segregation of
2020 portfolio due to COVID-19 pandemic
89. SE BI/HO/IMD/DF4/CIR/P/2020/163 September 01, Review of debt and money market securities
2020 transactions disclosure
90. SE BI/HO/IMD/DF4/CIR/P/2020/0000000151 August 10, 2020 Resources for Trustees of Mutual Funds
91. SE BI/HO/IMD/DF3/CIR/P/2020/130 July 22, 2020 Transaction in Corporate Bonds/Commercial
Papers through RFQ platform and enhancing
transparency pertaining to debt schemes
92. SE BI/HO/IMD/DF4/CIR/P/2020/100 June 12, 2020 Investment by sponsor or asset management
company in the scheme
93. SE BI/HO/IMD/DF2/CIR/P/2020/96 June 05, 2020 Participation of Mutual Funds in Commodity
Derivatives Market in India
94. SE BI/HO/IMD/DF3/CIR/P/2020/086 May 20, 2020 Listing of Mutual Fund schemes that are in
the process of winding up
95. SE BI/HO/IMD/DF3/CIR/P/2020/76 April 30, 2020 Relaxation in compliance with requirements
pertaining to Mutual Funds
96. SE BI/HO/IMD/DF2/CIR/P/2020/75 April 28, 2020 Existing grandfathered unlisted NCDs
439
Master Circular for Mutual Funds as on March 31, 2024
97. SE BI/HO/IMD/DF3/CIR/P/2020/70 April 23, 2020 Review of provisions of the circular dated
September 24, 2019 issued under SEBI
(Mutual Funds) Regulations, 1996 due to the
COVID - 19 pandemic and moratorium
permitted by RBI
98. SE BI/HO/IMD/DF3/CIR/P/2020/47 March 23, 2020 Relaxation in certain compliance with
requirements pertaining to Mutual Funds
99. SE BI/HO/IMD/DF3/CIR/P/2019/166 December 24, Investment in units of Mutual Funds in the
2019 name of minor through guardian and ease of
process for transmission of units
100. SE BI/HO/IMD/DF2/CIR/P/2019/155 December 16, Management and advisory services by AMCs
2019 to Foreign Portfolio Investors
101. SE BI/HO/IMD/DF3/CIR/P/2019/152 December 10, Review of investment norms for mutual
2019 funds for investment in Debt and Money
Market Instruments
102. SE BI/HO/IMD/DF3/CIR/P/2019/147 November 29, Norms for Debt Exchange Traded Funds
2019 (ETFs)/Index Funds
103. SE BI/HO/IMD/DF2/CIR/P/2019/127 November 07, Creation of segregated portfolio in mutual
2019 fund schemes
104. SE BI/HO/IMD/DF4/CIR/P/2019/126 November 06, Reporting of changes in terms of investment
2019
105. SE BI/HO/IMD/DF2/CIR/P/2019/104 October 01, Review of investment norms for mutual
2019 funds for investment in Debt and Money
Market Instruments
106. SE BI/HO/IMD/DF4/CIR/P/2019/102 September 24, Valuation of money market and debt
2019 securities
107. SE BI/HO/IMD/DF2/CIR/P/2019/101 September 20, Risk Management Framework for Liquid &
2019 Overnight Funds and norms governing
investment in short term deposits
108. SE BI/HO/IMD/DF4/CIR/P/2019/093 August 16, 2019 Parking of Funds in Short Term Deposits of
Scheduled Commercial Banks by Mutual
Funds - Pending deployment
109. SE BI/HO/IMD/DF2/CIR/P/2019/65 May 21, 2019 Participation of Mutual Funds in Commodity
Derivatives Market in India
110. SE BI/HO/IMD/DF5/CIR/P/2019/63 May 09, 2019 Reporting for Artificial Intelligence (AI) &
Machine Learning (ML) Applications and
systems offered and used by Mutual Funds
111. SE BI/HO/IMD/DF2/CIR/P/2019/058 April 11, 2019 Technology committee for Mutual Funds/
Asset Management Companies (AMCs)
440
Master Circular for Mutual Funds as on March 31, 2024
112. SE BI/HO/IMD/DF2/CIR/P/2019/57 April 11, 2019 System Audit Framework for Mutual Funds/
Asset Management Companies (AMCs)
113. SE BI/HO/IMD/DF2/CIR/P/2019/42 March 25, 2019 Review of Commission, Expenses, Disclosure
norms etc. - Mutual Fund
114. SE BI/HO/IMD/DF4/CIR/P/2019/41 March 22, 2019 Valuation of money market & debt securities
115. SE BI/HO/IMD/DF2/CIR/P/2019/34 March 08, 2019 Filing of advertisements under SEBI (Mutual
Funds) Regulations, 1996
116. SE BI/HO/IMD/DF3/CIR/P/2019/020 January 22, Revised Monthly Cumulative Report (MCR)
2019
117. SE BI/HO/IMD/DF2/CIR/P/2019/17 January 16, Norms for investment and disclosure by
2019 mutual funds in derivatives
118. SE BI/HO/IMD/DF2/CIR/P/2019/12 January 10, Cyber Security and Cyber Resilience
2019 framework for Mutual Funds/ Asset
Management Companies (AMCs)
119. SE BI/HO/IMD/DF3/CIR/P/2019/011 January 10, Portfolio Concentration Norms for Equity
2019 Exchange Traded Funds (ETFs) and Index
Funds
120. SE BI/HO/IMD/DF2/CIR/P/2018/160 December 28, Creation of segregated portfolio in mutual
2018 fund schemes
121. SE BI/HO/IMD/DF2/CIR/P/2018/137 October 22, Total Expenses Ratio (TER) and Performance
2018 Disclosure for Mutual Funds
122. SE BI/HO/IMD/DF2/CIR/P/2018/91 June 05, 2018 Total Expense Ratio for Mutual Funds
123. SE BI/HO/IMD/DF2/CIR/P/2018/92 June 05, 2018 Circular on Go Green Initiative in Mutual
Funds
124. SE BI/HO/IMD/DF3/CIR/P/2018/69 April 12, 2018 Performance disclosure post consolidation/
Merger of Schemes
125. SE BI/HO/IMD/DF2/CIR/P/2018/19 February 07, Enhancing fund governance for Mutual
2018 Funds
126. SE BI/HO/IMD/DF2/CIR/P/2018/18 February 05, Total Expense Ratio - change and disclosure
2018
127. SE BI/HO/IMD/DF3/CIR/P/2018/15 February 02, Charging of additional expenses of upto
2018 0.20% in terms of Regulation 52 (6A) (c) of
SEBI (Mutual Funds) Regulations, 1996
128. SE BI/HO/IMD/DF2/CIR/P/2018/16 February 02, Review of additional expenses of up to
2018 0.30% towards inflows from beyond top 15
cities (B15)
129. SE BI/HO/IMD/DF3/CIR/P/2018/04 January 04, Benchmarking of Scheme’s performance to
2018 Total Return Index
441
Master Circular for Mutual Funds as on March 31, 2024
130. SE BI/HO/IMD/DF3/CIR/P/2017/126 December 04, Categorization and rationalization of Mutual
2017 Fund schemes
131. SE BI/HO/IMD/DF2/CIR/P/2017/125 November 30, Enhancing fund governance for Mutual
2017 Funds
132. SE BI/HO/IMD/DF3/CIR/P/2017/114 October 06, Categorization and rationalization of Mutual
2017 Fund schemes
133. SE BI/HO/IMD/DF2/CIR/P/2017/109 September 27, Review of norms for participation in
2017 derivatives by Mutual Funds
134. SE BI/HO/IMD/DF3/CIR/P/2017/52 June 01, 2017 Online Registration Mechanism for Mutual
Funds
135. SE BI/HO/IMD/DF2/CIR/P/2017/39 May 08, 2017 Instant Access Facility & Use of e-wallet for
investment in Mutual Funds
136. SE BI/HO/IMD/DF2/CIR/P/2017/35 April 28, 2017 Circular on Mutual Funds
137. CI R/IMD/DF/23/2017 March 15, 2017 Review of Advertisement guidelines for
Mutual Funds
138. SE BI/HO/IMD/DF2/CIR/P/2017/17 February 28, Circular on Mutual Funds
2017
139. SE BI/HO/IMD/DF2/CIR/P/2017/14 February 22, Prudential limits in sector exposure for
2017 Housing Finance Companies (HFCs)
140. SE BI/HO/IMD/DF2/CIR/P/2017/13 February 20, Participation in derivatives market by
2017 Mutual Funds
141. SE BI/HO/IMD/DF2/CIR/P/2016/124 November 17, Investment/trading in securities by
2016 employees of AMC(s) and Trustees of
Mutual Funds
142. SE BI/HO/IMD/DF2/CIR/P/2016/89 September 20, Consolidated Account Statement
2016
143. SE BI/HO/IMD/DF2/CIR/P/2016/68 August 10, 2016 Circular on Mutual Funds
144. SE BI/HO/IMD/DF2/CIR/P/2016/57 May 31, 2016 Restriction on redemption in Mutual Funds
145. SE BI/HO/IMD/DF2/CIR/P/2016/42 March 18, 2016 Circular on Mutual Funds
146. SE BI/HO/IMD/DF2/CIR/P/2016/37 February 25, Circular on Mutual Funds
2016
147. SE BI/HO/IMD/DF2/CIR/P/2016/35 February 15, Circular on Mutual Funds
2016
148. CI R/IMD/DF/11/2015 December 31, Investment by Gold ETFs in Gold
2015 Monetization scheme of Banks
149. CI R/IMD/DF/03/2015 April 30, 2015 Stress Testing of Liquid Fund and Money
Market Mutual Fund Schemes
150. CI R/IMD/DF/4/2015 April 30, 2015 Product Labelling in Mutual Funds
442
Master Circular for Mutual Funds as on March 31, 2024
151. Ci r/ IMD/ DF/ 15 /2014 June 20, 2014 Minimum Asset under Management (AUM)
of Debt Oriented schemes
152. CI R/IMD/DF/10/2014 May 22, 2014 Circular on Mutual Funds
153. CI R/IMD/DF/07/2014 April 02, 2014 Disclosures pertaining to Assets Under
Management
154. CI R/IMD/DF/05/2014 March 24, 2014 Enhancing disclosures, investor education &
awareness campaign, developing alternative
distribution channels for Mutual Fund
products, etc.
155. CI R/IMD/DF/20/2013 November 29, Circular on Infrastructure Debt Fund (IDF)
2013
156. CI R/IMD/DF/16/2013 October 18, Gold Exchange Traded Fund scheme (Gold
2013 ETFs) and Gold Deposit Scheme (GDS) of
Banks
157. CI R / IMD / DF / 7 / 2013 April 23, 2013 Circular on Infrastructure Debt Fund
158. CI R/IMD/DF/5/2013 March 18, 2013 Product Labelling in Mutual Funds
159. CI R/IMD/DF/04/2013 February 15, Gold Exchange Traded Fund scheme (Gold
2013 ETFs)
Investment in Gold Deposit Scheme (GDS) of
Banks
160. CI R/ IMD/ DF/02/2013 February 06, Time period of initial offering and allotment
2013 of units of Mutual Fund scheme eligible
under Rajiv Gandhi Equity Savings Scheme,
2012 (RGESS)
161. CI R/IMD/DF/24/2012 November 19, Circular on Mutual Funds
2012
162. CI R/IMD/DF/23/2012 November 15, Participation of mutual funds in Credit
2012 Default Swaps (CDS) Market as users
("Protection Buyers") and in repo, in
corporate debt securities
163. CI R/IMD/DF/21/2012 September 13, Steps to re-energize Mutual Fund Industry
2012
164. Ci r/IMD/DF/6/2012 February 28, Circular on Mutual Funds
2012
165. Ci r/IMD/DF/7/2012 February 28, Circular for Mutual Funds
2012
166. CI R / IMD / DF / 21 / 2011 December 13, Revised Format of Monthly Cumulative
2011 Report (MCR) incorporating investments in
Infrastructure Debt fund
443
Master Circular for Mutual Funds as on March 31, 2024
167. CI R / IMD / DF / 19 / 2011 November 11, Participation of mutual funds in repo in
2011 corporate debt securities
168. Ci r/ IMD/ DF/ 16 / 2011 September 08, Amendment to SEBI (Mutual Funds)
2011 Regulations, 1996
169. Ci r/ IMD/ DF/13/ 2011 August 22, 2011 Circular for Mutual Funds
170. CI R/IMD/DF/12/2011 August 01, 2011 Indicative Portfolios and Yield in close ended
debt oriented mutual funds Schemes
171. CI R/IMD/DF/9/2011 May 19, 2011 Option to hold units in Demat Form
172. CI R/MFD/DF/4/2011 March 09, 2011 Usage of Load Balance
173. Ci r/ IMD/ DF/20/2010 December 06, Half Yearly Report by Trustees
2010
174. Ci r / IMD / DF / 19 / 2010 November 26, Circular for Mutual Funds
2010
175. CI R/IMD/DF/17/2010 November 09, Facilitating transactions in Mutual Fund
2010 schemes through the Stock Exchange
infrastructure
176. Ci r / IMD / DF / 15/ 2010 October 22, Consolidation or merger of Schemes
2010
177. CI R/IMD/DF/10/2010 August 18, 2010 Transferability of Mutual Fund units
178. Ci r/ IMD/ DF/ 11/ 2010 August 18, 2010 Review of norms for investment and
disclosure by Mutual Funds in derivatives
179. Ci r / IMD / DF / 9 / 2010 August 12, 2010 Updation of investor related documents
180. Ci r / IMD / DF / 8 / 2010 August 06, 2010 Amendments to SEBI (Mutual Funds)
Regulations, 1996
181. Ci r / IMD / DF / 6 / 2010 July 28, 2010 Additional Mode of payment through
Application Supported by Blocked Amount
(hereinafter referred to as 'ASBA') in Mutual
Funds
182. Ci r / IMD / DF / 5 / 2010 June 24, 2010 Certificate Programme for sale and/or
distributors of mutual fund products
183. Ci r / IMD / DF / 4 / 2010 June 21, 2010 Valuation of Debt and Money Market
Instruments
184. Ci r / IMD / DF/ 2 / 2010 May 13, 2010 Disclosure of investor complaints with
respect to Mutual Funds
185. SE BI/IMD/CIR No. 18/ 198647/2010 March 15, 2010 Circular for Mutual Funds
186. SE BI/IMD/CIR No. 17/ 193751/2010 February 04, Standard warning in Advertisements by
2010 Mutual Funds
444
Master Circular for Mutual Funds as on March 31, 2024
187. SE BI/IMD/CIR No.16/ 193388/2010 February 02, Valuation of Debt and Money Market
2010 Instruments
188. SE BI/IMD/CIR No.15/191378 /2010 January 18, Advertisement by mutual funds
2010
189. SE BI/IMD/CIR No 14/187175/2009 December 15, Modification to existing SEBI circulars on
2009 Mutual Funds
190. SE BI/IMD/CIR No.12 /186868 /2009 December 11, Transaction through some MF distributors
2009 and compliance with SEBI circular on AML
191. SE BI/IMD/CIR No./ 13/187052 /2009 December 11, AMFI Guidelines for change of mutual fund
2009 distributor
192. SE BI /IMD / CIR No.11/183204/ 2009 November 13, Facilitating transactions in Mutual Fund
2009 schemes through the Stock Exchange
infrastructure
193. SE BI/IMD/CIR No. 10/178129/09 September 29, Statement of Additional Information (SAI)
2009 and Scheme Information Document (SID) to
be made available on SEBI website
194. SE BI/IMD/CIR No. 8/176988/2009 September 16, System Audit of Mutual Funds
2009
195. SE BI/IMD/CIR No. 8/174648/2009 August 27, 2009 Code of Conduct for Intermediaries of
Mutual Funds
196. SE BI/IMD/CIR No.7/173650/2009 August 17, 2009 Exit load - Parity among all classes of unit
holders
197. SE BI / IMD / CIR No. 6 /172445/ 2009 August 07, 2009 Exit load - Parity among all classes of unit
holders
198. SE BI/IMD/CIR No. 5/169030/2009 July 08, 2009 Revision in filing fees - Amendments to SEBI
(Mutual Funds) Regulations, 1996
199. SE BI/IMD/CIR No. 4/ 168230/09 June 30, 2009 Mutual Funds - Empowering Investors
through transparency in payment of
commission and load structure
200. SE BI/IMD/CIR No.3/166386/2009 June 15, 2009 Guidelines for Investment by Mutual Funds
in Money Market Instruments
201. SE BI/IMD/CIR No. 2/166256/2009 June 12, 2009 Valuation of debt securities by Mutual Funds
202. SE BI/IMD/CIR No. 1/165935 / 2009 June 09, 2009 Guidelines for investment by Mutual Funds
in Indian Depository Receipts (IDRs) and
copies of gazette notifications dated April
08, 2009 and June 05, 2009
203. SE BI/IMD/CIR No. 15/157701/09 March 19, 2009 Portfolio Format for debt oriented close-
ended and interval schemes/plans
445
Master Circular for Mutual Funds as on March 31, 2024
204. SE BI/IMD/CIR No. 13/150975/09 January 19, Portfolio of “Liquid Schemes” and
2009 nomenclature of “Liquid Plus” schemes
205. SE BI/IMD/CIR No. 14/151044/09 January 19, Indicative Portfolios and Yields in Mutual
2009 Funds Scheme
206. SE BI/IMD/CIR No. 12/147132/08 December 11, Review of Provisions relating to Close Ended
2008 Schemes
207. SE BI/IMD/CIR No. 11/142521/08 October 24, Applicability of Net Asset Value (NAV) for
2008 Income/Debt oriented Mutual Fund
scheme(s)/plan(s) (Other than liquid fund
schemes)
208. SE BI/IMD/CIR No. 10 /141712/08 October 20, Standardizing format of Abridged Scheme
2008 wise Annual Report Format and Reduction in
time period for dispatch to the unitholders -
Amendments to SEBI (Mutual Funds)
Regulations, 1996
209. SE BI/IMD/CIR No. 9/141601/08 October 18, Valuation of Debt securities by Mutual Funds
2008
210. SE BI/IMD/CIR No.8/132968/08 July 24, 2008 Abridged Scheme wise Annual Report and
period disclosures to Unit holders
211. SE BI/IMD/CIR No.7/129592/08 June 23, 2008 Parking of Funds in Short Term Deposits of
Scheduled Commercial Banks by Mutual
Funds - Pending deployment
212. SE BI/IMD/CIR No.6/127947/08 June 06, 2008 Short Selling and Securities Lending and
Borrowing & Net Settlement of Government
Securities Transactions - Amendments to
SEBI (Mutual Funds) Regulations, 1996
213. SE BI/IMD/CIR No. 5/126096/08 May 23, 2008 Simplification of Offer Document and Key
Information Memorandum of Mutual Funds
schemes
214. SE BI/IMD/CIR No.4/124477/08 May 02, 2008 Notification on Real Estate Mutual Fund
schemes and initial issue expenses
215. SE BI/IMD/CIR No. 3/124444/08 April 30, 2008 Revised Monthly Cumulative Report (MCR)
216. SE BI/IMD/CIR No.2/122577/08 April 08, 2008 Overseas Investments by Mutual Fund
217. SE BI/IMD/CIR No.1/122201/08 April 03, 2008 Revision in Filing Fees and Registration Fees -
Amendment to SEBI (Mutual Funds)
Regulations, 1996
218. SE BI/IMD/CIR No. 14/120784/08 March 18, 2008 Load on Bonus Units and units allotted on
Reinvestment of Dividend
219. SE BI/IMD/CIR No. 13/118899/08 February 29, New Scheme Report
2008
446
Master Circular for Mutual Funds as on March 31, 2024
220. SE BI/IMD/CIR No. 12/ 118340 /08 February 26, Standard warning in Advertisements by
2008 Mutual Funds
221. SE BI/IMD/CIR No. 11/ 115723 /08 January 31, Removal of Initial Issue Expenses
2008
222. SE BI/IMD/CIR No. 10/ 112153 /07 December 31, Waiver of Entry Load for Direct applications
2007
223. SE BI/IMD/CIR No.9/108562/07 November 16, Circular for Mutual Funds
2007
224. SE BI/IMD/CIR No.8/107311/07 October 26, Parking of Funds in Short Term Deposits of
2007 Scheduled Commercial Banks by Mutual
Funds - Pending deployment
225. SE BI/IMD/CIR No.7/104753/07 September 26, Overseas Investments by Mutual Fund
2007
226. SE BI/IMD/CIR No. 6/98057/07 July 05, 2007 Bi-monthly Compliance Test Reports (CTRs)
227. SE BI/IMD/CIR No.5 /96576/07 June 25, 2007 Extension of time for uploading of NAVs of
Fund of Fund schemes
228. SE BI/IMD/CIR No.4 /95754/07 June 11, 2007 Gazette notification dated May 28, 2007
229. SE BI/IMD/CIR No.3/93334/07 May 14, 2007 Investment in ADRs/GDRs/Foreign Securities
and overseas ETFs by Mutual Funds
230. SE BI/IMD/CIR No.2/91600/07 April 20, 2007 REVISED MONTHLY CUMULATIVE REPORT
(MCR)
231. SE BI/IMD/CIR No.2/91033/07 April 17, 2007 REVISED MONTHLY CUMULATIVE REPORT
(MCR)
232. SE BI/IMD/CIR No. 1/ 91171 /07 April 16, 2007 Parking of Funds in Short Term Deposits of
Scheduled Commercial Banks by Mutual
Funds - Pending deployment
233. SE BI/IMD/CIR No. 15/87045/2007 February 22, Additional Reporting with Monthly
2007 Cumulative Report (MCR)
234. SE BI/IMD/CIR No.14 /84243/07 January 15, Circular for Mutual Funds
2007
235. SE BI/IMD/CIR No.13/83589/07 January 04, Investments in ADRs/GDRs/Foreign
2007 Securities and Overseas EFT by Mutual Funds
236. IM D/CIR/12/80083/2006 November 20, Dispatch of Account Statement
2006
237. SE BI/IMD/CIR No.11/78450/06 October 11, Uniform Cut Off Time for applicability of Net
2006 Asset Value (NAV) of Mutual Fund
scheme(s)/Plan(s)
447
Master Circular for Mutual Funds as on March 31, 2024
238. SE BI/IMD/CIR No.10 / 77780/06 September 28, Uniform Cut Off Time for applicability of Net
2006 Asset Value (NAV) of Mutual Fund
scheme(s)/Plan(s)
239. SE BI/IMD/CIR No.9/74364/06 August 14, 2006 Gazette notification dated August 03, 2006
240. SE BI/IMD/CIR No.8 / 73580/06 August 04, 2006 Filing of Annual Information Return to be
filed by Mutual Funds
241. SE BI/IMD/CIR No. 7 / 73202 /06 August 02, 2006 Investments in ADRs/GDRs/Foreign
Securities and Overseas EFTs by Mutual
Funds
242. SE BI/IMD/CIR No. 6 / 72245 /06 July 20, 2006 Revised Monthly Cumulative (MCR) and
Annual Statistical Report (ASR)
243. SE BI/IMD/CIR No.5/70559/06 June 30, 2006 Undertaking from Trustee for New Scheme
Offer Document
244. SE BI/IMD/CIR No.4/69458/06 June 16, 2006 Gazette notification dated May 22, 2006
245. SE BI/IMD/CIR No. 2/65348/06 April 21, 2006 Introduction of Gold Exchange Traded Funds
in India.
246. SE BI/IMD/CIR No. 3/65370/06 April 21, 2006 Dividend Distribution Procedure for Mutual
Funds
247. SE BI/IMD/CIR No. 1/64057/06 April 04, 2006 Rationalization of Initial issue expenses and
dividend distribution procedure for Mutual
Funds
248. SE BI/IMD/CIR No. 5/63714/06 March 29, 2006 Review of time limit for updating NAV on
AMFI website
249. SE BI/IMD/CIR No. 5/63715/06 March 29, 2006 Applicability of Investment restrictions for
securitized debt
250. SE BI/IMD/CIR No.4/58422/06 January 24, Gold ETF
2006
251. SE BI/IMD/CIR No.3/50241/05 September 26, Investments in ADRs/GDRs/Foreign
2005 Securities by Mutual Funds
252. SE BI/ IMD/CIR No.2/46603/2005 August 10, 2005 Unique Client Code (UCC) for Mutual Fund
schemes/plans
253. SE BI/ IMD/CIR No.1 /42529/2005 June 14, 2005 Minimum number of investors in the
Scheme(s)/Plan(s) of Mutual Funds
254. SE BI/ IMD/CIR No.11/36222/2005 March 16, 2005 Compliance Test Report (CTR)
255. SE BI/IMD/CIR No. 10/ 16521/04 July 28, 2004 Key Information Memorandum
256. SE BI/IMD/CIR No. 9/ 6016/04 March 25, 2004 Uniform Cut Off Time for applicability of Net
Asset Value (NAV) of Mutual Fund
Scheme(s)/plan(s)
448
Master Circular for Mutual Funds as on March 31, 2024
257. SE BI/IMD/CIR No. 7/ 5573/04 March 19, 2004 Investment in Foreign Securities by Mutual
Funds
258. SE BI/IMD/CIR No. 8/ 5611/04 March 19, 2004 Uniform Cut Off Time for applicability of Net
Asset Value (NAV) of Mutual Fund
Scheme(s)/plan(s)
259. SE BI/IMD/CIR No. 6/ 4213/04 March 01, 2004 Mentioning Bank Account Numbers & PAN
by investors
260. SE BI/ IMD/CIR No. 5/265/ 2004 February 16, Gazette notification dated January 15, 2004
2004
261. SE BI/ IMD/CIR No. 4/2627/ 2004 February 06, Guidelines for Participation by Mutual Fund
2004 in Derivative Trading
262. SE BI/IMD/CIR No. 03/2564/04 February 05, REVISED MONTHLY CUMULATIVE REPORT
2004 (MCR)
263. SE BI/IMD/CIR No. 02/254/04 February 04, Certification of Agents/distributors and
2004 employees
264. SE BI/IMD/CIR No. 01/1756/04 January 27, Unique Client Code for Schemes/Plans of
2004 Mutual Funds
265. SE BI/IMD/CIR No. 10/22701/03 December 12, Minimum number of investors in the
2003 Schemes/Plans of Mutual Funds
266. SE BI/IMD/CIR No. 9/20306/03 November 12, Investment by Mutual Funds in Short Term
2003 Deposits of Scheduled Commercial Banks
267. SE BI/IMD/CIR No.8/18944/03 October 06, Investment Limits for Government
2003 Guaranteed Debt Securities
268. SE BI/MFD/CIR No.7/13391/03 July 11, 2003 Investment/trading in securities by
employees of Asset Management Companies
and Mutual Fund Trustee Companies
269. SE BI/MFD/CIR No.6/12357/03 June 26, 2003 Advertisement by Mutual Funds
270. SE BI/MFD/CIR No.5/12031/03 June 23, 2003 Consolidation of Schemes
271. M FD/CIR No.04/11488/2003 June 12, 2003 Role of Chief Executive Officers and Fund
Managers & Fund of Funds
272. SE BI/MFD/CIR No.3/158/03 June 10, 2003 Investment in Interest Rate Derivatives
273. SE BI/MFD/CIR No.2/6855/03 April 04, 2003 Guidelines for Investment in Foreign
Securities by Mutual Funds
274. SE BI/MFD/CIR No.1/6693/03 April 03, 2003 Certification and Registration of
Intermediaries
275. M FD/CIR No.23/066/2003 March 07, 2003 Investment Valuation Norms for Mutual
Funds
449
Master Circular for Mutual Funds as on March 31, 2024
276. M FD/CIR No.22/2311/03 January 30, Conversion of Close ended Schemes to open-
2003 ended schemes
277. M FD/CIR/21/25467/2002 December 31, Guidelines for participation by Mutual Funds
2002 in Trading in Derivative Products
278. M FD/CIR/20/23230/2002 November 28, Registration of Intermediaries
2002
279. M FD/CIR/19/22474/2002 November 20, Reconciliation Procedure for investment in
2002 Government Securities
280. M FD/CIR/18/21826/2002 November 07, Investment in Foreign Securities
2002
281. M FD/CIR/16/21105/2002 October 28, Appointment of Independent Directors
2002
282. M FD/CIR/16/20844/2002 October 24, Gazette notification dated September 09,
2002 2002
283. M FD/CIR/15/19133/2002 September 30, Risk Management System
2002
284. M FD/CIR/14/18337/2002 September 19, Portfolio Disclosures
2002
285. M FD/CIR/13/16799/2002 August 29, 2002 Independent Directors on Boards of AMCs
and Trustee Companies
286. M FD/CIR/12/16588/2002 August 28, 2002 Quarterly reports on movement in net assets
& New Scheme report
287. M FD/CIR/10/16159/2002 August 22, 2002 Rounding off of NAVs
288. M FD/CIR/10/15895/2002 August 20, 2002 Circular for Mutual Funds
289. M FD/CIR/09/247/2002 July 23, 2002 New Scheme Report
290. M FD/CIR/08/514/2002 July 22, 2002 Uniformity in calculation of Sale and
Repurchase Price & Rounding off NAVs
291. M FD/CIR/ 07/213/2002 July 02, 2002 Circular for Mutual Funds
292. M FD/CIR/ 06/210/2002 June 26, 2002 Code of Conduct for intermediaries of
Mutual Fund
293. M FD/CIR/05/432/2002 June 20, 2002 Circular for Mutual Funds
294. M FD/CIR/04/430/2002 June 19, 2002 Circular for Mutual Funds
295. M FD/CIR/03/526/2002 May 09, 2002 Investment in Unlisted Equity shares
296. M FD/CIR/02/110/02 April 26, 2002 Revised Annual Statistical Report (ASR)
297. M FD/CIR/01/071/02 April 15, 2002 Benchmarks for Debt-Oriented and Balanced
Funds schemes
450
Master Circular for Mutual Funds as on March 31, 2024
298. M FD/CIR/17/419/02 March 30, 2002 Guidelines for Investment in Foreign
Securities by Mutual Funds
299. M FD/CIR/16/400/02 March 26, 2002 Introduction of Benchmarks
300. M FD/CIR/15/041/2002 March 14, 2002 Publication of audited annual accounts by
mutual funds
301. M FD/CIR/ No.14/442/2002 February 20, Circular for Mutual Funds
2002
302. M FD/CIR No.13/370/02 January 16, SEBI Investors Education Programme-
2002 Investments in Mutual Funds
303. M FD/CIR No.12/362/02 January 03, Rendering investment advice and reporting
2002 of compliance officer to SEBI
304. M FD/CIR/11/354/2001 December 20, Independent Directors on Boards of AMCs
2001 and Trustee Companies.
305. M FD/CIR No.10/310/01 September 25, Certification Programme and Disclosure
2001 Standards.
306. M FD/CIR/9/230/2001 August 14, 2001 Circular for Mutual Funds
307. M FD/CIR/No.8/290/01 July 30, 2001 Clients Codes For Mutual Funds
308. M FD/CIR/07/206/2001 July 19, 2001 Discontinuing Monthly Statistical Reports
(MSTATS)
309. M FD/CIR/06/275/2001 July 09, 2001 Circular for Mutual Funds
310. M FD/CIR No.5/153/2001 May 24, 2001 Circular for Mutual Funds
311. M FD/CIR No.4/216/2001 May 08, 2001 Investment/trading in securities by
employees of Asset Management Companies
and Mutual Fund Trustee Companies
312. M FD/CIR/ No.3/211/2001 April 30, 2001 Circular for Mutual Funds
313. M FD/CIR No.2/205/01 April 27, 2001 Validity of Scheme Offer Documents.
314. M FD/CIR/1/200/2001 April 20, 2001 Format for Half-Yearly of Unaudited
Financial Results
315. M FD/CIR/13/087/2001 March 28, 2001 Gazette Notification and publication of NAV
of close ended scheme
316. M FD/CIR/14/088/2001 March 28, 2001 Guidelines for Valuation of securities
317. M FD/CIR No. 12/175/01 February 15, Launch of Additional Plans under existing
2001 schemes
318. M FD/CIR/10/039/2001 February 09, Circular for Mutual Funds
2001
319. M FD/CIR No.11/171/01 February 09, Disclosure of NAVs on AMFI website
2001
451
Master Circular for Mutual Funds as on March 31, 2024
320. M FD/CIR/9/120/2000 November 24, Circular for Mutual Funds
2000
321. M FD/CIR/8(a)/104/2000 October 03, Guidelines for Mutual Funds
2000
322. M FD/CIR/8/92/2000 September 18, Guidelines for valuation of securities for
2000 Mutual Funds
323. M F/CIR/07/404/2000 July 31, 2000 Monthly Cumulative Report (MCR)
324. M FD/CIR/6/73/2000 July 27, 2000 Recording of investment decisions by Mutual
Funds
325. M FD/CIR/5/360/2000 July 04, 2000 Revised Format of Compliance Test Reports
(CTRs)
326. M FD/CIR/4/51/2000 June 05, 2000 Guidelines for Advertisement by Mutual
Funds
327. M FD/CIR/3/292/2000 May 30, 2000 Gazette Notification dated May 22,2000
328. SE BI/MFD /CIR/2/266/2000 May 19, 2000 Payment of interest for delay in dispatch of
redemption or repurchase proceeds.
329. M FD/CIR/1/189/2000 April 10, 2000 Gazette Notification dated March 14, 2020
and Money Market Mutual Funds Schemes
330. M F/CIR/12/109/2000 February 22, Submission of soft copies of offer document
2000
331. M FD/CIR/011/061/2000 February 01, Guidelines for participation by Mutual Funds
2000 in Trading in Derivative
332. M FD/CIR NO.010/024/2000 January 17, Frequency of Portfolio Disclosure, Formation
2000 of Audit Committee & Formation of
Valuation committee by AMC
333. M FD/CIR/09/014/2000 January 05, Applicability of Investment Restrictions,
2000 Responsibilities of Trustees etc.
334. M FD/CIR/08/23026/99 December 23, Clarification on Reporting of Transactions by
1999 Mutual Funds
335. M FD/CIR/07/384/99 December 17, Reporting of Transactions by Mutual Funds.
1999
336. M FD/CIR NO.5/062/99 September 30, Investments in ADRs/GDRs by Mutual Funds
1999
337. M FD/CIR NO.4/052/99 September 01, Investments in ADRs/GDRs by Mutual Funds
1999
338. M FD/CIR/01/047/99 February 10, Guidelines for Participation in Stock Lending
1999 Scheme
339. IIM ARP/MF/CIR/07/826/98 April 15, 1998 SEBI Circular dated April 15, 1998
452
Master Circular for Mutual Funds as on March 31, 2024
340. IIM ARP/MF/CIR/06/793/98 March 31, 1998 Standard Offer Document and Key
Information Memorandum
341. IIM ARP/MF/CIR/04/571/98 March 04, 1998 Corrigendum dated February 06, 1998 to
Gazette notification dated January 12, 1998
342. IIM ARP/MF/CIR/01/294/98 February 04, Gazette Notification dated January 12, 1998
1998 and Clarifications
343. IIM ARP/MF/CIR/14/1570/97 August 18, 1997 Compliance Test Formats
344. IIM ARP/MF/CIR/11/1171/97 June 20, 1997 Amendment in SEBI (Mutual Funds)
Regulations, 1996
345. IIM ARP/MF/CIR/10/1076/97 June 05, 1997 Submission of Compliance Test Formats
346. IIM ARP/CIR/08/845/97 May 07, 1997 Submission of Statistical Information/Bio-
data of Key-Personnel
347. IIM ARP/MF/CIR/07/844/97 May 05, 1997 Filing of Offer Documents/Disclosure of NAV
And Guaranteed Return Scheme
348. IIM ARP/ MF/CIR/05/788/97 April 28, 1997 Formats of Statistical
Information/Compliance Reports/Bio-Data
of key personnel of AMCs
349. IIM ARP/MF/CIR/01/428/97 February 28, Limitations of Fees and expenses charged to
1997 schemes and filing Of offer document of
schemes
350. SM D-II(N)/2113/94 April 12, 1994 No 1% listing deposit from Mutual Funds
351. IIM ARP/10772/93 July 14, 1993 Reporting by Mutual Funds - New Scheme
Reports
352. SE BI/HO/IMD/DF2/CIR/P/2020/156 August 24, 2020 Master Circular for Mutual Funds
453
Master Circular for Mutual Funds as on March 31, 2024
454
Master Circular for Mutual Funds as on March 31, 2024
INDEX OF ANNEXURES
ANNEXURE 1: RISK MANAGEMENT FRAMEWORK (RMF) FOR MUTUAL
FUNDS ............................................................................................................. 456
ANNEXURE 2: INVESTMENT VALUATION NORMS FOR MUTUAL FUNDS ............ 505
ANNEXURE 3: LIST OF MILLION PLUS CITIES .................................................. 506
ANNEXURE 4: FREQUENTLY ASKED QUESTIONS (FAQs) ................................. 509
ANNEXURE 5: GAZETTE NOTIFICATION DATED MAY 31, 2010 ....................... 510
ANNEXURE 6: CYBER SECURITY AND CYBER RESILIENCE FRAMEWORK FOR
MUTUAL FUNDS/ ASSET MANAGEMENT COMPANIES (AMCs) .......................... 512
ANNEXURE 7: REPORTING FOR ARTIFICIAL INTELLIGENCE (AI) AND MACHINE
LEARNING (ML) APPLICATIONS AND SYSTEMS OFFERED AND USED BY MUTUAL
FUNDS ............................................................................................................. 526
ANNEXURE 8: SYSTEM AUDIT ......................................................................... 528
ANNEXURE 9: PRODUCT LABELLING IN MUTUAL FUND SCHEMES – RISK-o-
METER ............................................................................................................ 545
ANNEXURE 10: STEWARDSHIP CODE FOR ALL MUTUAL FUNDS IN RELATION TO
THEIR INVESTMENT IN LISTED EQUITIES ...................................................... 565
ANNEXURE 11: DECLARATION FORM FOR OPTING OUT OF NOMINATION ...... 572
ANNEXURE 12: GUIDELINES REGARDING THE MARKET MAKING
FRAMEWORK .................................................................................................. 573
ANNEXURE 13: ANNEXURES TO CHAPTER 16B ............................................... 575
ANNEXURE 14: DETAILS OF STRATEGIES ....................................................... 577
ANNEXURE 15: UNIT HOLDER PROTECTION COMMITTEE (UHPC) .................. 579
ANNEXURE 16A: DETAILS OF STRATEGIES .................................................... 582
ANNEXURE 16B: LOSS WATERFALL ACCOUNTING FOR CDMDF ...................... 584
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Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 1: RISK MANAGEMENT FRAMEWORK (RMF) FOR MUTUAL
FUNDS647
1.0 RMF Standards
i. AMCs shall establish a RMF for its mutual fund business. The RMF
of mutual funds shall have the following characteristics:
a. Be structured, efficient and timely.
b. Be an integral part of the mutual fund’s processes and
governance framework, at both the operational and strategic
level, and consider all available information i.e. both internal and
external.
c. Be customized to both AMC's and scheme’s risk profile, focuses
on potential risks and implements mitigation and control
measures to explicitly address uncertainty.
d. Be dynamic and flexible enough to identify new risks that emerge
and make allowances for those risks that no longer exist.
e. Recognize that people and culture have an impact on its
effectiveness, and accordingly the framework must
communicate and consult with stakeholders throughout.
f. Protect reputation.
ii. The objectives of RMF should assist the management and the Board
of Directors of both AMC and Trustees in:
a. Demonstrating high standards of due diligence in daily
management.
b. Promoting proactive management and early identification of risk.
c. Assigning and increasing accountability and responsibility in the
organization.
d. Managing risk within the tolerance limits defined in the RMF.
647 SEBI/HO/IMD/IMD-1 DOF2/P/CIR/2021/630dated September 27, 2021
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Master Circular for Mutual Funds as on March 31, 2024
iii. The RMF of mutual funds shall comprise the following
components:
a. Governance and Organization.
b. Identification of Risks.
c. Measurement and Management of Risks.
d. Reporting of Risks and related Information.
1.1 Governance and Organization
i. Risk Management shall be an independent and specific function of
the AMC.
ii. There should be at least one CXO level officer identified to be
responsible for the risk management of specific functions of the
AMC/Mutual Fund. For instance, there should be dedicated risk
officers for various key risks such as Investment Risk (by Chief
Investment Officer), Compliance Risk (by Chief Compliance Officer),
Operational Risk (by Chief Operating Officer or similar functionary
responsible for the respective functions overseen), Cyber Security (by
Chief Information Security Officer), etc.
iii. The policy on risk management of the mutual fund should have
clarity on roles and responsibility assigned to CXOs and the same
needs to be disclosed on their website.
iv. AMC should have a Chief Risk Officer (CRO), who would be
responsible for the overall risk management of the mutual fund
operation including the key risks. This is in addition to one CXO level
officer responsible for each key risk type. The CXO shall be the “Head
of Department” or official of the AMC up to one level below CEO, other
than CRO. However, for the overall risk management of the mutual
fund, along with the management, both board of AMC and trustees
should also be responsible. For this purpose, both the AMC and the
trustees should mandatorily have separate Risk Management
Committees (RMCs). These committees shall undertake annual
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Master Circular for Mutual Funds as on March 31, 2024
review of RMF at both AMC and scheme level. The CRO should be
part of the RMCs. The RMCs shall report to the Board of AMCs and
trustees respectively and also recommend long term solutions
regarding risk management both at the AMC level as well as the
scheme level.
v. There shall be clear demarcation between the roles and
responsibilities of the respective CXOs and the CRO. For instance,
while defining the role of CRO, it should be ensured that the CRO
would be responsible for the overall governance of the RMF; the
investment decisions and the other functions of CIO are not
encroached upon and the risk taking ability of CIO in accordance of
the scheme objective is not hindered. The CRO or the risk
management function of the CRO cannot be entrusted with day to
day functioning, the responsibility for which shall lie with the
respective CXOs.
vi. The AMC should maintain risk metric for each mutual fund scheme.
The risk metric should incorporate each key risk type like investment
risk, liquidity risk, credit risk, etc. along with the path to maintain
the targeted risk level. The metric may incorporate evaluation of risk
levels vis-à-vis an appropriate benchmark, wherever applicable. The
RMCs shall meet at least once in a quarter to review various risks
including risk metrics at both the scheme and the AMC level and
assist the board of AMCs and trustees in discharging their duties in
this regard.
1.1.1 Risk Management Policy
The risk management policy can be a macro level description of risk
management governance (including roles and responsibilities of the Board of
AMC and the three lines of defense – Management, Risk Management Team and
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Master Circular for Mutual Funds as on March 31, 2024
Internal Auditor), the organization's risk appetite and key elements of its risk
management process. The policy on the RMF shall be approved by the board
of AMC and trustees. The mandatory and recommendatory elements for
inclusion in the risk management policy, approved by the board of AMC and
trustees, are outlined below:
1.1.1.1 Mandatory Elements
i. There shall be an approved policy on the RMF both at AMC and
scheme level.
ii. A risk appetite framework should be in place at both AMC and
scheme level. Quantification of the framework in the form of a metric
for key risks shall include but not limiting to credit risk, market risk
and liquidity risk, etc. and targeted path of improvement. The metric,
wherever applicable, should incorporate an appropriate benchmark
vis-à-vis which the measurements of risk and targeted risk levels
may be made.
iii. There should be a Delegation of Power (DoP) framework covering daily
risk management, daily risk reporting and corrective actions at
various levels of management.
iv. Formation of RMCs (of both AMC and Trustees), its roles and
responsibilities.
v. Each CXO level officer to take ownership of risks and manage risk
level for those risks as are applicable to their area of operation.
vi. Clarity on roles and responsibility assigned to CXOs
vii. Responsibility of line management and process ownership for risk
management and reflection of the same in the performance appraisal
through Key Result Areas (KRAs) of key officials of line management.
The performance may be evaluated vis-à-vis an appropriate
benchmark, if applicable.
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Master Circular for Mutual Funds as on March 31, 2024
viii. All aspects of risks that the AMC can face along with the mitigation
plans, including but not limited to:
a. Risk management practices in fund management, customer service,
marketing and distribution.
b. Disaster recovery and business contingency planning.
ix. Limit management framework for the material or key risks.
x. Risk assessment & monitoring measures and tools for all risks with
quantified risk indicators and limits thereto.
xi. Implementation of scenario analysis and stress testing.
xii. Risk mitigation requirements and control mechanisms.
xiii. Additional triggers that could require review of the RMF, including:
a. Material claims or litigations from customers or incidents.
b. Material findings from internal or external audits.
c. Adverse media attention impacting reputation risk.
d. Adverse observations from the regulator(s), etc.
e. Key risk indicator breaches.
f. New regulatory requirements.
g. Sector-relevant developments or incidents.
1.1.1.2 Recommended Elements
i. Use of technology to automate risk management, reporting and
compliance.
1.1.2 Risk Management Function – Responsibility of Board of AMC,
Trustees and the Management
1.1.2.1 Risk Management - Role of the Board of AMC and Trustees
i. Approving the RMF policies and procedures including the risk metrics
at scheme level.
ii. Defining, reviewing and approving the AMC’s and scheme’s risk
appetite framework.
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Master Circular for Mutual Funds as on March 31, 2024
iii. Periodic monitoring of risk appetite versus actual risk at scheme level.
iv. Event based monitoring of Risk appetite versus actual risk at scheme
level.
v. Define specific responsibility of the management, including CEO
vi. Approval for policy for risk based KRAs and KRAs at level of CEO and
up to one level below CEO. Suggest modifications in KRA outcomes and
link compensation to those KRAs.
vii. Review of actions taken by Board of AMC and management in respect
of risk management.
viii. Reporting of material risk related observations to SEBI on periodic
basis.
ix. Setting up of the risk management function and developing appropriate
structures and procedures to ensure that it can function
independently.
x. Approving a methodology for Board Evaluation of the RMF (either
through outsourced or self-assessment) on an annual basis.
xi. Annual review of effectiveness of the AMC and/or management’s risk
management function and policies including risk metrics to address
the risk outcomes.
xii. Trustee may recommend reduction/ change in the risk level of the
schemes within the Potential Risk Class (PRC).
xiii. For assessing the effectiveness of the RMF,
a. The board of AMC should seek an annual report through an
internal management assessment process or from a third party
covering all key risks and key risk metrics both at the AMC and
scheme level.
b. The RMCs of both AMCs and Trustees shall meet at least once in
a quarter to review various risks including the risk metrics at
both AMC and scheme level.
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Master Circular for Mutual Funds as on March 31, 2024
c. The Board of AMC should have all relevant information of
appropriate committee(s) (with the mandate and membership),
CRO, CXO(s) for specific risk management, audit functions,
investor relations, investment and credit decisions, etc.
1.1.2.2 Risk Management - Role of the Management
i. The risk management role of the management can be broadly classified
into risk management roles and responsibilities of the CEO, CRO, CIO,
CXOs and the fund manager.
ii. The overall role of the management shall be as below:
a. Overseeing the risk management function.
b. Keeping the Board of AMC and Trustees informed on new or
emerging risks.
c. Putting in place a mechanism for risk reporting on quarterly basis
to the Board of AMC and trustees, covering all risks including risk
metrics, escalation of material risk related incidents, if any, and
timely and corrective actions taken in specific cases of risk
escalation. This may be carried out with an objective to address the
root cause in escalation of such risks and also to improve the
measurement and control mechanism for prevention of
reoccurrence of such risks.
d. Establishing an organization-wide risk-conscious culture.
e. Inclusion of risk management as a parameter for performance
appraisal (through KRAs or equivalent) of all the officials of the AMC
at the level of CEO and up to two levels below CEO.
f. Establishing human resource practices pertaining to hiring,
orientation and training in order to send messages to employees
regarding the organization's expected standards on integrity,
ethical behavior, competence and risk management.
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Master Circular for Mutual Funds as on March 31, 2024
1.1.2.2.1 Risk Management - Role of Chief Executive Officer (CEO)
i. The CEO shall be responsible for all the risks at both AMC and
Scheme level.
ii. The CEO shall
a. ensure that the outcomes of risk management function are
reported to him on a monthly basis
b. define specific responsibility of CIO and CXO regarding risk
management
c. define a risk appetite framework for schemes and AMC.
d. define appropriate risk metric for respective CXO, CIO, fund
manager, etc.
e. ensure adherence to the guidelines pertinent to SEBI in respect of
RMF and relevant principles thereunder including risk
identification, risk management, risk reporting (both periodic and
escalation of material incident) and corrective actions taken, if
any.
f. The CEO shall approve the corrective action on various findings
and report to the board of AMC and trustee regarding the same
and also escalate to board of AMCs and trustees, if required, any
major findings being reported.
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Master Circular for Mutual Funds as on March 31, 2024
1.1.2.2.2 Risk Management - Role of Chief Risk Officer (CRO)
i. The CRO shall be responsible for ensuring that there is an effective
governance framework and reporting framework of risk management
in line with the regulatory requirements.
ii. The risk management roles of the CRO are as under:
a. Implementation of Risk management framework across the
organization.
b. Review specific responsibility of management, including CEO,
CIO, CXOs, and Fund Managers.
c. Put in place mechanism for risk reporting at least on a quarterly
basis to the board of AMC, trustees and RMCs, covering all risks
including risk metrics, escalation of material risk related
incidents, timely and corrective actions taken, if any.
d. Independent assessment of reporting of risk to various committees
and CEO, etc.
e. Put in place mechanism for reporting to CEO - Including outcomes
for risk management function on monthly basis.
f. The reporting of risk as above is independent from the CIO and
verified by the risk team.
g. There is a DoP approved by the Board of AMC for risk management
by CRO covering the following:
1) Daily risk management
2) Daily risk reporting
3) Corrective actions at the level of Fund manager, CIO and
CEO.
h. The CRO shall inform to board of AMCs, trustee and risk
committees regarding any major findings or corrective actions
required and also update on closure or the status of various
recommendations.
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1.1.2.2.3 Risk Management - Role of Chief Investment Officer (CIO)
i. Daily management of risk and necessary reporting relating to
Investment risk of all scheme(s) such as market Risk, liquidity Risk,
credit risk etc. and other scheme specific risks (Compliance Risk,
Fraud Risk, etc.) lies on the CIO.
ii. In respect of all schemes CIO should ensure:
a. Adherence to the guidelines pertinent to SEBI in respect of RMF
and relevant principles thereunder including risk identification,
risk management, risk reporting (both periodic and escalation of
material incident) and corrective actions taken, if any.
b. Defining specific responsibility of Fund Managers
c. Adherence to risk appetite framework - maintain risk level for
schemes
iii. CIO will calculate the overall risk by taking in to account the
weighted average of (i) the risk-o-meter and (ii) the events of defaults.
Both (i) and (ii) are to be calculated in terms of a number taking into
account the risko-meter and events of defaults or early mortality of
investments which may inter alia include credit default, change in
yield, change in NAV, external shock or unusual redemptions, etc. to
quantify the overall risk.
iv. The CIO shall escalate the corrective actions taken, if any, to the CEO
and the CRO.
1.1.2.2.4 Risk Management - Role of other CXOs
i. The CXOs shall be responsible for the governance of the respective risk
types.
ii. In respect of respective risk type, CXO should ensure:
a. Adherence to the guidelines pertinent to SEBI in respect of RMF and
relevant principles thereunder including risk identification, risk
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management, risk reporting (both periodic and escalation of material
incident) and corrective actions taken.
b. Defining specific responsibility regarding risk management of key
personnel reporting to them.
c. Maintaining risk level as per the risk metric.
iii. The CXOs shall take immediate corrective action for non-compliance or
major finding post approval from CEO as per DoP and shall report to
CRO regarding the risk reports.
iv. The CXO shall escalate to CEO and the CRO any major findings reported
by respective risk management function.
1.1.2.2.5 Risk Management - Role of Fund Manager (FM)
i. The FM shall be responsible for daily management of investment risk of
managed scheme(s) such as market Risk, liquidity Risk, credit risk and
other scheme specific risks and appropriate risk reporting of any risk
related event to CIO.
ii. In respect of schemes managed by them, FMs should ensure:
a. Adherence to relevant SEBI guidelines in respect of RMF and
relevant principles thereunder including risk identification, risk
management, reporting and corrective actions etc.
b. Adherence to risk appetite framework to maintain appropriate risk
level for schemes.
c. If there is any need of change in the risk appetite of the scheme
within the PRC of that particular scheme, the same is to be with the
approval of the CIO.
iii. The FM shall take corrective action, if required, as per the approved DoP
and escalate major risk related event to CIO.
1.2 Identification of Risks
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For the identification of risks, the RMF should address the following key
questions:
1.2.1 What are the different types of risks faced by the mutual fund/AMC
and its mutual fund schemes?
1.2.2 What is the probability of the happening of each of the above risks,
considering the control environment and automation within the AMC,
external factors or dependencies such as market infrastructure,
outsourced activities, etc. and available historical risk data?
1.2.3 What is the likely impact of key risk events, in terms of financial loss,
reputation loss, impact on investors/ unit holders and regulatory
action?
1.2.4 What are the emerging or new risks due to new business lines, new
products, statutory changes, changes in external environment or market
infrastructure, etc.?
1.2.5 The mandatory and recommendatory elements for identification of risks,
are outlined below:
1.2.5.1 Mandatory Elements
i. Each AMC shall identify on an ongoing basis, the specific risks to be
covered within the RMF, based on the nature, scale and complexity of
its business, the risk profiles and strategies of the funds it manages,
and the impact of different risks on its mutual funds business.
ii. Documented risk profile for each of the key functions incorporating
events that might create, enhance, prevent, degrade, accelerate or delay
the achievement of objectives, sources of risks and areas impacted due
to the event.
1.2.5.2 Recommendatory Elements
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i. Formalized risk appetite statement (incorporating themes such as
investment, sales, and operational losses as a result of in-house or
outsourced activities) both at the scheme and AMC level.
1.3 Measurement and Management of Risks
1.3.1 AMC should have approved internal policy for measurement of various
scheme specific risks (such as governance risk, investment risk,
liquidity risk, credit risk) through appropriate risk metrics.
1.3.1.1 It should reflect the Risk-O-Meter and the PRC of the scheme
vis-a-vis the scheme benchmark.
1.3.1.2 The policy should have the defined guidelines regarding the
appropriate risk metric with role clarity depending on the
responsibility of each person.
1.3.2 AMCs should have approved internal policy for measurement of
organization wide risk like operational risk, technology risk, legal risk,
talent risk, outsourcing risk, etc.
1.3.3 Having identified and documented the applicable risks, the risk
management function should develop process/tools to measure and
manage those risks. For this purpose, the following needs to be
considered for each risk category:
i. Ascertaining the measurement criteria for each risk category
(qualitative and quantitative criteria).
ii. Documentation of measurement tool(s) for each risk category, i.e.
Risk and Control Self-Assessment (RCSA), stress testing, scenario
analysis, etc.
iii. Determination of required frequency of monitoring.
iv. Developing a process for escalation.
v. Determination and documentation of remedial or mitigating actions.
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Wherever appropriate, it is recommended that AMCs consider
documenting risk limits based on their risk appetite.
1.3.4 The mandatory and recommendatory elements for measurement and
management of risks, are outlined below:
1.3.4.1 Mandatory Elements
i. The AMCs shall have established structure and responsibility across
the three lines of defense:
a. Business Operations.
b. Oversight functions like Risk Management and Compliance.
c. Internal Audit.
ii. Internal Audit and Oversight functions like Risk Management and
Compliance shall ensure the following:
a. There should be a dedicated internal auditor at the AMC level for
audit of the RMF of the AMC.
However, the same may be carried out by independent auditor
appointed by trustees, provided that the personnel undertaking the
said audit have relevant expertise in the domain of risk management
necessary for both the AMC level and the scheme level audit. In such
scenario, care must be taken that no conflict arises w.r.t submission
of independent audit reports by the auditor to the audit committee
and the Board of both the AMC and the trustees for the conduct of
their respective audit functions.
b. The internal auditor should audit both the scheme level and AMC
level risks.
c. The internal auditor should audit compliance with the internal
policies of the AMC on risk management as well as the applicable
rules and regulations mandated by SEBI on risk management.
d. For the processes being audited by the internal auditor, a
noncompliance rate shall be computed. The non-compliance rate
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may be computed based on sampling out of the total number of
processes being audited.
e. The internal auditor should submit the internal audit report to the
audit committee of the AMC and the Board of AMC representing the
noncompliance rate as audited in the books of accounts of the AMC
and its schemes. While submitting to the audit committee, the
noncompliance level shall be converted to an overall internal audit
score represented in the form of a number providing a quantitative
representation of the internal audit report. This number shall be
generated considering all key risk types.
f. Further, this number shall be compared in subsequent internal
audits to analyze the improvement in minimizing the non-
compliance level at the AMC. This shall reflect the degree of
rectification of noncompliance as done at the level of AMC. Therefore,
this number may be represented in the form of a “Rectification Index”
in the internal audit report.
iii. There shall be an RCSA process with defined frequency.
iv. There shall be an established mechanism for reporting to the CRO,
management and the Board of AMC and Trustees.
v. Periodic review of policy frameworks shall be done to ensure that the
said policies are up-to-date responding to new strategic priorities and
risks and the monitoring mechanisms are working to ensure
compliance with the updated policies.
vi. Mechanisms are established for management to make use of early
warning indicators to identify, evaluate, and respond to changes
quickly.
vii. Periodic stress tests are performed on critical risks and the impact of
risks are assessed based on acceptable tolerances.
viii. Based on the management of the risk level as defined by respective
risk metric of CXOs, necessary corrective actions must be taken to
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address any short comings. The output of the risk level shall be an
indicator of the performance of the respective CXOs and shall form
one of the inputs for their performance review.
1.3.4.2 Recommendatory Elements
i. There should be independent testing and verification of efficacy of
corporate governance standards and business line compliances,
validation of the RMF and assurance over the risk management
processes by external agency.
1.4 Reporting of Risks and Related Information
1.4.1 Adequate risk reporting is an integral part of the risk management
framework and it is important that those responsible for different
functions within the AMC shall ensure that they exercise sufficient
oversight to report on their risk profile and risk management actions.
1.4.2 The mandatory elements for reporting of risk and related information,
are outlined below:
1.4.2.1 Mandatory Elements
i. In order to ensure that the risk management function obtains the
necessary information from other departments as well as from
outsourcing partners (wherever applicable), a structured bottom-up
reporting process should be designed and the risk management function
should perform meaningful and independent analysis of such
information.
ii. The outcomes of the risk management function should mandatorily be
reported to the management at least once on a monthly basis and to the
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Board of AMC and Trustees on a quarterly basis. Trustees may forward
the results and steps taken to mitigate the risk along with their
comments to SEBI in the half-yearly trustee reports.
iii. Risk reports should consider the following:
a. It should be holistic (considering all risk categories identified), timely
and accurate.
b. It should incorporate the risk metrics comprising the risk profile of
all schemes and the risk profile consolidated across the departments
and the AMC level. It should also incorporate the rectification index
as calculated in the internal audit report for both the AMC and the
scheme level.
c. It should contain all necessary information to assess whether
appropriate measures have been taken by the management to
control and mitigate all relevant risks.
d. It should provide information on existing as well as new risks
including a statement on severity (e.g. low, medium, high) and its
evolution over time, and the measures to mitigate existing risks
where possible.
iv. The Risk management function shall ensure that any significant
emerging risk issues that are not adequately addressed by the
responsible functional department are promptly reported to the
management or the risk management team and to the Board of AMC.
2.0 Managing Key Risks
a. SEBI (Mutual Funds) Regulations, 1996 vide various circulars has
prescribed certain norms which would cover many aspects of risk
management such as, stress testing, internal credit risk assessment,
cyber security and system audit, liquidity buffer, creation of segregated
portfolio, investment restrictions, investment due diligence, etc. that are
to be adhered to by the mutual funds. The following sections incorporate
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comprehensive guidelines for management of various key risks by the
AMCs, elements of which may overlap with the above mentioned norms
and in such cases, the detailed norms specified in the relevant circular
must be strictly followed.
b. These key risks may be divided in to two broad categories.
i. Scheme specific risks
ii. AMC specific risks
c. The scheme specific risks are the risks majorly associated with the core
activities of investment and portfolio management. The AMC specific risks
are the risks associated with the functioning of the mutual fund business
by the AMC.
d. The scheme specific risks may be divided in to the following categories.
i. Investment risk
ii. Credit risk
iii. Liquidity risk and
iv. Governance risk
The AMC specific risks may be divided in to the following categories.
i. Operational Risk
ii. Technology, Information Security and Cyber Risk
iii. Reputation and Conduct Risks
iv. Outsourcing Risk
v. Sales and Distribution Risk
vi. Financial Reporting Risk
vii. Legal & Tax Risks and
viii. Talent Risk
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The compliance risk shall be applicable for both investment management
activity (scheme specific risk) and business activity of AMC (AMC specific risk).
The following sections incorporate comprehensive guidelines for
management of the key risks
2.1 Investment Risk
2.1.1 Investment risk can be defined as the probability or likelihood of
occurrence of losses relative to the expected return on any particular
investment.
2.1.2 Investment risk management should be based on reasonable investor
expectations about the risks that the mutual fund will take in order to
achieve its investment objectives, which can be thought of as the fund’s
risk profile or risk appetite. A fund's risk profile should be stated in its
communications with investors including in its Scheme Information
Document (SID) and marketing materials, which state the fund's
investment strategies and risk factors. The SID shall also incorporate
any other elements of risk appetite as may be stipulated by AMCs and
Trustees.
2.1.3 Investment risk management should involve both controlling risk by
limiting certain risk exposures and the size & probability of losses, as
well as using a number of active investment techniques that seek to
align the fund’s investments with its investment objectives, its risk
profile, and the portfolio manager's investment convictions.
2.1.4 Risk control should focus on placing limits on a fund’s investment
positions and concentrations. These limits should include the
investment restrictions mentioned in the fund’s SID as well as any
limits and restrictions imposed by the risk management function
within the regulatory limits. Risk control activities may include
reviewing portfolio concentrations and adjusting portfolio holdings
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accordingly; evaluating and reviewing new and/or complex
instruments, such as derivatives, and imposing conditions and limits
on their use; monitoring and limiting credit exposure from issuers of
portfolio securities and from counterparties; and ensuring that a fund
is managed in compliance with the SID and the regulatory investment
restrictions.
2.1.5 The mandatory and recommendatory elements for managing
investment risk, are outlined below:
2.1.5.1 Mandatory Elements
i. The AMC should have the following policies / process:
a. An investment universe to be updated periodically and responsibility
for the same should be clearly defined.
b. An investment policy for investment in various asset classes/
securities as permitted by SEBI from time to time and policy on
hedging of interest rate risk, foreign exchange risk, price risk, etc.
c. Policy on participation in IPOs/FPOs including policy on participation
in IPOs/FPOs of associate/ group company(ies).
d. Trade execution policy.
e. Policy on trade allocation and Inter-Scheme Transfers (ISTs).
f. Investment valuation policy.
g. Broker empanelment policy.
h. Trustee should review the portfolio at frequency as required by SEBI
Regulations.
ii. The AMC must ensure that investment risk is adequately factored in by:
a. Setting up an Investment committee which has close coordination
with related departments, and monitors market risk.
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b. Setting limits for issuer/ sector exposure vis-a-vis benchmark (in line
with MF Regulations and internal limits).
c. Setting limits for investment in debt and money market instruments
of various credit qualities.
d. Having all relevant documents and disclosures (that are required for
listing) with regard to the debt and money market instruments before
finalizing the deal for investment into the respective instruments so
that mutual funds as investors into such instruments are not at an
informational disadvantage vis-à-vis other market participants or
lenders.
e. Review of passive breaches and corrective actions.
iii. Investment Committee shall be responsible for the following:
a. Review of Investment Policy at a pre-defined frequency.
b. Reviewing the Investment plan or policy to meet the investment
objectives documented in the SID.
c. Any other responsibility as assigned by the management.
iv. The AMC should conduct the following to manage and monitor investment
risks (at scheme level or aggregate portfolio level, whichever is applicable):
a. Redemption analysis.
b. Investor concentration analysis. Both single investor and/or group
concentration.
c. Monitor investment risk at a defined frequency.
d. Managing and monitoring investment restrictions for overseas
investment, if any.
e. Monitor investment risk at individual portfolio level and also
concentration risk and other relevant risks at aggregate level in a
structured manner.
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f. Stress testing for investment risk.
g. Consider investment risk while launching new products.
h. Ensure that Trade Allocation policy is adhered to along with adequate
information to identify those allocations that are out of line with the
normal percentage allocation across funds.
i. Quantitative risk analysis using metrics such as VaR, Sharpe Ratio,
Treynor Ratio, Information Ratio, etc.
j. Prepare and maintain management reports on topics discussed and
conclusions made at investment committee meetings (including
interest rate prospects, risk-taking and hedging policy, etc.)
k. Distributor concentration analysis.
v. Further, it should be ensured that:
a. Actual risk measures and reports are adapted to the risk
characteristics of the individual asset classes, and capture
dependencies between risks (e.g. market risk and liquidity risk).
b. Actual risk measures address risks in normal and stressed market
conditions.
c. Actual risk measures cover all risk types in the portfolio, including
counterparty credit and liquidity risks (assets, investors).
d. Appropriate tools are adopted for measurement of market and credit
risks on different types of investment products.
e. Adequate processes and controls are in place to ensure that risk
reporting is complete, accurate, timely and meets the needs of various
stakeholders.
f. Adequate documentation of calculations, analyses and decisions is
maintained.
g. Performance and positions with regard to objectives of schemes are
reviewed.
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h. Performance vis-à-vis scheme benchmarks and performance of peer
group(s) is reviewed.
i. Exceptions are defined and their monitoring is conducted.
j. Exceptions in style drift and portfolio concentration are reviewed.
k. In cases of inter scheme transfer, the scheme (s) buying the securities
must conduct an enhanced level of due diligence.
2.1.5.2 Recommendatory Elements
The AMCs may consider the following practices:
a. Regular analysis on bulk trades and block deals of large values.
b. Formulating a plan for assessing and monitoring risks of investing in
multiple markets.
c. Setting limits for minimum number of stocks/securities, cash (net of
derivatives), stocks/securities vis-a-vis benchmark and Beta range.
2.2 Credit Risk
2.2.1 The credit risk relevant to mutual funds is the issuer credit risk
attributable to individual securities and the negative outlook on specific
sectors or industries and its consequent impact on the credit
exposures.
2.2.2 The mandatory and recommendatory elements for managing credit
risk, are outlined below:
2.2.2.1 Mandatory Elements
i. To manage credit risk, the AMC must have a robust framework
comprising:
a. An approved and documented Credit Risk Management policy.
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b. Analysis and evaluation of ratings received from multiple credit
rating agencies for securities across portfolios, at all points of time
i.e. before investing in such securities/instruments or products
and also on continuous basis.
c. Formal procedure for AMCs to carry out their own credit
assessment of assets and reduce reliance on credit rating
agencies. For this purpose, all AMCs shall have an appropriate
policy and system in place to conduct an in-house credit risk
assessment or due diligence of debt and money market
instruments or products at all points of time i.e. before investing
in such instruments or products and also on continuous basis.
d. Adequate provisions to generate early warning signals (including
yield based alerts) on deterioration of credit profile of the
issuer. Based on the alerts generated, the AMCs shall take
appropriate measures and report the same to trustees.
e. Concentration limits (counterparty wise, group wise, industry or
sector wise, geography wise) monitoring.
f. Stress testing for credit risk - applying shocks based on rating
downgrades, negative outlook on specific industries and the
consequent impact on credit exposures.
2.2.2.2 Recommendatory Elements
i. Over a period of time and having regard to the size, scale and complexity
of the fixed income portfolio, AMCs may consider developing sector level
standards for implementing internal credit assessment based models to
measure credit risk in line with the prevailing global best practices.
2.3 Liquidity Risk
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2.3.1 Thinly traded securities carry the danger of not being easily saleable
at or near their real values. Further, all securities run the risk of not
being saleable in tight market conditions at or near their real values.
Measuring and monitoring liquidity risk is an important aspect of
risk management.
2.3.2 The mandatory and recommendatory elements for managing liquidity
risk, are outlined below:
2.3.2.1 Mandatory Elements
i. Liquidity Risk has to be modelled at the level of each scheme (except
schemes that do not have continuous liquidity requirements like close
ended and interval schemes) and should display alerts pertaining to asset
liability mis-match on monthly basis and in line with any other relevant
guidelines as specified by SEBI in this regard from time to time. The
aforesaid model, should be based on the following key principles:
a. The secondary market liquidity of assets of the scheme, shall be
incorporated into the liquidity risk management model.
b. For debt and money market instruments, the total asset value shall
be classified in various maturity buckets for e.g. assets maturing in
days 0-30, 30-60, 60-90 and so on. Debt and money market
instruments that have a demonstrable secondary market liquidity
shall be classified into a lesser maturity bucket depending upon the
reasonable time in which particular value of the said instrument can
be expected to be offloaded. In the absence of demonstrable secondary
market liquidity, the instruments shall be strictly classified based only
on the maturity dates.
c. Liabilities of scheme shall be modelled in similar buckets based on
back testing of historical data for subscription and redemption
amounts in the respective schemes. The back testing period should
be sufficiently long (say for last 5 years) to include spikes in
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redemptions because of market wide events. Organization specific
factors/risks that may have a bearing on redemptions should also be
factored into the model.
d. Liquidation of assets at near the value ascribed to each asset in the
scheme portfolio in specified period of time, shall be one of the factors
to be considered in liquidity risk management.
e. The model should incorporate forward looking asset liability mis-
match for the scheme at different periods of time at least up to next
30 days.
ii. The AMC should have policy in place on management of the mis-match in
putative liabilities vis-à-vis the liquid assets of each scheme. It should
follow the following principles:
a. There should be an upper limit or threshold on the mis-match in
putative liabilities vis-à-vis the liquid assets of each scheme. The
upper limit shall be customized depending on size or type of the
scheme.
b. There should be a system based mechanism to generate alerts as per
point(a) above.
c. The policy shall include monthly reporting to Board of AMC and
Trustees and on quarterly basis to SEBI in a standard format (to be
prescribed by AMFI in consultation with SEBI).
d. The report shall include the details of alerts generated by the system
regarding asset liability mis-match in excess of the defined threshold
and subsequent actions taken to address the same. The scheme wise
mis-match limits shall be put in the system and all alerts shall be
managed effectively.
iii. Stress testing should be mandatorily conducted for all schemes (excluding
close ended and interval schemes) appropriately atleast on monthly basis.
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The results of the stress testing may be placed before trustees in every
quarter. Trustees may forward the results along with their comments and
steps taken, if any, to SEBI in the half-yearly trustee reports. With respect
to stress testing of open ended debt schemes, norms have been provided
under Paragraph 4.2 of the Master Circular and the same must be adhered
to and any future guidelines issued by SEBI in this regard may suitably be
followed.
iv. The policies and procedures implemented by the AMC should include the
following:
a. Measures and limits for monitoring liquidity risk - cash flow approaches,
ratios/tools for monitoring market liquidity (including equity market),
etc.
b. Measures for managing intra-day liquidity and controls around the
same.
c. Stress testing policy to align the stress testing requirements mandated
by SEBI for mutual funds in India specifically incorporating:
1. Risk parameters used and methodology adopted to conduct the
stress tests.
2. Procedure to deal with stress events and early warning signals.
d. Overview of funding plans/strategy during normal and stressed events,
including contingency funding plan.
v. Systematic classification and evaluation of liquidity risks should be
initiated by performing following activities:
a. Evaluation and disclosure of liquidity risk associated with
schemes/products in the SID.
b. Controls around preparation and accuracy of cash flows.
c. Management of collateral and margins for execution and settlement of
derivatives, securities and money-market instruments.
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2.3.2.2 Recommendatory Elements
i. AMCs may consider introducing the following measures:
a. Judicious use of intraday / overnight borrowing lines to address
liquidity / settlement risks faced by the mutual funds. Uncommitted
lines of credit available with the AMC may not be useful in real time of
stress and therefore while assessing liquidity risk of AMC, these lines
should be treated differently than committed lines.
b. Internal committee with the mandate to review and provide direction
on liquidity risk management.
c. Identifying and reporting appropriate and relevant information to the
management, for decision making.
d. Reporting to the Board of AMC on any other material outcomes and
events.
2.4 Governance Risk
2.4.1 Governance risk is a risk that the persons who are in position of power
or fiduciary responsibility towards the holders of security (equity/debt),
do not act in the best interest of such stakeholders, rather compromise
the interest of such stake holders for their personal gain.
2.4.2 The act of people with power may significantly impact the equity market
price of the shares along with having a direct impact on debt issuances.
2.4.2.1 Mandatory Elements
a. The AMC shall have an approved policy to deal with governance risk of
the investee companies.
b. The policy shall incorporate measures such as assessment of whether
there are enough system checks and balances in the governance
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structure of the issuer to prevent such wrong doing and also assessment
of track record or history of the issuer to monitor the trend of their past
behavior.
c. The policy shall also include guidelines on how it identifies and monitors
any conflicts of interest involving members of the Board/ KMPs of the
investee company.
d. The AMC shall adhere to the “Stewardship Code” prescribed by SEBI for
mutual funds which inter alia includes continuous monitoring of the
investee companies on various matters such as operational and financial
performance, corporate governance, related party transactions,
opportunities or risks including ESG risks, etc., bearing in mind the
insider trading Regulation while seeking information from the investee
company for the purpose of monitoring etc.
2.5 Operational Risk
2.5.1 Operational risk refers to the risk of loss resulting from inadequate or
failed processes, people and systems or from external events, e.g.
internal fraud, external fraud, physical damage caused by nature or
man-made, etc.
2.5.2 As operational risk could manifest in any function or process within the
organization or at a third party service provider, it is important to have
adequate monitoring and tracking of all elements that can go wrong.
This includes fails, reconciliation differences, customer complaints,
guideline breaches, systems issues, process gaps, system bugs, etc. It is
equally important to have an escalation process as any undue delay in
reporting could magnify the loss or turn a gain into a loss.
2.5.3 The key for effective operational risk management should be to create a
process that tracks the various elements of operational risk over time,
to identify trends that could be an early warning signal, and to
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implement an exception/escalation process that ensures the problems
which are significant, large, aged or growing dealt with at increasingly
higher levels of management.
2.5.4 Paragraph 6.15 of the Master Circular has provided indicative guidelines
encompassing system audit framework. The systems and processes as
elaborated in the aforementioned paragraphs must be in place and any
future guidelines issued by SEBI in this regard may be suitably followed.
2.5.5 The mandatory elements for managing operational risk, are outlined
below:
2.5.5.1 Mandatory Elements
i. The AMC should implement the following policies:
a. Operational risk management policy, shall cover the following key
elements:
1. Purpose and scope.
2. Governance Structure - Roles and Responsibilities.
3. Identification of operational risk events.
4. Management of the operational risk events, e.g. reversal of
positions, rectifications, etc.
5. Guidelines regarding transactions with associates, group
entities, related parties or even with other stakeholders, such as
distributors, channel partners, brokers, etc.
6. Escalation and reporting.
7. Compensation of loss, if any.
8. Follow-up actions, e.g. strengthening of systems and processes,
training, etc.
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9. Communication with external stakeholders - regulators,
investors, distributors, etc.
10. Implementation of a ‘new product approval' process to ensure
that all functions have the systems, people, processes to support
a new product
11. Recording and documentation.
b. The Dealing room policy incorporating the non- usage of mobile,
restricted internet access, dedicated recorded lines, handling of
information, etc. In this regard, the detailed guidelines on this aspect
as provided in Paragraph 12.29 of the Master Circular as well as in the
part B of Fifth Schedule of SEBI (Mutual Funds) Regulations, 1996 or
any further SEBI guidelines may be referred to.
c. Roles and responsibilities are defined for the following:
1. Time stamping, application processing and confirmation,
2. Review of KYC and investor declarations as specified through
various SEBI regulations,
3. Timely and accurate credit identification (for investor
subscription) and bank reconciliations (banks/custody).
4. A system to track and report high value transactions (including
bulk redemptions) to the Investment management function.
5. Control oversight on brokerage computation and payment,
redemptions, inter-scheme switches, maturity payments in
closed ended funds, dividend payouts, tax and other statutory
payments, subscription refunds, identification of unclaimed
amounts and their deployment as per regulatory requirements,
etc.
6. Review of ‘value dated’ transactions, reversals, broker/
distributor code changes, etc.
7. Incident reporting and escalation matrix for the same.
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8. Maintaining a Chinese wall between the different businesses
earned out by the Asset Management Company (such as PMS,
AIF, Overseas Investments, Advisory, Mutual Funds, etc.)
9. Documented process to review human errors in transaction
processing to identify training needs and corrective actions to
prevent the errors in the future.
d. There is an adequate RCSA process for operational risks on a periodic
basis with a structured reporting methodology.
e. The AMC should perform the following:
1. Analyze and classify frauds into internal (within the
organization) and external (by persons outside the organization)
frauds, identify root causes and incorporate monitoring
mechanisms to address fraud scenarios.
2. Reporting of frauds and near miss incidents to the Board of AMC
and Trustees on quarterly basis.
f. Insurance cover shall be obtained for first and third party losses:
1. The mutual fund must have insurance cover against third party
losses arising from errors and omissions:
(a) Third party liabilities refer to liabilities arising out of financial
loss to investors or any other third party, incurred due to
errors and omissions of directors, officers, employees,
trustees, R&T agents, custodians etc.
(b) The level and type of cover should be recommended by the
AMC and approved by the Trustees.
2. Further, the AMC shall have insurance to cover first party losses:
(a) First party losses are those which impact the insured and
include asset based losses (due to natural or unnatural
disasters such as fire, flood, burglary, etc.) as well as financial
or data losses.
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(b) They also include losses due to the acts of employees of the
insured and computer based crimes such as hacking or virus
attacks that may impact the data of the mutual fund, etc.
(c) Key details of the same, together with claims thereunder,
shall be annually reported to the Trustees.
g. The AMC should have an integrated system (front-mid-back) to perform
the following functions:
1. Order generation
2. Position-keeping (Positions on all supported products are
updated in real time). Trades can be accounted for by an
electronic feed.
3. Pre-trade compliance checks
4. Order execution
5. Deal booking
6. Straight-through processing to allow one-time capture of trade
details.
7. System check on preset parameters and reporting of breaches
e.g. whether investments made in permitted securities or limits
on deal size, etc. have been adhered.
8. Automatic time-stamping of deals.
9. Maker-checker authorisations.
10. Exception reporting.
11. Generation of deal confirmations.
12. Monitoring of outstanding confirmations, settlements and
payments.
13. Cash management.
14. Integrated reporting across the Mutual Fund.
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Master Circular for Mutual Funds as on March 31, 2024
15. The back office system should facilitate daily fund projections to
ascertain liquidity and settlement requirements.
h. The AMC should have documented procedures for the following:
1. Trade confirmations, settlements.
2. Cash flow Management.
3. Collateral Management.
4. Corporate Actions.
5. Margin Management.
6. Security Master Creation.
7. Pricing and Valuation.
8. Corporate action tracking and accounting.
9. Oversight on Service Providers – Custodians, Fund
Administrators - SLA tracking, Parallel Valuation and
calculation of NAV. The oversight over custodians shall inter alia
include, receipt of daily position report from custodian, end of
day reconciliation of positions with custodian data and once a
week complete reconciliation of fund accounting system records
with custodian records.
i. The AMC may implement the following depending upon the scale and
complexity of business:
a. Documenting a Fraud Response Plan and reporting of near miss
incidents.
b. Developing Fraud Risk scenarios and updating with changing
business dynamics, documentation thereof being maintained in
appropriately designed and updated Fraud Risk Registers
(capturing details such as past fraud incidents).
c. Using data analytics as a key tool for identifying fraud patterns
and indicators.
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Master Circular for Mutual Funds as on March 31, 2024
d. Conducting a fraud control and reporting' training program.
2.6 Compliance Risk
2.6.1 Failure by the AMC to meet its regulatory obligations or manage changes
in legal statutory and regulatory requirements may result in
investigations, fines, financial forfeiture, or regulatory sanctions and
material loss to investors and the organization.
2.6.2 The mandatory and recommendatory elements for managing compliance
risk, are outlined below:
2.6.2.1 Mandatory Elements
i. The AMC shall establish and maintain policies as required by applicable
statutes and regulations, including policies to address the following:
a. Know Your Client (KYC), Anti-Money Laundering (AML) and Combating
the Financing of Terrorism (CFT)
b. Outsourcing
c. Customer Complaints & Investor Grievance – Should inter alia include
details of adherence to SEBI regulations with regard to investor
servicing and complaint resolution, tracking complaint resolution,
update of complaint log and forwarding of complaints and the
Management Information System (MIS) to compliance officer, complaint
resolution process being reviewed by compliance officer. The
compliance officer shall review the complaints with an objective to
catch early warning signs for fraud or any systemic issues.
d. Related Party Transactions.
e. Front running
f. Conflict of Interest.
g. Employee Trading (including issues related to Insider Trading).
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h. Code of Conducts.
i. Commission and other sales & marketing costs.
j. Commercial Bribes or Kickbacks.
k. Fraud Risk Management
l. Whistle Blowing
m. Information Security and Data Privacy
n. Gifts and Entertainment
o. Record Retention
p. Dealing Room Policy
q. All disclosure requirements (including derivative transactions, off
balance sheet items and contingent liabilities, etc.).
ii. There should be defined responsibilities for:
a. Filing of timely and accurate regulatory reports to the Regulator(s) and
Board of AMC and Trustees as prescribed by the applicable laws and
regulations.
b. Pre-use review of AMC’s marketing materials (collateral, brochures
etc.), website uploads, digital advertising and performance advertising
etc.
c. Monitoring that all investments and holdings are consistent with
disclosures made to clients and applicable restrictions.
d. Mechanism for prevention or detection of possible insider trading at the
personnel or portfolio levels.
e. Review for adequacy of disclosures made to the investors regarding
significant risks such as liquidity, counterparty and credit (quality of
investments made mainly debt based on the credit rating), investment,
and other risk areas.
f. Measures to prevent and detect trading violations involving short
selling.
g. Maintenance of all required licenses, registrations, approvals and
permissions.
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iii. AMCs should have an Anti-Money Laundering/Combating Financing of
Terrorism (AML/CFT) program with the following attributes:
a. Employees understand obligations and contents of policies to
effectively carry out their AML/CFT responsibilities.
b. Transaction Monitoring is done to identify Suspicious Activities.
c. Suspicious Transactions Reporting is done to the relevant
authorities.
d. Adequate training programs to ensure employees are constantly
aware of money laundering/financing of terrorism risks and
measures (focus on their roles and responsibilities).
iv. AMCs should have systems in place to detect and prevent securities
market violations including securities market frauds and malpractices at
their end:
a. A report containing details of the alerts generated and the
subsequent actions taken in this regard should be submitted to
trustees on a quarterly basis.
b. Trustees may forward the results along with their comments and
steps taken, if any, to SEBI in the half-yearly trustee reports.
2.6.2.2 Recommendatory Elements
i. The following policies may be incorporated by the AMCs depending on
complexity and scale of operations:
a. Political Contributions.
b. Outside business activity policy.
ii. The AML/CFT program of the AMCs may include the following depending
on the size and scale:
a. Investor awareness programs (literature or pamphlets or such) to
educate clients about the AMC’s AML/CFT obligations.
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b. Review of client risk scoring model to ensure effectiveness of the
AML/CFT program.
c. Independent or External review of AML/CFT policies to ensure
their effectiveness.
2.7 Technology, Information Security and Cyber Risk
2.7.1 Given the huge dependence on technology, any system failure could
trigger a variety of risks, e.g. operational risk, compliance risk. etc.
Technology Operations should support processing and storage of
information, such that the required information is available in a
timely, reliable, secure and resilient manner.
2.7.2 Increasing disclosure requirements on public portals by AMCs
required a focused approach towards data management. Digitalization
and online platforms have given rise to need for effectively mitigating
information security and cyber risks.
Paragraph 4.7, 4.8 & 6.15 of the Master Circular has provided indicative
guidelines encompassing cyber security and cyber resilience framework and
audit framework encompassing systems and processes for Mutual
Funds/AMCs. The systems and processes as elaborated in the
aforementioned paragraphs must be in place and any future guidelines
issued by SEBI in this regard may be suitably followed.
2.8 Reputation and Conduct Risks
2.8.1 The risk of damage to the firm's reputation that could lead to negative
publicity, costly litigation, a decline in the customer base or the exit of
key employees and therefore, directly or indirectly, financial loss or
revenue shrinkage.
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Master Circular for Mutual Funds as on March 31, 2024
2.8.2 Conduct risk is often defined as the risk to the delivery of fair customer
outcomes or to market integrity.
2.8.3 The mandatory and recommendatory elements for managing reputation
and conduct risk are outlined below:
2.8.3.1 Mandatory Elements
i. The management must look into reputation and conduct risks and
inculcate their significance in the AMC culture by,
a. Integrating reputation and conduct risk considerations into
strategy setting and business planning.
b. Establishing a crisis management policy (to minimize or
neutralize negative publicity in the event of any incident or bad
conduct by an employee).
c. Establishing monitoring tool(s) for social media grievances, etc.
ii. The Board of AMC should approve and monitor the effectiveness of
implementation of an enforceable code of ethics and business conduct;
in the event of a material breach in conduct or a significant reputation
risk event, the Board of AMC should be informed.
iii. The following practices must be adopted by the AMC:
a. While designing or improving the products, the complexity of the
product and consumer behaviors must be considered.
b. Impact assessment should be undertaken for sales and
promotion expenses (i.e. evaluation of value added v/s cost
incurred) using appropriate techniques, e.g. analysis of
complaints, compliance monitoring program, data analytics,
mystery shopping, etc.
c. Preventive measures and monitoring mechanism should be
implemented to mitigate mis-selling risks.
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Master Circular for Mutual Funds as on March 31, 2024
2.8.3.2 Recommendatory Elements
i. AMCs may consider adopting:
a. Reputation risk policy.
b. Media interaction policy and procedures
c. Assessment and management of reputation via brand
management tools, data analytics, business intelligence.
d. Framework / Process to review and action any negative mention
in traditional or social media.
e. Procedures to monitor reputation risk on an ongoing basis.
ii. The management may be involved in increasing awareness about
conduct risk within the AMCs by:
a. Conducting training programs for conduct risk awareness.
b. Monitoring conduct risk indicators.
c. Incorporating conduct performance as part of the AMCs’ sales and
marketing team metrics.
2.9 Outsourcing Risk
2.9.1 Inadequate management of outsourced processes lead to errors, frauds,
Inefficiencies, poor quality investor services, breach of fiduciary duties
data pilferages and long term impact on reputation and contractual
obligations.
2.9.2 Asset management companies often rely on third parties including
Custodians, Fund Administrators, R&T agents, and various types of
outsourced service providers who perform operational, accounting,
recordkeeping and other types of services. In utilizing the services of
such third parties, it is important from a risk management perspective
to keep in mind that asset managers have ongoing fiduciary obligations
to their customers even though they have delegated certain of their roles
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Master Circular for Mutual Funds as on March 31, 2024
to others. It is therefore critical to perform careful reviews of the
capabilities of third parties at inception of relationships and on an
ongoing basis, and to review information provided by third parties for
completeness, balance and accuracy in order to be able to determine
whether such third parties meet the risk management, credit,
operational, legal and other relevant standards of the reviewing company
with respect to the function they are performing.
2.9.3 The mandatory and recommendatory elements for managing
Outsourcing risk, are outlined below:
2.9.3.1 Mandatory Elements
i. Risk management with respect to any outsourced activity should be
done in the manner as if the activities were being done in-house.
ii. There shall be a dedicated person in the AMC who would be responsible
for the outsourced activities of each outsourced vendor.
iii. The AMC should have a Board approved Outsourcing Policy
incorporating the following aspects (as well as other applicable
regulatory requirements):
a. Listing of core activities which cannot be outsourced.
b. Procedure for outsourcing, including risk and materiality
assessment.
c. Monitoring and control of outsourced activities (as part of
outsourcing risk management program).
d. Information security and confidentiality (including data privacy/
protection standards).
e. Criteria for selection and minimum qualification.
f. Minimum quality standards.
g. Tenure of agreement.
h. Responsibility for outsourced functions.
i. Acceptable level of deviations.
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Master Circular for Mutual Funds as on March 31, 2024
j. Periodic review of service levels and pricing.
k. Restriction on sub-delegation or sub-contracting.
l. Right for inspection and audit.
m. Approval authorities.
n. Service level agreement.
o. Archival and retrieval of documents/data.
p. Insurance requirements.
q. Incident reporting and escalation matrix.
iv. Before outsourcing any activity, the AMC should ensure the following is
in place:
a. Outsourcing agreements with service provider are legal and binding
as per the law.
b. Due diligence (including AML/CFT, if applicable) is conducted on the
service provider, where the outsourced activity is material, which may
include the following considerations:
1. Availability of qualified and experienced service providers to
perform the service on an ongoing basis
2. Arrangements for structured review of the capability and
experience of service providers
3. Evaluation of relevant personnel for critical functions, to evaluate
their specific competencies and execution capabilities
4. A disaster recovery and business continuity plan exist with
regard to the contracted services and products, and that the
adequacy and effectiveness of the same is maintained and tested
periodically by the service provider.
c. Analysis of the benefits and risks of outsourcing the proposed activity
as well as the service provider risk, and determination of the cost
implications for establishing the outsourcing arrangement.
v. After outsourcing any activity, the AMC shall ensure:
a. Outsourcing vendors’ process/people/systems are reviewed.
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Master Circular for Mutual Funds as on March 31, 2024
b. A periodic internal review is done on the functioning of outsourced
activities (like Fund Accounting and R&T agent functions) at least
annually.
c. An effective structured tool (IT / manual) is used to
review/benchmark the performance of the third party service
providers (Fund Administrators / Custodians / R&T agents) vis-a-vis
the SLA.
d. The result of the review documented and risks emanating from them
are highlighted and remediation plans are monitored on an ongoing
basis.
e. Communication of its error tolerance, code of conduct and objective
to its third party service providers (Fund Administrators / Custodians
/ R&T agents).
f. The service provider should test business continuity and contingency
plan on a periodic basis to ensure adequacy and effectiveness’.
vi. The Mutual Fund should establish reconciliation procedures with regard
to periodic reconciliation between fund accounting system, R&T system
and bank account and conduct a periodic audit of all investor-related
activities, carried out both by the Mutual Fund and the R&T agent, to
ensure that all allotments, redemptions, income distributions and
commission distributions have been accurate and timely.
vii. The Mutual Fund should ensure that the fund accounting systems used
(inhouse or by the fund accountant to whom this activity has been
outsourced) facilitate:
a. Validation of NAV calculations.
b. Automated and manual price feeds.
c. Identification of missing prices.
d. Flagging of price variances beyond pre-established tolerance levels.
2.9.3.2 Recommendatory Elements
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Master Circular for Mutual Funds as on March 31, 2024
i. To enhance protection over outsourcing risk, AMCs may include the
following as part of their evaluation / monitoring program:
a. Consider fraud vulnerabilities in the outsourced process, including:
1. Detailed periodic fraud risk assessment program
2. Fraud response plan
3. Fraud risk register
4. Reporting to the AMC’s Board
b. Maintain an exit strategy including a pool of comparable service
providers, in the event that a contracted service provider is unable to
perform or in the event of a critical fraud.
2.10 Sales and Distribution Risk
2.10.1 As most AMCs outsource or use other channels for distributing
products, such as banks, IAs, brokers, NBFCs, Distributors, etc., there
is a need of monitoring risks associated with managing distribution
channels and processes, commission pay-outs, brokerage
disbursements, sales expenses, etc.
2.10.2 The mandatory and recommendatory elements for managing sales and
distribution risk, are outlined below:
2.10.2.1 Mandatory Elements
i. The KRA/performance appraisal at the relevant CXO level must
capture the performance in managing the risk of mis-selling. The risk
of mis-selling may incorporate the components like the number of mis-
sellings, outcomes in the inspection report, analysis of the portfolio of
investors, analysis based on assessment of appropriateness to the
investors, etc. As an example, a parameter to gauge mis-selling may be
the analysis of whether growth in the AUM of a scheme is on account
of performance or mainly due to higher commission paid to distributor.
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Master Circular for Mutual Funds as on March 31, 2024
ii. The AMC shall also be responsible for the mis-selling done by the
persons associated with selling of mutual funds including distributors.
The performance disclosure to investors, if any, by the distributors
should be true and fair. It should not be misleading to the investor by
representing any selective time period representing the favorable
return.
iii. Detailed analysis should be done at the AMC level to verify mis-sellings,
if any.
iv. All the sales staff and distributers must be NISM certified with the
required qualifications prescribed by SEBI/AMFI.
v. The AMC must implement the following procedures relating to
distributor commissions:
a. Analytical tools/ audit procedures used to review trends/errors
in brokerage/ commission disbursements.
b. An approved methodology for determining commission
structures applicable to distributors / products, together with
an authorization matrix for approving deviations and reporting
cost-benefit outcome.
c. Ensuring that commissions and other payments made to
distributors adhere to AMFI and regulatory requirements.
vi. Conducting regular performance reviews for distributors.
vii. Conducting enhanced due diligence of distributors where appropriate
(suitable policy to be incorporated)
2.10.2.2 Recommendatory Elements
i. Distribution risks can be further monitored by:
a. Monitoring marketing, sales and promotional expenses which includes
the nature of expenses and approval matrix for the expenses.
b. Monitoring and reporting the cost-benefit outcome of the marketing,
marketing, sales and promotional expenses
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c. Undertaking mystery shopping.
d. Claw back provisions in the commission structures to provide adequate
protection from continuous services to the investors.
2.11 Financial Reporting Risk
2.11.1 Absence of internal control over financial reporting with regard to the
mutual fund schemes, may pose the following risks:
i. Improper maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of assets
ii. Absence of reasonable assurance that transactions are recorded as
necessary to permit calculation of NAV and preparation of financial
statements in accordance with generally accepted accounting principles,
and that receipts and expenditures are being made only in accordance
with authorizations of the management and the Board
iii. Failure to prevent or timely detect unauthorized acquisition, use, or
disposition of assets that could have a material effect on the NAV and/or
financial statements.
2.11.2 The mandatory elements for managing financial reporting risk, are
outlined below:
2.11.2.1 Mandatory Elements
i. The AMC should have detailed accounting policies and procedures for
Mutual Fund accounting.
ii. Adequate segregation of duties must be created within the Finance (or
relevant) function for Mutual Fund accounting.
iii. There should be documentation and regular testing of internal controls
over financial reporting of Mutual Fund schemes.
2.12 Legal & Tax Risks
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Master Circular for Mutual Funds as on March 31, 2024
2.12.1 Legal & Tax risk is the risk of loss to an institution which is primarily
caused by:
i. A defective transaction.
ii. A claim (including a defense to a claim or a counterclaim) being made or
some other event occurring which results in a liability for the institution
or other loss (for example, as a result of the termination of a contract).
iii. Failing to take appropriate measures to protect assets (for example,
intellectual property) owned by the institution.
iv. Change in law
v. Misinterpretation of statutes and regulations.
vi. Failure to collect or pay appropriate taxes, or submit required returns or
information.
2.12.2 The mandatory elements for managing legal and tax risk, are outlined
below:
2.12.2.1 Mandatory Elements
i. The AMC should have documented processes and defined
responsibilities for:
a. Calculation and deposit statutory levies applicable to Mutual Funds.
b. Acceptance of applications from permitted jurisdictions.
c. Monitoring of risks emanating from tax related aspects and their
redressal.
d. Implementation of new and amended statutory and regulatory
requirements.
ii. To mitigate legal risks, the AMC should have documented processes and
defined responsibilities for:
a. Review of material agreements.
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b. Authorized personnel for execution and registration of legal
agreements and documents.
c. Centralized register of all legal agreements
d. Archival of physical and electronic versions of all legal agreements
and documents.
2.13 Talent Risk
2.13.1 Talent risk is the risk of not having the right people in place at the right
time to drive current and future business growth.
2.13.2 The mandatory and recommendatory elements for managing talent
risk, are outlined below:
2.13.2.1 Mandatory Elements
ii. With respect to talent risk, there should be proper succession planning
for identified key positions. At no point of time the AMC is deprived of
the services of any Key Managerial Person.
iii. The AMC should have adequately documented policies and procedures
for:
a. Recruiting staff with appropriate experience, skill levels, and degree
of expertise to undertake specialized business operations., in
particular, those relating to risk management
b. Employing screening procedures, including background checks, for
job applicants, particularly for key positions.
c. Creation of policies for recruiting, retaining and remunerating staff,
especially for key personnel.
d. Evaluation of the candidate's capability and experience to manage
the risks associated with the concerned role is should be a key
element of the recruitment process.
e. Adequate back-ups for key people are present.
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Master Circular for Mutual Funds as on March 31, 2024
2.13.2.2 Recommendatory Elements
i. AMCs may implement a remuneration policy that prevents excessive risk
taking and also ensures retention of good talent.
ii. A Remuneration Committee, comprising mainly of non-executive
directors may be established to review and recommend the policy
relating to the remuneration of key management personnel, including
the CEO, Fund Managers, etc.
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ANNEXURE 2: INVESTMENT VALUATION NORMS FOR MUTUAL FUNDS648
All mutual funds shall provide transaction details of various types of debt securities like NCDs, Mibor
linked floaters and CPs on daily basis in the format below to the agency recommended by AMFI.
Submission of data would help in daily matrix generation, would improve uniformity and accuracy of
valuation in the mutual funds industry.
Staggered
Staggered Put/Call Put/Call Interest Volume YTM
Date Of Security Security Redemption Clean
Coupon Redemption/Maturity Rating Option Option Payment (in Rs. (Annualis
Transaction Name Type /Maturity Price
Dates Dates Values Dates Crs) ed)
Values
NCD
Mibor
Linked
CP
648 SEBI Cir No - MFD/CIR.No 23 / 066 /2003 dated March 7, 2003
ANNEXURE 3: LIST OF MILLION PLUS CITIES
List of Million Plus Cities for investments by REMF649
Census of India 2001 (Provisional)
Civic State/Union
S.No. Name of City Status Territory
1 2 3 4
1 Greater Mumbai M.Corp. Maharashtra
Delhi Municipal Corporation
2 (Urban) M.Corp. Delhi
3 Kolkata M.Corp. West Bengal
4 Bangalore M.Corp. Karnataka
5 Chennai M.Corp. Tamil Nadu
6 Ahmedabad M.Corp. Gujarat
7 Hyderabad M.Corp. Andhra Pradesh
8 Pune M.Corp. Maharashtra
9 Kanpur M.Corp. Uttar Pradesh
10 Surat M.Corp. Gujarat
11 Jaipur M.Corp Rajasthan
12 Lucknow M.Corp. Uttar Pradesh
13 Nagpur M.Corp. Maharashtra
14 Indore M.Corp. Madhya Pradesh
15 Bhopal M.Corp. Madhya Pradesh
16 Ludhiana M.Corp. Punjab
17 Patna M.Corp Bihar
18 Vadodara M.Corp. Gujarat
19 Thane M.Corp. Maharashtra
20 Agra M.Corp. Uttar Pradesh
21 Kalyan-Dombivli M.Corp. Maharashtra
22 Varanasi M.Corp. Uttar Pradesh
23 Nashik M.Corp. Maharashtra
24 Meerut M.Corp. Uttar Pradesh
25 Faridabad M.Corp. Haryana
26 Haora M.Corp. West Bengal
27 Pimprichinchwad M.Corp. Maharashtra
649 SEBI/IMD/CIR No.4/124477/08 dated May 2, 2008
Total:
Note:
M. Corp. stands for Municipal Corporation
List of Million Plus UAs Cities for investments by REMF
Urban Agglomerations/Cities having population of more
than one million in 2001
Rank Urban Agglomeration/City Civic Status
in 2001 (1,000,000 + population)
1 2 3
1 Greater Mumbai UA
2 Kolkata UA
3 Delhi UA
4 Chennai UA
5 Bangalore UA
6 Hyderabad UA
7 Ahmadabad UA
8 Pune UA
9 Surat UA
10 Kanpur UA
11 Jaipur M.Corp.
12 Lucknow UA
13 Nagpur UA
14 Patna UA
15 Indore UA
16 Vadodara UA
17 Bhopal UA
18 Coimbatore UA
19 Ludhiana M.Corp.
20 Kochi UA
21 Visakhapatnam UA
22 Agra UA
23 Varanasi UA
24 Madurai UA
25 Meerut UA
26 Nashik UA
27 Jabalpur UA
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28 Jamshedpur UA
29 Asansol UA
30 Dhanbad UA
31 Faridabad M.Corp.
32 Allahabad UA
33 Amritsar UA
34 Vijayawada UA
35 Rajkot UA
TOTAL
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ANNEXURE 4: FREQUENTLY ASKED QUESTIONS (FAQs)
1. SEBI has prepared a FAQs on mutual funds. The same is updated by
SEBI from time to time. FAQs are available on SEBI website under
“SEBI Website -> FAQs -> Mutual Funds”.
2. Link for accessing FAQs is given below:
Details Link
https://www.sebi.gov.in/sebi_data/faqfiles/apr-
FAQs for Mutual Fund
2023/1682683461615.pdf
Intermediaries
https://www.sebi.gov.in/sebi_data/faqfiles/apr-
FAQs for Mutual Fund
2023/1682683491126.pdf
Investors
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ANNEXURE 5: GAZETTE NOTIFICATION DATED MAY 31, 2010650
THE GAZETTE OF INDIA
EXTRAORDINARY
PART - III - SECTION 4
PUBLISHED BY AUTHORITY
NEW DELHI, MAY 31, 2010
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 31st May, 2010
Notification under regulation 3 of the Securities and Exchange
Board of India (Certification of Associated Persons in the Securities
Markets) Regulations, 2007.
In terms of sub-regulation (1) of regulation 3 of the Securities and
Exchange Board of India (Certification of Associated Persons in the
Securities Markets) Regulations, 2007 (the Regulations), the Board is
empowered to require, by notification, any category of associated persons
as defined in the Regulations to obtain requisite certification.
Accordingly, it is notified that with effect from June 01, 2010, the following
category of associated persons, i.e., distributors, agents or any persons
employed or engaged or to be employed or engaged in the sale and/or
distribution of mutual fund products, shall be required to have a valid
certification from the National Institute of Securities Markets (NISM) by
passing the certification examination as mentioned in the NISM
communiqué NISM/Certification/Series-V-A: MFD/2010/01 dated May
05, 2010.
650 SEBI Cir no Cir / IMD / DF / 5 / 2010 dated June 24, 2010
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Master Circular for Mutual Funds as on March 31, 2024
Provided that if the said associated person possesses a valid certificate by
passing before June 01, 2010, the AMFI Mutual Fund (Advisors) Module,
he shall be exempted from the requirement of the aforementioned NISM
certification examination.
LAD-NRO/GN/2010-11/09/6422
C. B. BHAVE
CHAIRMAN
SECURITIES AND EXCHANGE BOARD OF INDIA
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Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 6: CYBER SECURITY AND CYBER RESILIENCE
FRAMEWORK FOR MUTUAL FUNDS/ ASSET MANAGEMENT
COMPANIES (AMCs)651
1. Cyber-attacks and threats attempt to compromise the
Confidentiality, Integrity and Availability (CIA) of the computer
systems, networks and databases (Confidentiality refers to
limiting access of systems and information to authorized users,
Integrity is the assurance that the information is reliable and
accurate, and Availability refers to guarantee of reliable access to
the systems and information by authorized users). Cyber security
framework includes measures, tools and processes that are
intended to prevent cyber-attacks and improve cyber resilience.
Cyber Resilience is an organization’s ability to prepare and
respond to a cyber-attack and to continue operation during, and
recover from, a cyber-attack.
Governance
2. As part of the operational risk management framework to manage
risk to systems, networks and databases from cyber-attacks and
threats, Mutual Funds/ Asset Management Companies (AMCs)
should formulate a comprehensive cyber security and cyber
resilience policy document encompassing the framework
mentioned hereunder. The policy document should be approved
by the Board of the AMC and Trustees, and in case of deviations
from the suggested framework, reasons for such deviations
should also be provided in the policy document. The policy
document should be reviewed by the Board of AMC at least once
651 SEBI Cir No SEBI/HO/IMD/DF2/CIR/P/2019/12 dated January 10, 2019 & SEBI
Circular No. SEBI/HO/IMD/IMD-I/DOF2/P/CIR/2022/81 dated June 9, 2022
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annually with the view to strengthen and improve its cyber
security and cyber resilience framework.
3. The cyber security and cyber resilience policy should include the
following process to identify, assess, and manage cyber security
risk associated with processes, information, networks and
systems;
a. ‘Identify’ critical IT assets and risks associated with such
assets,
b. ‘Protect’ assets by deploying suitable controls, tools and
measures,
c. ‘Detect’ incidents, anomalies and attacks through
appropriate monitoring tools/processes,
d. ‘Respond’ by taking immediate steps after identification
of the incident, anomaly or attack,
e. ‘Recover’ from incident through incident management,
disaster recovery and business continuity framework.
4. The Cyber security policy should encompass the principles
prescribed by National Critical Information Infrastructure
Protection Centre (NCIIPC) of National Technical Research
Organization (NTRO), Government of India, in the report titled
’Guidelines for Protection of National Critical Information
Infrastructure’ and subsequent revisions, if any, from time to
time.
5. Mutual Funds/ AMCs should also incorporate best practices from
standards such as ISO 27001, ISO 27002, COBIT 5, etc., or their
subsequent revisions, if any, from time to time.
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6. Mutual Funds/ AMCs should designate a senior official as Chief
Information Security Officer (CISO) whose function would be to
assess, identify and reduce cyber security risks, respond to
incidents, establish appropriate standards and controls, and
direct the establishment and implementation of processes and
procedures as per the cyber security and resilience policy
approved by the Board of the AMCs.
7. The Board of the AMCs shall constitute a Technology Committee
comprising experts proficient in technology. This Technology
Committee should on a quarterly basis review the implementation
of the cyber security and cyber resilience policy approved by their
Board, and such review should include review of their current IT
and cyber security and cyber resilience capabilities, set goals for
a target level of cyber resilience, and establish a plan to improve
and strengthen cyber security and cyber resilience. The review
shall be placed before the Board of the AMCs and Trustees for
appropriate action.
8. Mutual Funds/ AMCs should establish a reporting procedure to
facilitate communication of unusual activities and events to CISO
or to the senior management in a timely manner.
9. The aforementioned committee and the senior management of the
AMCs, including the CISO, should periodically review instances of
cyber-attacks, if any, domestically and globally, and take steps to
strengthen cyber security and cyber resilience framework.
10. Mutual Funds/ AMCs should define responsibilities of its
employees, outsourced staff, and employees of vendors, members
or participants and other entities, who may have access or use
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systems / networks of the Mutual Funds/ AMCs, towards
ensuring the goal of cyber security.
Identify
11. Mutual Funds/ AMCs shall identify and classify critical assets
based on their sensitivity and criticality for business operations,
services and data management. The critical assets shall include
business critical systems, internet facing applications/ systems,
systems that contain sensitive data, sensitive personal data,
sensitive financial data, Personally Identifiable Information (PII)
data, etc. All the ancillary systems used for accessing/
communicating with critical systems either for operations or
maintenance shall also be classified as critical assets. The Board
of the AMCs and Trustees shall approve the list of critical assets.
To this end, Mutual Funds/ AMCs shall maintain up-to-date
inventory of its hardware and systems, software and information
assets (internal and external), details of its network resources,
connections to its network and data flows..
12. Mutual Funds/ AMCs should accordingly identify cyber risks
(threats and vulnerabilities) that it may face, along with the
likelihood of such threats and impact on the business and
thereby, deploy controls commensurate to the criticality.
13. Mutual Funds/ AMCs should also encourage its third-party
service providers, if any, such as RTAs, Custodians, Brokers,
Distributors, etc. to have similar standards of Information
Security.
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Protection
Access Controls
14. No person by virtue of rank or position should have any intrinsic
right to access confidential data, applications, system resources or
facilities.
15. Any access to AMC’s/ Mutual Fund’s systems, applications,
networks, databases, etc., should be for a defined purpose and for
a defined period. AMCs/MFs should grant access to IT systems,
applications, databases and networks on a need-to-use basis and
based on the principle of least privilege. Such access should be
for the period when the access is required and should be
authorized using strong authentication mechanisms.
16. Mutual Funds/ AMCs should implement strong password
controls for users’ access to systems, applications, networks and
databases. Password controls should include a change of
password upon first log-on, minimum password length and
history, password complexity as well as maximum validity period.
The user credential data should be stored using strong and latest
hashing algorithms.
17. Mutual Funds/ AMCs should ensure that records of user access
are uniquely identified and logged for audit and review purposes.
Such logs should be maintained and stored in encrypted form for
a time period not less than two (2) years.
18. Mutual Funds/ AMCs should deploy additional controls and
security measures to supervise staff with elevated system access
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entitlements (such as admin or privileged users). Such controls
and measures should inter-alia include restricting the number of
privileged users, periodic review of privileged users’ activities,
disallow privileged users from accessing systems logs in which
their activities are being captured, strong controls over remote
access by privileged users, etc.
19. Account access lock policies after failure attempts should be
implemented for all accounts.
20. Employees and outsourced staff such as employees of vendors or
service providers, who may be given authorized access to the
Mutual Fund’s/ AMC’s critical systems, networks and other
computer resources, should be subject to stringent supervision,
monitoring and access restrictions.
21. Two-factor authentication at log-in should be implemented for all
users that connect using online/ internet facility.
22. Mutual Funds/ AMCs should formulate an Internet access policy
to monitor and regulate the use of internet and internet based
services such as social media sites, cloud-based internet storage
sites, etc.
23. Proper ‘end of life’ mechanism should be adopted to deactivate
access privileges of users who are leaving the organization or
whose access privileges have been withdrawn.
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Physical Security
24. Physical access to the critical systems should be restricted to
minimum. Physical access of outsourced staff or visitors should
be properly supervised by ensuring at the minimum that
outsourced staff or visitors are accompanied at all times by
authorized employees.
25. Physical access to the critical systems should be revoked
immediately if the same is no longer required.
26. Mutual Funds/ AMCs should ensure that the perimeter of the
critical equipments rooms are physically secured and monitored
by employing physical, human and procedural controls such as
the use of security guards, CCTVs, card access systems,
mantraps, bollards, etc. where appropriate.
Network Security Management
27. Mutual Funds/ AMCs should establish baseline standards to
facilitate consistent application of security configurations to
operating systems, databases, network devices and enterprise
mobile devices within the IT environment. The Mutual Funds/
AMCs should conduct regular enforcement checks to ensure that
the baseline standards are applied uniformly.
28. Mutual Funds/ AMCs should install network security devices,
such as firewalls as well as intrusion detection and prevention
systems, to protect their IT infrastructure from security exposures
originating from internal and external sources.
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Master Circular for Mutual Funds as on March 31, 2024
29. Anti-virus software should be installed on servers and other
computer systems. Updation of anti-virus definition files and
automatic anti-virus scanning should be done on a regular basis.
Security of Data
30. Data-in motion and Data-at-rest should be in encrypted form by
using strong encryption methods such as Advanced Encryption
Standard (AES), RSA, SHA-2, etc.
31. Mutual Funds/ AMCs should implement measures to prevent
unauthorized access or copying or transmission of data /
information held in contractual or fiduciary capacity. It should be
ensured that confidentiality of information is not compromised
during the process of exchanging and transferring information
with external parties.
32. The information security policy should also cover use of devices
such as mobile phone, faxes, photocopiers, scanners, etc. that can
be used for capturing and transmission of data.
33. Mutual Funds/ AMCs should allow only authorized data storage
devices through appropriate validation processes.
Hardening of Hardware and Software
34. Only a hardened and vetted hardware / software should be
deployed by the Mutual Funds/ AMCs. During the hardening
process, Mutual Funds/ AMCs should inter-alia ensure that
default passwords are replaced with strong passwords and all
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Master Circular for Mutual Funds as on March 31, 2024
unnecessary services are removed or disabled in equipments /
software.
35. All open ports which are not in use or can potentially be used for
exploitation of data should be blocked. Other open ports should
be monitored and appropriate measures should be taken to
secure the ports.
Application Security and Testing
36. Mutual Funds/ AMCs should ensure that regression testing is
undertaken before new or modified system is implemented. The
scope of tests should cover business logic, security controls and
system performance under various stress-load scenarios and
recovery conditions.
Patch Management
37. Mutual Funds/ AMCs should establish and ensure that the patch
management procedures include the identification, categorization
and prioritization of security patches. An implementation
timeframe for each category of security patches should be
established to implement security patches in a timely manner.
38. Mutual Funds/ AMCs should perform rigorous testing of security
patches before deployment into the production environment so as
to ensure that the application of patches do not impact other
systems.
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Master Circular for Mutual Funds as on March 31, 2024
Disposal of systems and storage devices
39. Mutual Funds/ AMCs should frame suitable policy for disposals
of the storage media and systems. The data / information on such
devices and systems should be removed by using methods viz.
wiping / cleaning / overwrite, degauss and physical destruction,
as applicable.
Vulnerability Assessment and Penetration Testing (VAPT)
40. Mutual Funds/ AMCs shall carry out periodic VAPT, inter-alia,
including critical assets and infrastructure components like
servers, networking systems, security devices, load balancers,
other IT systems pertaining to the activities done as a role of
Mutual Funds/ AMCs, etc., in order to detect security
vulnerabilities in the IT environment and in-depth evaluation of
the security posture of the system through simulations of actual
attacks on its systems and networks. Mutual Funds/ AMCs shall
conduct VAPT at least once in a financial year. However, for the
Mutual Funds/ AMCs, whose systems have been identified as
“protected system” by National Critical Information Infrastructure
Protection Centre (NCIIPC) under the Information Technology (IT)
Act, 2000, VAPT shall be conducted at least twice in a financial
year. Further, all Mutual Funds/ AMCs shall engage only Indian
Computer Emergency Response Team (CERT-In) empanelled
organizations for conducting VAPT. The final report on said VAPT
shall be submitted to SEBI after approval from Technology
Committee of respective Mutual Funds/ AMCs, within 1 month of
completion of VAPT activity.
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Master Circular for Mutual Funds as on March 31, 2024
41. Any gaps or vulnerabilities detected shall be remedied on
immediate basis and compliance of closure of findings identified
during VAPT shall be submitted to SEBI within 3 months post the
submission of final VAPT report.
42. In addition, Mutual Funds/ AMCs shall perform vulnerability
scanning and conduct penetration testing prior to the
commissioning of a new system which is a critical system or part
of an existing critical system.
Monitoring and Detection
43. Mutual Funds/ AMCs should establish appropriate security
monitoring systems and processes to facilitate continuous
monitoring of security events and timely detection of
unauthorized or malicious activities, unauthorized changes,
unauthorized access and unauthorized copying or transmission
of data / information held in contractual or fiduciary capacity, by
internal and external parties. The security logs of systems,
applications and network devices should also be monitored for
anomalies.
44. Further, to ensure high resilience, high availability and timely
detection of attacks on systems and networks, Mutual Funds/
AMCs should implement suitable mechanism to monitor capacity
utilization of its critical systems and networks.
45. Suitable alerts should be generated in the event of detection of
unauthorized or abnormal system activities, transmission errors
or unusual online transactions.
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Master Circular for Mutual Funds as on March 31, 2024
Response and Recovery
46. Alerts generated from monitoring and detection systems should
be suitably investigated, including impact and forensic analysis of
such alerts, in order to determine activities that are to be
performed to prevent expansion of such incident of cyber-attack
or breach, mitigate its effect and eradicate the incident.
47. The response and recovery plan of the Mutual Funds/ AMCs
should aim at timely restoration of systems affected by incidents
of cyber-attacks or breaches. The recovery plan should be in line
with the Recovery Time Objective (RTO) and Recovery Point
Objective (RPO) as specified by SEBI for Market Infrastructure
Institutions vide SEBI circular CIR/MRD/DMS/17/20 dated
June 22, 2012 as amended from time to time.
48. The response plan should define responsibilities and actions to be
performed by its employees and support or outsourced staff in the
event of cyber-attacks or breach of cyber security mechanism.
49. Any incident of loss or destruction of data or systems should be
thoroughly analyzed and lessons learned from such incidents
should be incorporated to strengthen the security mechanism and
improve recovery planning and processes.
50. Mutual Funds/ AMCs should also conduct suitable periodic drills
to test the adequacy and effectiveness of response and recovery
plan.
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Master Circular for Mutual Funds as on March 31, 2024
Sharing of information
51. All cyber-attacks, threats, cyber-incidents, and breaches
experienced by Mutual Funds/ AMCs shall be reported to SEBI
within 6 hours of noticing/ detecting such incidents or being
brought to their notice about such incidents. The incident shall
also be reported to CERT-In in accordance with the guidelines/
directions issued by CERT-In from time to time. Additionally, the
Mutual Funds/ AMCs, whose systems have been identified as
“protected system” by NCIIPC, shall also report the incident to
NCIIPC. The quarterly reports containing information on cyber-
attacks, threats, cyber-incidents, and breaches experienced by
Mutual Funds/ AMCs and measures taken to mitigate
vulnerabilities, threats and attacks including information on
bugs/ vulnerabilities/ threats that may be useful for other Mutual
Funds/ AMCs shall be submitted to SEBI within 15 days from the
quarter ended June, September, December and March of every
year.
52. Such details as are felt useful for sharing with other Mutual
Funds/ AMCs in masked and anonymous manner shall be shared
using mechanism to be specified by SEBI from time to time.
Training
53. Mutual Funds/ AMCs should conduct periodic training programs
to enhance awareness level among the employees and outsourced
staff, vendors, etc. on IT / Cyber security policy and standards.
Special focus should be given to build awareness levels and skills
of staff from non-technical disciplines.
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Master Circular for Mutual Funds as on March 31, 2024
54. The training program should be reviewed and updated to ensure
that the contents of the program remain current and relevant.
Periodic Audit
55. AMCs / Mutual Funds shall arrange to have its systems audited
on an semi-annual basis by an independent CISA / CISM
qualified or CERT-IN empanelled auditor to check compliance
with the above areas and shall submit the report to SEBI along
with the comments of the Board of AMCs and Trustees within
three months of the end of the financial year.
Vendors or Service Providers
56. AMCs / MFs have outsourced many of their critical activities to
different agencies / vendors / service providers. The
responsibility, accountability and ownership of those outsourced
activities lies primarily with AMCs / MFs. Therefore, AMCs / MFs
have to come out with appropriate monitoring mechanism
through clearly defined framework to ensure that all the
requirements as specified in this Annexure are complied with. The
periodic report submitted to SEBI should highlight the critical
activities handled by the agencies and to certify the above
requirement is complied. The provisions of this Annexure shall
also apply to those RTAs which serves AMCs as the in-house RTAs
of the AMCs.
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Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 7: REPORTING FOR ARTIFICIAL INTELLIGENCE (AI)
AND MACHINE LEARNING (ML) APPLICATIONS AND SYSTEMS
OFFERED AND USED BY MUTUAL FUNDS652
Systems deemed to be based on AI and ML technology
Applications and Systems belonging but not limited to following categories or a
combination of these:
1. Natural Language Processing (NLP), sentiment analysis or text mining
systems that gather intelligence from unstructured data. – In this case,
Voice to text, text to intelligence systems in any natural language will be
considered in scope. E.g.: robo chat bots, big data intelligence gathering
systems.
2. Neural Networks or a modified form of it. – In this case, any systems that
uses a number of nodes (physical or software simulated nodes) mimicking
natural neural networks of any scale, so as to carry out learning from
previous firing of the nodes will be considered in scope. E.g.: Recurrent
Neural networks and Deep learning Neural Networks.
3. Machine learning through supervised, unsupervised learning or a
combination of both. – In this case, any application or systems that carry
out knowledge representation to form a knowledge base of domain, by
learning and creating its outputs with real world input data and deciding
future outputs based upon the knowledge base. E.g.: System based on
Decision tree, random forest, K mean, Markov decision process, Gradient
boosting Algorithms.
652 SEBI Cir No SEBI/HO/IMD/DF5/CIR/P/2019/63 dated May 09, 2019
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Master Circular for Mutual Funds as on March 31, 2024
4. A system that uses statistical heuristics method instead of procedural
algorithms or the system / application applies clustering or categorization
algorithms to categorize data without a predefined set of categories.
5. A system that uses a feedback mechanism to improve its parameters and
bases it subsequent execution steps on these parameters.
6. A system that does knowledge representation and maintains a knowledge
base.
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Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 8: SYSTEM AUDIT653
System Audit framework for Mutual Funds/ Asset Management Companies
(AMCs)
IT Environment
Organization Details
Name
Address
What is the IT team size
(Employees)?
What is the IT team size
(Vendors)?
IT Setup & Usage
Data Center and DR Site
(Location,
owned/outsourced)
Network Diagram
(schematic) with WAN
connectivity
Network/ Security Systems:
(Please specify
Version/make/model)
- Routers
- Switches
- Proxy servers
- Firewall
- Intrusion Detection
Systems
- Intrusion Prevention
Systems
- Remote Access Servers
- Data Leakage Prevention
(specify network and/ or
host)
- Privileged Identity
Management
- Others (please specify e.g.
WIPS)
Total number of
workstations (incl. laptops)
& users
Primary Operating Systems
in use for workstations?
Application Systems
Application System Location of HW/OS/DB for DB HW/OS/DB for HW/OS/DB for
server(s) Server Web Server Web Server
653 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/57 dated April 11, 2019
e.g. Front Office System
e.g. Back Office System
e.g. Email System
e.g. Intranet System
e.g. File Server System
e.g. Finance & Accounting
System
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Master Circular for Mutual Funds as on March 31, 2024
System Audit Program Checklist
The checklist is intended to provide guidance to the Mutual Funds/Asset Management
(MFs/AMCs) Companies and Firms/ Companies appointed by MFs/AMCs for
performing the systems audit. MFs/AMCs are responsible for ensuring that adequate
and effective control environment exists over the IT systems in use for supporting
business operations, including that at vendors/ third parties supporting operations like
Register & Transfer Agents (RTAs), Fund Accountants, Custodians etc.
Audit Audit Sub-Heading Audit Checklist
Objective Objective
Question Heading
No
1 IT IT GOVERNANCE
GOVERNANCE
1a IT IT Governance IT Governance framework:
GOVERNANCE Framework Whether an IT Governance framework exists which
requires defining of:
- An IT Organization Structure
- Frameworks used for IT governance
- Organization wide IT governance processes including
policy making, implementation and monitoring to
ensure that the governance principles are followed as
desired
1b IT IT Strategy IT Strategy Committee:
GOVERNANCE Committee - Whether an IT Strategy Committee exists with
representations from Board of Directors (BOD), senior
IT and business management and reporting to the
BOD?
- Is the IT strategy committee has members with skills
and understanding of processes, information
technology and information security in the context of
Mutual Fund and other business of the organization?
- Are roles and responsibilities of the IT Strategy
Committee defined?
- Does the IT Strategy Committee meet at least twice in
a year?
1c IT IT Risk IT Risk Management:
GOVERNANCE Management - Whether organization has a defined IT risk
management framework covering amongst others
process and responsibilities of risk assessment,
management and monitoring?
- Does the risk management framework include the
following:
a. Identification of IT assets subject to risk
management
b. Identification of threats related to those IT assets
c. Assessment of probability of occurrence of threats
d. Defining risk mitigation methods in line with
threats, risk categorization and probability
e. Process to be followed for monitoring of risks
identified and mitigation methods implemented
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Master Circular for Mutual Funds as on March 31, 2024
- Is the IT risk management framework approved by
the BOD?
- Has the organization established risk management
committee that oversee and provide direction with
respect to IT risk?
1d IT IT Policies and IT Policies and Procedures:
GOVERNANCE Procedures: - Whether a defined and documented IT policy exists
and is approved by the BOD?
- Is the current state of IT architecture documented
including infrastructure, network and application
components to show system linkages and
dependencies?
- Whether defined and documented procedures exist
for all components, which amongst others include:
a. IT Assets Acquisition (including retrial)
b. Logical access management
c. Change management
d. Backup and recovery
e. Automated batch jobs
f. Incident management
g. Problem management
h. Data Center Operations
i. Operating systems and database management
j. Network and communication management
k. End user computing
l. Acceptable use of IT assets, etc.
- Does IT policy comprise of the IT organization
structure, roles and responsibilities of key IT
management personnel, IT strategic management
process and processes for ensuring adherence with
compliance requirements?
1e IT IT Organization IT Organization Structure:
GOVERNANCE Structure - Whether a defined organization structure exists with
defined authorities, reporting lines and responsibilities
related to IT governance including a designated Chief
Information Officer (CIO)/ Chief Technology Officer
(CTO), Chief Information Security Officer (CISO) and
heads for key IT teams managing IT operations, IT
applications, IT infrastructure, IT risk management/
reviews?
- Are roles and responsibilities of IT Organization
defined?
1f IT IS Audit Information Systems (IS) Audit:
GOVERNANCE - Is there a defined IS audit framework including
process and responsibilities to be followed for IS
audits, IS audit calendar, scope definition, review,
reporting process and monitoring progress against
non-compliances?
- Are IS audit plans, reports, findings and action plans
reported management and audit committee of board as
appropriate?
2 INFORMATION INFORMATION SECURITY
SECURITY
2a INFORMATION Information Information Security function:
SECURITY Security - Whether an information security function exists
function distinct from IT function with dedicated responsibility
of defining and monitoring implementation of
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information security policies and controls?
- Is there a designated CISO responsible for overseeing
the information security function and for ensuring
information security procedures are defined and
implemented?
- Does the information security function include
representations from departments and operations
across the organization including internal and client
facing functions and including all organization
locations?
2b INFORMATION Information Information Security policy:
SECURITY Security policy - Whether a defined and documented information
security policy exists and is approved by the BOD?
- Whether the information security framework ensures
security requirements are in-built into key IT
architecture, operations and other non-IT aspects,
including but not limited to:
a. Access management - Physical and Logical
b. Infrastructure and applications change management
c. Backup and recovery
d. automated batch jobs
e. Incident management (including security incidents)
f. Problem management
g. Data center Operations
h. Operating systems and database management
i. Network and communication management
j. End user computing, in addition consider phone,
faxes, photocopiers, scanners, etc.
k. Security Operations - logging and monitoring
- Whether defined and documented procedures exist
for the following:
a. Hardening procedures, standards and guidelines for
operating systems, databases, servers and network
devices
b. Use of cryptography
c. Third Party Security
d. Human Resource controls for information security
e. Information classification guidance and process
including mechanisms for storage, transmission and
disposal of information
- Whether the information security framework/ policy
is reviewed on an yearly basis at a minimum?
2c INFORMATION Information Information Security Risk Management:
SECURITY Security Risk - Whether a defined process exists and is followed for
Management Information Security (IS) risk management on an
annual basis, at a minimum?
- Whether the IS risk management is performed in line
with the organization and IT risk management
framework?
- Whether the risk assessment is performed for new
functions, processes, teams and locations. Whether
relevant risk mitigation and monitoring actions are
implemented as per the defined framework?
2d INFORMATION Cyber Security Cyber Security:
SECURITY
- Whether Mutual Funds / AMCs has complied with
the provisions of Cyber Security and Cyber Resilience
prescribed under Paragraph 4.7 of the Master Circular
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Master Circular for Mutual Funds as on March 31, 2024
and any further guidelines by SEBI with regard to
cyber security for MFs / AMCs?
2e INFORMATION Information Information Security Awareness:
SECURITY Security - Whether information security and cybersecurity
Awareness processes are communicated to employees,
contractors, third parties, etc.?
- Whether information security and cybersecurity
trainings are conducted as part of induction as well as
periodic trainings?
2f INFORMATION Information Information Privacy:
SECURITY Privacy - Whether defined and documented privacy policy
exists and is approved by the BOD?
- Whether procedures have been defined in line with
applicable regulations with respect to:
a. Privacy notice
b. Choice & consent
c. Data collection
d. Data use, retention & disposal
e. Access to data
f. Disclosure to third parties
g. Security controls for private data
h. Monitoring & enforcement
2g INFORMATION Human Human Resource Controls:
SECURITY Resource - Whether policies and procedures have been
Controls implemented to address HR controls as part of
information security?
- Whether hiring policies are defined in line with IT
operations and information security requirements?
- Whether induction trainings are conducted for all
new joiners?
- Whether all new joiners are required to confirm and
accept the organization's policies and procedures with
respect to information technology, information security
and cybersecurity?
- Whether background check procedures are performed
for all new joiners?
2h INFORMATION Digital Digital Technologies:
SECURITY Technologies - Whether the organization has a defined process to
identify, develop and implement digital technologies
supporting internal and external facing functions?
- Whether all digital technologies including mobile
applications, web-based portals, mobile websites, cloud
storage, etc. are implemented only after performing
risk assessment, testing and where required
independent reviews?
- Whether the organization has a defined and approved
social media usage policy to address information
security and reputational risks arising out of the
same?
2i INFORMATION Third Party Third Party Security:
SECURITY Security - Whether the organization has a defined vendor
management framework and is approved by the BOD?
- Whether the vendor management framework includes
processes to be followed for vendor due diligence,
selection, risk assessment, onboarding, contracting
and monitoring?
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Master Circular for Mutual Funds as on March 31, 2024
- Whether vendors are on boarded only after
performing a technical due diligence, risk assessment
and background checks?
- Whether formal contracts are signed with vendors
and include the following at a minimum:
a. Services provided
b. Processes to be followed
c. Service Level Agreements and related penalty
clauses, if any
d. Confidentiality, service continuity and data privacy
clauses
e. Performance monitoring processes and reports to be
provided
f. Escalation procedures
g. Right to access and audit
2j INFORMATION Information Information Security Compliance:
SECURITY Security - Has the organization implemented procedures to
Compliance assess compliance against defined information security
procedures in the form of periodic assessments/
reviews?
- Are critical functions within the organization subject
to stringent security reviews by internal teams or
external agencies, where necessary?
- Are IS review reports, findings and action plans
reported to IT/IS risk committees, IT Strategy
Committee of BOD as appropriate?
3 ACCESS ACCESS MANAGEMENT
MANAGEMENT
3a ACCESS Access Policies Access Policies and procedures:
MANAGEMENT and procedures - Whether defined and documented policies and
procedures exist for managing access to applications
and infrastructure (including network, operating
systems and database) and are approved by relevant
authority?
- Whether the defined procedures include
responsibilities and process to be followed for:
a. Access grant and modification including definition of
authorization matrix as per system
b. Access revocation procedures including notification
as well as timeliness of revocation
c. Access rights and Roles review procedures for all
systems
d. Privileged access to systems
e. Review of access logs for privileged users
f. Segregation of Duties (SOD)
- Whether appropriate risk acceptance is taken 0in the
event entire approved procedures ca0nnot be
implemented due to system limitations? In such cases,
whether alternate risk mitigation measures are
implemented?
3b ACCESS Privileged Privileged access:
MANAGEMENT access - Whether privileged access to systems is available to
limited authorized personnel?
- Whether privileged access to systems is subject to
more stringent security controls (such as Privileged
Identity Management Solutions, more stringent
password parameters, etc.) as compared to normal
users?
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Master Circular for Mutual Funds as on March 31, 2024
- Whether access rights for privileged users are
monitored on periodic basis?
- Whether logs of privileged users are stored and
reviewed on a periodic basis based on criticality of
systems?
3c ACCESS Access Access Administration:
MANAGEMENT Administration - Whether role-based and least privilege access
mechanisms are in-built into systems to enable
authorized access as per job roles?
- Whether access administration requests, related
approvals/ notifications and related actions (creations,
revocation and modification) are logged and
documented using automated tools with date-time
stamps and appropriate evidences are retained as per
defined procedures for review and audit purpose?
- Whether creation and modification of access to
systems requires a formal approval based on a defined
authorization matrix?
- Whether access revocation notifications are sent on a
timely basis?
- Whether access is revoked on a timely basis on the
last working date of the user?
- Whether sufficient monitoring mechanisms have been
implemented to ensure all access administration
requests are addressed as per procedures?
- Whether users are provided with unique user
identifier as per organizations naming conventions?
3d ACCESS Access Access Authentication:
MANAGEMENT Authentication - Whether appropriate authentication mechanisms are
used for access to systems including use of passwords,
One Time Passwords (OTP), Single Sign on, etc.?
- Following password parameters should be defined [In
brackets some prevalent practices are shared]:
a. Minimum length (e.g. 8 characters)
b. Complexity (combination of alphabets (upper case
and lower case)/ numbers/ symbols.)
c. Maximum Age (e.g. 90 days)
d. History (e.g. 3)
e. Account lockout threshold (e.g. 3 or 5 attempts)
- Whether defined procedures require usage of unique
user IDs for each individual?
- Whether usage of generic IDs and default IDs is
prohibited unless necessary and with risk acceptance
sign-off?
In such cases ownership and accountability for usage
of generic IDs should be documented.
-Whether the system allows for automatic session
logout after a system defined period of inactivity?
3e ACCESS Access Review Access Review and Monitoring:
MANAGEMENT and Monitoring - Whether access rights to systems are reviewed on a
periodic basis based on criticality of systems?
- Whether access logs of users having access to critical
activities are monitored?
- Whether rule based automated or manual alerts are
implemented for unauthorized access or activities,
whether such alerts are monitored and addressed on a
timely basis?
- Whether audit trails of critical activities including key
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Master Circular for Mutual Funds as on March 31, 2024
business transactions, modification of security
parameters, masters' updates, and access
administration activities are available with details
around related user IDs, approvers and date-time
stamps. Whether audit trails are retained for evidence,
review and audit purposes?
- Whether control mechanisms such as periodic
reconciliation of user lists with HR lists, deactivation of
users with no logins for a defined timeframe, etc. have
been deployed to ensure any unauthorized access is
timely terminated?
3f ACCESS Segregation of Segregation of Duties (SOD):
MANAGEMENT Duties (SOD) - Whether a defined and documented SOD matrix
exists describing key roles within the systems and
conflicting rights?
- Whether access approvals, creations and
modifications are performed based on approved SOD
matrix?
- Potential SOD conflicts are investigated during
periodic access reviews and corrective actions are
taken, if any.
3g ACCESS Physical Access Physical Access Administration:
MANAGEMENT Administration - Whether defined and documented procedures exist
for managing physical access to data center and
processing facilities?
- Whether creation of physical access requires
documentation of appropriate approvals as per
authorization matrix?
- Whether revocation of physical access is performed
on a timely basis on the last working day of the user?
- Whether physical access administration requests,
related approvals/ notifications and related actions
(creations and modification) are logged and
documented using automated tools with date-time
stamps and appropriate evidences are retained as per
defined procedures for review and audit purpose?
- Whether access to restricted areas is reviewed at least
once a year?
- Whether physical access logs are available and
retained for investigation purpose as per guidelines?
- Whether physical access related incidents and invalid
access attempts are monitored on a periodic basis?
3h ACCESS Physical Physical Security:
MANAGEMENT Security - Whether appropriate physical security mechanisms
have been deployed including guarding entrance,
usage of access control system, door alarms,
turnstiles, biometric access, etc.?
- Whether appropriate visitor access controls have
been implemented including logging of visitor access
including equipment carried, visitor escorting, issue
and reconciliation of visitor badges, etc.?
- Whether Closed Circuit Tele Vision (CCTV) has been
installed in restricted areas for monitoring, and logs for
the same are retained for investigation purpose?
- Whether appropriate environmental security
measures such as fire alarms, smoke detectors, water
detectors, Air-conditioners, etc. have been
implemented. Whether environmental controls are
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Master Circular for Mutual Funds as on March 31, 2024
monitored on a periodic basis. Are environmental
security devices maintained at regular intervals as
prescribed by the vendor?
4 CHANGE CHANGE MANAGEMENT
MANAGEMENT
4a CHANGE Change Change Management Policies and Procedures:
MANAGEMENT Management - Whether organization has established formalized
Policies and change management policy and procedures that define
Procedures processes to be followed for changes made to all
systems including applications and infrastructure
(networks, operating systems, databases, etc.)
including emergency and configuration changes,
capturing the version history and approval history?
- Whether appropriate guidance is available for
categorization and prioritization of changes?
4b CHANGE Change Change Administration:
MANAGEMENT Administration - Whether changes to applications and infrastructure
(networks, operating systems and databases),
including requests to third party service providers are
approved and authorized by both authorized IT and
business management personnel, as per defined
authorization matrix?
- Whether for each change, a risk evaluation process is
carried out and results of the same are approved by
authorized personnel?
-Whether test cases library is maintained and updated
to enable comprehensive testing?
- Whether changes for relevant applications, including
infrastructure changes are tested and documented
during User Acceptance testing (UAT). Whether there is
a formal signoff of the UAT results provided by the
business prior to implementation?
- Whether changes for applications, including
infrastructure (OS/DB) changes are tested and
documented during system, unit, and regression
testing, where applicable. Whether there is a formal
signoff of the test results by the technology team prior
to UAT performed by business?
- Whether the procedures require sign-off from
information security team for ensuring that security
controls have been in-built into the systems?
- Whether a post implementation review is performed
and recorded for each change migrated to production
environment?
- Whether there exists a procedure to log emergency
changes made to relevant applications and underlying
infrastructure, which are authorized by business and
IT management within defined time frame of being
migrated to production environment?
- Whether new systems or modules including major
changes are subject to application security testing
before deployment?
- Whether software development is performed based on
industry accepted coding standards?
4c CHANGE Segregation of Segregation of Duties (SOD), environments and
MANAGEMENT Duties (SOD), version control:
environments - Whether there exists a segregation of production,
development and test environments?
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Master Circular for Mutual Funds as on March 31, 2024
and version - Whether the organization has implemented a change
control management versioning tool to maintain audit trails for
all types of changes including applications, databases,
operating systems and networks?
- Whether implemented changes are reviewed on a
periodic basis and inappropriate or unauthorized
activities are investigated and communicated to
respective individuals?
- Whether a formal process exists for granting user
access to migrate changes to the production
environment for relevant applications based upon
approval by authorized personnel?
- In case of any new system or module implementation,
whether adequate procedures were performed to
ensure accurate and complete transfer of data?
5 INCIDENT INCIDENT MANAGEMENT
MANAGEMENT
5a INCIDENT Incident Incident Management Policies and Procedures:
MANAGEMENT Management - Whether management has established formalized
Policies and incident management policy and procedures that
Procedures define processes to be followed for incidents related to
all systems including applications and infrastructure
(networks, operating systems, databases, etc.)
capturing the version history and approval history?
- Whether appropriate guidance is available for
categorization and prioritization of incidents?
5b INCIDENT Incident Incident Resolution:
MANAGEMENT Resolution - Whether incidents are logged using automated tools
with a unique ID assigned to each incident?
- Whether incidents are classified based on their
severity and urgency. Whether severity of incidents can
be changed only by authorized personnel?
- Whether a root cause analysis is performed for each
incident and documented?
- Whether a known error database is maintained for
resolution and workaround details for similar
incidents?
- Whether details of resolution provided against each
incident is documented against the ticket logged?
- Whether incidents are tracked and monitored for
resolution on a timely basis?
- Whether recurring incidents are identified and logged
as problems?
5c INCIDENT Service Level Service Level Agreements (SLAs):
MANAGEMENT Agreements - Whether formal SLAs have been defined for each
(SLAs) incident type and agreed with business and the
incident management team?
- Whether SLAs are tracked using automated tools to
identify timely escalation to be performed?
- Whether escalation matrix has been defined and
configured using automated tools?
- Whether SLA monitoring reports are generated and
sent to senior management on periodic basis and
relevant actions are taken?
5d INCIDENT Security Security Incident Management:
MANAGEMENT Incident - Whether management has defined and documented
Management procedures for identifying security related incidents by
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Master Circular for Mutual Funds as on March 31, 2024
monitoring logs generated by various IT assets such as
Operating Systems, Databases, Network Devices, etc.?
- Whether security incidents / events are detected,
classified, investigated and resolved in a timely
manner?
- Whether periodic reports are published for various
identified Security incidents? Whether the logging
facilities and log information are protected from
tampering and unauthorized access?
- Whether security incidents are reported to SEBI in
the prescribed format within stipulated timelines?
6 BACKUP & BACKUP & RECOVERY
RECOVERY
6a BACKUP & Backup Backup Administration:
RECOVERY Administration - Whether documented policies and procedures exist
for backup scheduling, implementation and monitoring
capturing version history and approval history?
- Whether regular/ periodic back up of relevant data
and programs is taken as per the approved backup
policies and frequency [e.g., daily, weekly, etc.]
configured via backup tool?
- Whether access to backup tools is restricted to
authorized personnel?
- Whether modifications to backup schedule are
performed through the formal change management
process?
- Whether appropriate data is backed up including at a
minimum database records, audit trails, reports, user
activity logs, transaction history, alert logs, etc.?
- Whether execution of backups are monitored for
successful completion and failures are investigated and
closed?
6b BACKUP & Backup Storage Backup Storage:
RECOVERY - Whether backup tapes are stored onsite in a secure
fireproof storage?
- Whether access to onsite backups are limited to
authorized personnel?
- Whether backup tapes are sent for offsite storage on
a periodic basis?
- Whether offsite storage of tapes is monitored on a
periodic basis?
6c BACKUP & Restoration Restoration:
RECOVERY - Whether restoration testing is performed on a
periodic basis and issues, if any are resolved?
- Whether request based restorations are performed
only after obtaining approvals from business head?
7 JOB JOB PROCESSING
PROCESSING
7a JOB Job Processing Job Processing:
PROCESSING - Whether documented policies and procedures exist
for automated job scheduling, implementation and
monitoring capturing version history and approval
history?
- Whether automated jobs are processed as per the
approved policies and frequency [e.g., daily, weekly,
etc.] and configured via automated tool?
- Whether access to job processing tools is restricted to
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Master Circular for Mutual Funds as on March 31, 2024
authorized personnel?
- Whether modifications to job schedules are performed
through the formal change management process?
- Whether execution of automated jobs are monitored
for successful completion and failures are investigated
and closed?
8 BUSINESS BUSINESS CONTINUITY PLANNING (BCP) &
CONTINUITY DISASTER RECOVERY
PLANNING
(BCP) &
DISASTER
RECOVERY
(DR)
8a BUSINESS BCP BCP Organization:
CONTINUITY Organization - Whether the organization has a BCP Committee that
PLANNING provides oversight on BCP planning and functioning in
(BCP) & the organization?
DISASTER - Whether the organization has a dedicated BCP Head
RECOVERY or Coordinator overall responsible for development of
(DR) the enterprise BCP framework in conjunction with
internal and external facing functions within the
organization through a defined process?
- Whether the organization has a dedicated BCP Team
or Crisis Management team to execute the BCP plan,
when required. Does the BCP team have
representations from various functions and locations of
the organization?
- Whether roles and responsibilities of all members of
the BCP organization are defined and documented?
8b BUSINESS BCP BCP Methodology and Plan:
CONTINUITY Methodology - Whether the organization has a defined and
PLANNING and Plan documented BCP methodology which is approved by
(BCP) & the BOD?
DISASTER - Whether the BCP methodology includes a process
RECOVERY wise approach for development and maintenance of the
(DR) BCP framework including Business Impact Analysis
(BIA), Risk Assessment (RA), BCP Strategy, and BCP
Plan?
- Whether a documented BCP plan exists and is
approved by the BOD?
- Whether the BCP is developed based on the approved
methodology and includes at a minimum the following:
a. Organization's strategy for BCP
b. Inputs from BIA and RA conducted
c. BCP / DR procedures
d. Conditions for activating plans
e. BCP Team and responsibilities
f. Maintenance schedules
g. Awareness and education activities
h. Resumption procedures
i. Responsibilities of employees
j. Emergency and fall back procedures
8c BUSINESS BCP Plan BCP Plan:
CONTINUITY - Whether a BIA is conducted including identification
PLANNING of critical processes within the organization and their
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Master Circular for Mutual Funds as on March 31, 2024
(BCP) & dependencies on other processes, vendor dependencies
DISASTER and resources. Whether Recovery Time Objective (RTO)
RECOVERY and Recovery Point Objective (RPO) has been
(DR) calculated as part of the BIA. Whether the BIA is
approved by the business, technology and risk teams?
- Whether a Risk Assessment is conducted for all
critical processes identified in the BIA including
identification of risks and threats and their impact,
probability and priority. Whether the RA is conducted
across parameters including people, processes and
technology. Has the organization identified and
implemented appropriate procedures and systems for
risk mitigation?
- Whether a documented BCP plan exists and is
approved by the BOD. Whether the BCP is developed
based on the approved methodology and includes at a
minimum the following:
a. Organization's strategy for BCP
b. Inputs from BIA and RA conducted
c. BCP / DR procedures
d. Conditions for activating plans
e. BCP Team and responsibilities
f. Maintenance schedules
g. Awareness and education activities
h. Resumption procedures
i. Responsibilities of employees
j. Emergency and fall back procedures
k. Procedures to be followed in the event of natural
calamities and disasters that have a wide area or long
term impact
8d BUSINESS BCP/ DR BCP/ DR testing:
CONTINUITY testing - Whether the BCP/ DR plan is reviewed on an yearly
PLANNING basis or in case of a major change in business or
(BCP) & infrastructure?
DISASTER - Whether the defined BCP/ DR plan is tested through
RECOVERY appropriate strategies including table-top reviews,
(DR) simulations, DR drills, alternate site recovery testing,
system recovery, etc. involving all aspects of people,
process and technology?
8e BUSINESS BCP/ DR BCP/ DR Communication and training:
CONTINUITY Communication - Whether the organization has established appropriate
PLANNING and training procedures for BCP training and update for the BCP
(BCP) & team?
DISASTER - Whether the BCP plan is communicated to all users
RECOVERY internal as well as external with detailed description of
(DR) roles, responsibilities and dependencies?
8f BUSINESS DR Plan DR Plan:
CONTINUITY - Whether the organization has documented a DR plan
PLANNING including recovery procedures to be followed in the
(BCP) & event of disasters?
DISASTER - Has the organization identified and implemented a
RECOVERY DR Site which is a replica of the production site? Has
(DR) the organization implemented procedures for
maintaining the DR readiness and support
infrastructure to be relied upon in the event of a
disaster? Have redundancies been built into systems
and processes?
- Are relevant system architecture documents prepared
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Master Circular for Mutual Funds as on March 31, 2024
and approved representing infrastructure, hardware
and software components at the primary and DR sites?
9 BUSINESS BUSINESS CONTROLS
CONTROLS
9a BUSINESS Master Controls Master Controls (Investment management, Front
CONTROLS (Investment Office, Middle Office, Back Office, Fund Accounting
management, and Registrar & Transfer Agent):
Front Office, - Whether new schemes/ funds are created in the
Middle Office, system through an automated maker checker
Back Office, mechanism and based on the Scheme Information
Fund Documentation (SID) and information received from
Accounting, authorized sources?
Registrar & - Whether new customer accounts are created and
Transfer Agent) assigned schemes/ funds based on the agreement
signed with the customers?
- Whether access to create/ update/ delete any master
data (Customer/ Scheme/ Securities/ Broker/
Subscriptions/ Redemptions etc.) is restricted only to
the authorized individuals?
- Whether changes to masters are performed through
an automated maker checker mechanism?
- Whether system has the capability to capture audit
trails/ logs of all changes, updation, and activities
performed?
- Whether update of security prices is controlled and is
updated only from authorized automated/ manual
sources?
9b BUSINESS Front Office Front Office and Back Office Operations:
CONTROLS and Back Office - Whether appropriate segregation of duties is
Operations maintained between users having access to front office
and back office system?
- Whether controls exist over data integrity and
accuracy on integration between the front office and
back office system?
- Whether system does not allow cancellation of deal
order once the deal is confirmed in the system?
- Whether trade settlement process is performed by
authorized personnel through an automated maker
checker mechanism?
- Whether system allocates trades to the schemes as
per defined policy?
9c BUSINESS Risk Risk Management (Middle Office):
CONTROLS Management - Whether a documented risk management policy
(Middle Office) exists defining deal, counterparty wise limits,
securities, etc. and the same is approved by the BOD?
- Whether hard limits (beyond which system does not
allow booking) and soft limits (for which system
provides warnings) have been configured in the system
in line with the risk management policy?
- Whether there are controls defined to monitor and
generate alerts/ reports in case of breach of predefined
SEBI and Compliance limits defined at scheme/ fund
level?
- Whether system monitors the adherence to
predefined rights/ limits assigned to Fund Manager at
scheme/ fund level?
- Whether systemic checks are performed for
prohibiting blacklisted securities if entered by Dealers
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Master Circular for Mutual Funds as on March 31, 2024
for Trades?
- Whether the system monitors adherence to broker
limits defined?
- Whether appropriate field level validations and
mandatory checks are built in the system to identify
and appropriate expenses to individual schemes?
- Whether the system monitors adherence to
guidelines specified in the Ninth Schedule of the
Mutual Fund Regulations with respect to accounting
policies?
- Whether the system monitors adherence to policies
related to documentation of rationale for valuation
including inter-scheme transfers?
9d BUSINESS Investor Investor Servicing (Registrar & Transfer Agent):
CONTROLS Servicing - Whether automated maker checker controls have
(Registrar & been implemented for processing subscription and
Transfer Agent) redemption requests?
- Whether appropriate field level validations and
mandatory checks are built in the system during
subscription and redemption?
- Whether the system has the capability to maintain
the record of all types of transactions executed on
behalf of the investor for specific scheme/ investment?
- Whether the system has appropriate controls on
brokerage computation and payouts?
9e BUSINESS Fund Fund Accounting:
CONTROLS Accounting - Whether NAV calculations, if automated are
accurately calculated?
- Whether end of day reconciliations (cash recon,
portfolio recon, pricing recon, etc.) are performed to
ensure no deals are missed from reporting to the fund
accountant for processing and complete data is
processed for safekeeping?
- Whether details of the expenses accrued by the client
(Management fees, audit etc.) are updated
appropriately and accurately and maker-checker
control exists?
- Whether income related transactions are updated in
the system appropriately and accurately?
- Whether corporate actions are applied accurately and
completely?
- Whether NAV is accurately computed by Fund
Accountant and the same is released to client, press,
R&TA AMFI appropriately?
9f BUSINESS Reporting Reporting:
CONTROLS - Does the organization have list of regulatory and
standard operational reports?
- Has organization implemented reasonable controls
over report generation with respect to accuracy and
completeness?
9g BUSINESS Custody of Custody of mutual fund scheme assets (Custodian):
CONTROLS mutual fund - Whether automated maker checker controls have
scheme assets been implemented for processing of receipt and
(Custodian) delivery of securities, collection of income, distribution
of dividends and segregation of assets between
schemes and settlements between schemes?
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Master Circular for Mutual Funds as on March 31, 2024
-Whether appropriate field level validations and
mandatory checks are built in the system for receipt
and delivery of securities, collection of income,
distribution of dividends and segregation of assets
between schemes and settlements between schemes?
- Whether the system has the capability to maintain
the record of all types of transactions executed on
behalf of the client for specific scheme/ investment?
- Whether end of day reconciliations (cash recon,
portfolio recon, pricing recon, etc.) are performed to
ensure whether all securities have been gone to the
correct schemes in time?
- Whether the system monitors adherence to controls
related to significant accounting and valuation
policies?
- Whether the system monitors adherence to
compliance with SEBI guidelines and PMLA guidelines?
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Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 9: PRODUCT LABELLING IN MUTUAL FUND SCHEMES – RISK-o-
METER654
Risk level of a scheme shall be evaluated using the following methodology:
1. The underlying securities of a scheme shall be assigned a value for each of
the parameters based on which the risk-o-meter value will be calculated.
2. For the purpose of evaluation of risk level, AUM of the security forming part
of the scheme portfolio shall be as on last day of the given month.
3. The evaluation of risk parameters are as detailed below:
i. Debt securities
a) Credit Risk
 Debt securities of schemes shall be valued for credit risk as follows:
TABLE 1
Credit rating of the Instrument CREDIT RISK VALUE
G-Sec/AAA/SDL/ TREPS 1
AA+ 2
AA 3
AA- 4
A+ 5
A 6
A- 7
BBB+ 8
BBB 9
BBB- 10
Unrated 11
Below investment grade 12
 Based on the weighted average value of each instrument (weights
based on the AUM), credit risk value of the portfolio shall be
assigned.
 The price of debt instrument to be considered for calculating AUM
shall include the accrued interest i.e. dirty price.
654 SEBI Circular no. SEBI/HO/IMD/DF3/CIR/P/2020/197 dated October 05, 2020
545
Master Circular for Mutual Funds as on March 31, 2024
 For the above purpose, credit rating of the instrument as on last
day of the month shall be considered.
b) Interest Rate Risk
 Interest rate risk shall be valued using Macaulay Duration of the
Portfolio:
TABLE 2
Macaulay Duration of the portfolio INTEREST RATE RISK
(years) VALUE
≤ 0.5 1
> 0.5 to ≤ 1 2
> 1 to ≤ 2 3
> 2 to ≤ 3 4
> 3 to ≤ 4 5
> 4 6
 For the above purpose, Macaulay Duration of an instrument as on
last day of the month shall be considered.
c) Liquidity Risk
 For measuring liquidity risk of the schemes, listing status, credit
rating, structure of debt instruments is considered.
 Liquidity risk of the debt securities shall be valued as follows:
TABLE 3
LIQUIDITY
Instrument RISK
VALUE
TREPS/G-Sec/AAA rated PSU/SDLs 1
Listed AAA rated debt securities without bespoke
structures/ structured obligations, credit 2
enhancements or embedded options*
Listed AA+ rated debt securities without bespoke
structures/ structured obligations, credit 3
enhancements or embedded options*
Listed AA rated debt securities without bespoke
structures/ structured obligations, credit 4
enhancements or embedded options*
Listed AA- rated debt securities without bespoke
structures/ structured obligations, credit 5
enhancements or embedded options*
Listed A+ rated debt securities without bespoke
structures/ structured obligations, credit 6
enhancements or embedded options*
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Master Circular for Mutual Funds as on March 31, 2024
TABLE 3
LIQUIDITY
Instrument RISK
VALUE
Listed A rated debt securities without bespoke
structures/ structured obligations, 7credit 7
enhancements or embedded options*
Listed A- rated debt securities without bespoke
structures/ structured obligations, credit 8
enhancements or embedded options*
Listed BBB+ rated debt securities without bespoke
structures/ structured obligations, credit 9
enhancements or embedded options*
Listed BBB rated debt securities without bespoke
structures/ structured obligations, credit 10
enhancements or embedded options*
Listed BBB- rated debt securities without bespoke
structures/ structured obligations, credit 11
enhancements or embedded options*
AAA rated debt securities with any one of the
following features*-
 unlisted
 bespoke structure 3
 structured obligation
 credit enhancement
 embedded options
AA + rated debt securities with any one of the
following features*-
 unlisted
 bespoke structure 4
 structured obligation
 credit enhancement
 embedded options
AA rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 5
 structured obligation
 credit enhancement
 embedded options
AA- rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 6
 structured obligation
 credit enhancement
 embedded options
A+ rated debt securities with any one of the following
7
features*-
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Master Circular for Mutual Funds as on March 31, 2024
TABLE 3
LIQUIDITY
Instrument RISK
VALUE
 unlisted
 bespoke structure
 structured obligation
 credit enhancement
 embedded options
A rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 8
 structured obligation
 credit enhancement
 embedded options
A- rated debt securities with any one of the following
features*-
 unlisted
 bespoke structure 9
 structured obligation
 credit enhancement
 embedded options
BBB+ rated debt securities within investment grade
with any one of the following features*-
 unlisted
 bespoke structure 10
 structured obligation
 credit enhancement
 embedded options
BBB rated debt securities within investment grade
with any one of the following features*-
 unlisted
 bespoke structure 11
 structured obligation
 credit enhancement
 embedded options
BBB- rated debt securities within investment grade
with any one of the following features*-
 unlisted
 bespoke structure 12
 structured obligation
 credit enhancement
 embedded options
AAA rated debt securities with more than one of the
following features*-
4
 unlisted
 bespoke structure
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Master Circular for Mutual Funds as on March 31, 2024
TABLE 3
LIQUIDITY
Instrument RISK
VALUE
 structured obligation
 credit enhancement
 embedded options
AA + rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 5
 structured obligation
 credit enhancement
 embedded options
AA rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 6
 structured obligation
 credit enhancement
 embedded options
AA- rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 7
 structured obligation
 credit enhancement
 embedded options
A+ rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 8
 structured obligation
 credit enhancement
 embedded options
A rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 9
 structured obligation
 credit enhancement
 embedded options
A- rated debt securities with more than one of the
following features*-
 unlisted
10
 bespoke structure
 structured obligation
 credit enhancement
549
Master Circular for Mutual Funds as on March 31, 2024
TABLE 3
LIQUIDITY
Instrument RISK
VALUE
 embedded options
BBB+ rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 11
 structured obligation
 credit enhancement
 embedded options
BBB rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 12
 structured obligation
 credit enhancement
 embedded options
BBB- rated debt securities with more than one of the
following features*-
 unlisted
 bespoke structure 13
 structured obligation
 credit enhancement
 embedded options
Below investment grade and unrated debt securities 14
*Or any other structure / feature which increase the liquidity risk of
the instrument.
 Liquidity Risk Value of a portfolio shall be assigned based on the
weighted average of such values (weights based on the AUM) of
each instrument.
 For the above purpose, instruments held by the scheme as on last
day of the month shall be considered.
d) Risk value for the debt portfolio shall be simple average of credit risk
value, interest rate risk value and liquidity risk value. However, if the
liquidity risk value is higher than the average of credit risk value,
liquidity risk value and interest rate risk value then the value of
liquidity risk shall be considered as risk value of the debt portfolio.
550
Master Circular for Mutual Funds as on March 31, 2024
e) For investment by mutual funds in instruments having short term
ratings, the liquidity risk value and the credit risk value shall be based
on the lowest long term rating of the instrument of the same issuer as
shown above (in order to follow conservative approach) across credit
rating agencies. However, if there is no long term rating of the same
issuer, then based on credit rating mapping most conservative long
term rating shall be taken for a given short term rating.
ii. Equity
a) Market Capitalisation
 Following values shall be assigned to the security for market
capitalisation parameter:
TABLE 4
Market Cap of the underlying MARKET CAPITALISATION
security VALUE
Large cap 5
Mid cap 7
Small cap 9
 The market capitalisation data as published by AMFI on six-
monthly basis shall be considered.
 Based on the weighted average of the above Market Capitalisation
values of each security (weights being AUM of the security), Market
Capitalisation Value of a portfolio shall be assigned.
b) Volatility
 Following values shall be assigned to the security based on its
volatility:
TABLE 5
Daily Volatility of the Security VOLATILITY VALUE
price (based on the past two
years price of the security)
≤ 1% 5
> 1% 6
551
Master Circular for Mutual Funds as on March 31, 2024
 Based on the weighted average of above volatility values of each
security (weights being AUM of the security), Volatility Value of a
portfolio shall be assigned.
If an instrument is traded on multiple stock exchanges, then the
most conservative volatility value across stock exchanges for a
given month shall be considered.
c) Impact Cost (Liquidity Measure)
 Impact cost shall be considered as a measure for liquidity. Based
on the average impact cost of the security for previous three
months including the month under consideration following values
shall be assigned:
TABLE 6
Average Impact Cost of the Security IMPACT COST
for the month VALUE
≤ 1% 5
>1 % to ≤ 2% 7
> 2% 9
 Based on the weighted average of impact cost values of each
security (weights being AUM of the security), impact cost value of
a portfolio shall be assigned.
 If an instrument is traded on multiple stock exchanges, then the
impact cost shall be based on average value of impact costs across
stock exchanges for a given month.
d) For investment in IPOs or recently listed securities, the following
process shall be adopted for arriving at weighted average value for
Risk-o-meter:
 Market Capitalisation value: Market capitalisation of a security as
on the last trading day of the month shall be compared with that
of the market capitalisation of the threshold for large cap, mid cap
and small cap as published by AMFI and then market
capitalisation parameter of risk shall be valued based on the Table
4 mentioned above.
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Master Circular for Mutual Funds as on March 31, 2024
 Volatility value: For the first three months of trading of a security,
the value for volatility shall be assigned as 6. From the subsequent
months, volatility shall be calculated based on the available
security prices as mentioned at Table 5 above.
 Impact cost value: For the first three months of trading of a
security, the impact cost value shall be assigned as 5. From the
subsequent month, impact cost value shall be as mentioned in
Table 6 above.
e) Risk value for equity portfolio shall be simple average of market
capitalisation value, volatility value and impact cost value.
iii. Equity Derivatives
 For hedging positions, the underlying security held and its
corresponding derivative instrument shall not be included for
arriving at risk value. For instance, if XYZ security in cash market
is being hedged by its futures instrument, then the XYZ cash
market security and short futures position in XYZ security both
shall not be considered for arriving at risk value.
 If the quantity of derivative positions taken for hedging purposes
are in excess of the underlying position against which the hedging
position has been taken, the excess position shall be included
while calculating the risk value.
iv. Index Futures and Stock Futures
 For index and stock futures, following values are to be assigned:
TABLE 7
INDEX / STOCK FUTURES
Value for Index / Stock futures
VOLATILITY VALUE
≤ NIFTY near month futures
5
annualized volatility
> NIFTY near month futures
6
annualized volatility
553
Master Circular for Mutual Funds as on March 31, 2024
 Based on the weighted average of above values of each security
(weights being AUM of the security), the risk value shall be
assigned to the portfolio.
v. Index Options and Stock Options
 For index and stock options, following values are to be assigned:
TABLE 8
Value for Index / Stock INDEX / STOCK OPTIONS’
options IMPLIED VOLATILITY VALUE
≤ India VIX 5
> India VIX 6
 Based on the weighted average of above values of each security
(weights being AUM of the security), the risk value shall be
assigned to the portfolio.
vi. Other derivative instruments
 If the derivative instrument is used for hedging, then the hedging
instrument shall not be included for calculating the risk value only
if the quantity of derivative instrument is less than or equal to the
quantity of underlying/instrument being hedged. If the derivative
instrument position is in excess of the underlying then the excess
position shall be considered while calculating the risk value.
 If Interest rate swaps (IRS) are being used for hedging purpose,
then IRS shall not be considered for arriving at the risk value.
 For investment in other derivative instruments, such instruments
shall be valued as under:
TABLE 9
Daily Volatility of the
VOLATILITY VALUE
instrument
≤ 1% 5
>1% 6
 Volatility calculated above is based on daily close prices of past
three months of the instrument.
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Master Circular for Mutual Funds as on March 31, 2024
 Based on the weighted average of above values of each security
(weights being AUM of the security), the risk value shall be
assigned to the portfolio.
vii. REITs & InvITs
 Investment by schemes in REITs and InvITs shall be valued as 7
from risk perspective.
 Based on the weighted average of each security (weights being
AUM of the security), the risk value shall be assigned to the
portfolio.
viii. Commodities (Gold/Silver) in which mutual funds are permitted to
invest:655
 Investment in Gold/Silver and gold/silver related instruments by
mutual fund schemes shall be assigned a risk score corresponding
to the annualized volatility of the price of said commodity. The
annualized volatility shall be computed quarterly based on past 15
years’ prices of benchmark index of the said commodity and risk
score for the commodity shall be in terms of the following table:
Annualized volatility Risk value on risk-o-meter
(Risk)
<10% 3 (Moderate)
10-15% 4 (Moderately High)
15-20% 5 (High)
>20% 6 (Very high)
Illustration: If price of gold has annualized volatility of 18% based
on price of gold of past 15 years, then Gold and gold related
instruments will have risk value of 5 (High) on risk-o-meter.
655 SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/49 dated April 11, 2022
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Master Circular for Mutual Funds as on March 31, 2024
ix. Foreign Securities
 Investment by schemes in foreign securities shall be valued as 7
from risk perspective.
 Based on the weighted average of each security (weights being
AUM of the security), the risk value shall be assigned to the
portfolio.
x. Mutual Fund Schemes:
 For schemes holding units of other mutual fund schemes, the
following values shall be assigned basis the risk-o-meter of
underlying schemes:
TABLE 10
Risk as per risk-o-meter Value
Low 1
Low to Moderate 2
Moderate 3
Moderately High 4
High 5
Very High 6
 The risk value for investment in overseas mutual fund units or
ETFs shall be 7.
 Based on the weighted average of each mutual fund scheme held
(weights being AUM of the scheme), the risk value shall be assigned
to the portfolio.
xi. Cash and Net Current Assets:
 Cash and Net Current Assets, shall be valued as 1 from risk
perspective.
4. Risk-o-meter value
 Based on the above calculations, the risk value arrived upon shall
be mapped to the risk level mentioned in the table below and the
same may be depicted in the risk-o-meter:
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Master Circular for Mutual Funds as on March 31, 2024
TABLE 11
Risk Value RISK LEVEL AS PER RISK-O-METER
≤ 1 Low
>1 to ≤ 2 Low to Moderate
>2 to ≤ 3 Moderate
>3 to ≤ 4 Moderately High
>4 to ≤ 5 High
>5 Very High
5. Illustrations:
In order to illustrate the above process, following are a few illustrations:
1. Debt scheme
 Consider a bond scheme category having 10 debt securities with
following attributes:
o At the portfolio level, the average Macaulay Duration is 1.41
TABLE 12
Securities
Weight
held by Credit
as % of Structure
the rating
AUM
scheme
AAA -
A 10% No additional feature/structure
PSU
Unlisted and has structured
B 10% AA-
obligation
C 10% A No additional feature/structure
D 10% BBB+ No additional feature/structure
E 10% AA Has credit enhancement
F 10% AA+ Is bespoke and unlisted
G 10% A No additional feature/structure
H 10% AA No additional feature/structure
I 10% AAA No additional feature/structure
J 10% TREPS -
DEBT- Security A to J
 Based on the above portfolio, following shall be parameter based
valuing of securities held by the scheme:
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Master Circular for Mutual Funds as on March 31, 2024
TABLE 13
Securities
Credit Liquidity
held by Weight as Interest Rate
Risk risk
the % of AUM Risk Value
value value
scheme
A 10% 1 1
B 10% 4 7
C 10% 6 7
D 10% 8 9
E 10% 3 5
F 10% 2 5
G 10% 6 7
H 10% 3 4
I 10% 1 2
J 10% 1 1
TOTAL* 3.5 3 4.8
*Total is calculated as weighted average with weights based on
AUM of the instrument in the scheme as under:
TABLE 14
Parameter Average Value
Credit risk 0.1 X 1 + 0.1 X 4 + 0.1 X 6 + 0.1 X 8 + 0.1 X 3 3.5
+ 0.1 X 2 + 0.1 X 6 + 0.1 X 3 + 0.1 X 1 + 0.1 X
1
IR Risk 1 x 3 3
LR value 0.1 X 1 + 0.1 X 7 + 0.1 X 7 + 0.1 X 9 + 0.1 X 5 4.8
+ 0.1 X 5 + 0.1 X 7 + 0.1 X 4 + 0.1 X 2 + 0.1 x
1
Simple 3.8
Average
PORTFOLIO RISK-O-METER VALUE:
 Simple average of the above three parameters comes out to 3.8
([3.5+3+4.8]/3)
 Since the liquidity risk value of 4.8 is higher than the average value
of above three parameters i.e. 3.8, the risk value assigned to the
scheme will be 4.8. Hence, the risk level as per Risk-o-meter is
High.
 Therefore, risk-o-meter for the abovementioned debt scheme would
be High, and shall be as depicted below:
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Master Circular for Mutual Funds as on March 31, 2024
2. Equity scheme
 Consider an Equity scheme having 10 equity securities with
following attributes:
TABLE 15
Securities Market Volatility Impact cost
held by Weight as Cap
the % of AUM
scheme
A 10% Large Cap 0.01% 0.2%
B 10% Large Cap 1.5% 0.3%
C 10% Mid cap 2.5% 1.5%
D 10% Mid cap 1.5% 1.2%
E 10% Mid cap 2% 1.9%
F 10% Mid cap 1.5% 1.2%
G 10% Large Cap 0.005% 0.7%
H 10% IPO - -
I 10% Small 1.7% 2.5%
Cap
J 10% Cash - -
 Based on the above portfolio, following shall be the scoring of the
securities held by the scheme across parameters:
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Master Circular for Mutual Funds as on March 31, 2024
EQUITY – Security A to I
TABLE 16
Securities
Market
held by Weight as Volatility Impact cost
Cap
the % of AUM Value Value
Value
scheme
A 10% 5 5 5
B 10% 5 6 5
C 10% 7 6 7
D 10% 7 6 7
E 10% 7 6 7
F 10% 7 6 7
G 10% 5 5 5
H* 10% 7 6 5
I 10% 9 6 9
TOTAL 90% 6.6 5.8 6.3
* Assuming the market cap of the security at the time of listing
is falling under Mid cap as per the market cap data published
by AMFI, a value of 7 is considered. Volatility value and Impact
cost value are considered as 6 and 5 respectively.
 The TOTAL mentioned above is calculated as under:
TABLE 17
Parameter Average Value
Market 0.1 X 5 + 0.1 X 5 + 0.1 X 7 + 0.1 X 7 + 0.1 X 7 6.6
Cap + 0.1 X 7 + 0.1 X 5 + 0.1 X 7 + 0.1 X 9
Volatility 0.1 X 5 + 0.1 X 6 + 0.1 X 6 + 0.1 X 6 + 0.1 X 6 5.8
Value + 0.1 X 6 + 0.1 X 5 + 0.1 X 6 + 0.1 X 6
Impact 0.1 X 5 + 0.1 X 5 + 0.1 X 7 + 0.1 X 7 + 0.1 X 7 6.3
cost value + 0.1 X 7 + 0.1 X 5 + 0.1 X 5 + 0.1 X 9
Simple 6.2
Average
 Simple average of the above three parameters comes out to 6.2
[(6.6+5.8+6.3)/3]
CASH – Component J
 Further, cash component is valued as 1.
PORTFOLIO RISK-O-METER VALUE:
 Hence, the average for the total portfolio is 6.2 + 0.1 x 1 = 6.3
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Master Circular for Mutual Funds as on March 31, 2024
 Since the value of risk is higher than 5, it shall fall into range of
Very High Risk.
 Therefore, risk-o-meter for the abovementioned equity scheme
would be Very High, and shall be as depicted below:
3. Multi asset scheme:
 Consider a Multi Asset category scheme having 10 securities with
following attributes:
TABLE 18
Securities
Type of Weight as Market Volatili Impact
held by the
security % of AUM Cap ty cost
scheme
Equity A 20% Large Cap 0.01% 0.2%
Equity B 10% Large Cap 1.5% 0.3%
Equity C 10% Mid cap 2.5% 1.5%
Macaul
Securities Weight as
Type of Credit ay
held by the a % of Structure
security rating Duratio
scheme AUM
n
Debt D 10% No
additional
A 2.6
feature/st
ructure
Debt E 10% No
additional
AA 2.1
feature/st
ructure
Debt F 10% No
AAA 2.8
additional
561
Master Circular for Mutual Funds as on March 31, 2024
TABLE 18
feature/st
ructure
TREPS G 10% - - -
Gold ETF H 10% - - -
REITS I 10% - - -
Interest J -20%
rate swap
(IRS)
 As interest rate swap instrument was used for hedging, it is not
included while calculating the risk value.
 Macaulay Duration of debt scheme portfolio (D, E & F) is 2.5 years
 Based on the above portfolio, following shall be the valuing of the
securities held by the scheme across parameters:
TABLE 19
Securities held Weight as Market Cap Volatility Impact
by the scheme % of AUM Value Value cost Value
A 20% 5 5 5
B 10% 5 6 5
C 10% 7 6 7
Interest
Securities held Weight as a Credit Risk Liquidity
rate risk
by the scheme % of AUM value risk value
value
D 10% 6 7
E 10% 3 4
F 10% 1 2
G 10% 1 1
EQUITY- Security A, B and C
TABLE 20
Securities held Weight as Market Cap Volatility Impact
by the scheme % of AUM Value Value cost Value
A 20% 5 5 5
B 10% 5 6 5
C 10% 7 6 7
TABLE 21
Parameter Average Value
Market Cap 0.2 X 5 + 0.1 X 5 + 0.1 X 7 2.2
Volatility Value 0.2 X 5 + 0.1 X 6 + 0.1 X 6 2.2
Impact cost 0.2 X 5 + 0.1 X 5 + 0.1 X 7 2.2
value
Simple Average 2.2
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Master Circular for Mutual Funds as on March 31, 2024
DEBT- Security D, E, F and G
TABLE 22
Interest
Securities held Weight as a Credit Risk Liquidity
rate risk
by the scheme % of AUM value risk value
value
D 10% 6 7
E 10% 3 4
F 10% 1 2
G 10% 1 1
TABLE 23
Parameter Average Value
Credit risk 0.1 X 6 + 0.1 X 3 + 0.1 X 1 + 0.1 X 1 1.1
IR Risk 0.4 x 4 1.6
LR value 0.1 X 7 + 0.1 X 4 + 0.1 X 2 + 0.1 X 1 1.4
Simple Average 1.37
 For debt component, Simple average of the three parameters
comes out to 1.37.
 Since the liquidity risk value of 1.4 is higher than the average value
of above three parameters i.e. 1.37, the risk value assigned to the
scheme will be 1.4.
GOLD and REITS - H and I
TABLE 24
Securities held Weight as a
Risk Value Value
by the scheme % of AUM
H 10% 4 0.4
I 10% 7 0.7
PORTFOLIO RISK-O-METER VALUE:
 The final weighted average risk value for the portfolio is as under:
2.2 + 1.4 + 0.4 + 0.7 = 4.7
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Master Circular for Mutual Funds as on March 31, 2024
 Since the value of risk is higher than 4, it shall fall into range of
High Risk.
 Therefore, risk-o-meter for the abovementioned scheme would be
High, and shall be as depicted below.
564
Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 10: STEWARDSHIP CODE FOR ALL MUTUAL FUNDS IN
RELATION TO THEIR INVESTMENT IN LISTED EQUITIES656
 Principle 1
Institutional Investors should formulate a comprehensive policy on the discharge of
their stewardship responsibilities, publicly disclose it, review and update it
periodically.
Guidance
Stewardship responsibilities include monitoring and actively engaging with
investee companies on various matters including performance (operational,
financial, etc.), strategy, corporate governance (including board structure,
remuneration, etc.), material environmental, social, and governance (ESG)
opportunities or risks, capital structure, etc. Such engagement may be through
detailed discussions with management, interaction with investee company boards,
voting in board or shareholders meetings, etc.
Every institutional investor should formulate a comprehensive policy on how it
intends to fulfill the aforesaid stewardship responsibilities and disclose it publicly.
In case any of the activities are outsourced, the policy should provide for the
mechanism to ensure that in such cases, stewardship responsibilities are exercised
properly and diligently.
The policy should be reviewed and updated periodically and the updated policy
should be publicly disclosed on the entity's website. A training policy for personnel
involved on implementation of the principles is crucial and may form a part of the
policy.
656 SEBI Circular no. CIR/CFD/CMD1/ 168 /2019 dated December 24, 2019
565
Master Circular for Mutual Funds as on March 31, 2024
 Principle 2
Institutional investors should have a clear policy on how they manage conflicts of
interest in fulfilling their stewardship responsibilities and publicly disclose it.
Guidance
As a part of the aforesaid comprehensive policy, institutional investors should
formulate a detailed policy for identifying and managing conflicts of interest. The
policy shall be intended to ensure that the interest of the client/beneficiary is
placed before the interest of the entity. The policy should also address how matters
are handled when the interests of clients or beneficiaries diverge from each other.
The conflict of interest policy formulated shall, among other aspects, address the
following:
1. Identifying possible situations where conflict of interest may arise. E.g. in case
of investee companies being associates of the entity.
2. Procedures put in place by the entity in case such conflict of interest situations
arise which may, inter alia, include:
a. Blanket bans on investments in certain cases
b. Having a ‘Conflict of Interest’ Committee to which such matters may be
referred to.
c. Clear segregation of voting function and client relations/ sales functions.
d. Policy for persons to recuse from decision making in case of the person
having any actual/ potential conflict of interest in the transaction.
e. Maintenance of records of minutes of decisions taken to address such
conflicts.
3. Periodical review and update of such policy and public disclosure.
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Master Circular for Mutual Funds as on March 31, 2024
 Principle 3
Institutional investors should monitor their investee companies.
Guidance
As a part of the aforesaid comprehensive policy, institutional investors should have
a policy on continuous monitoring of their investee companies in respect of all
aspects they consider important which shall include performance of the
companies, corporate governance, strategy, risks etc.
The investors should identify the levels of monitoring for different investee
companies, areas for monitoring, mechanism for monitoring etc. The investors may
also specifically identify situations where they do not wish to be actively involved
with the investee companies e.g. in case of small investments.
The investors should also keep in mind regulations on insider trading while seeking
information from the investee companies for the purpose of monitoring.
Accordingly, the institutional investors shall formulate a policy on monitoring
specifying, inter-alia, the following:
1. Different levels of monitoring in different investee companies. E.g. companies
where larger investments are made may involve higher levels of monitoring vis-à-
vis companies where amount invested in insignificant from the point of view of its
assets under management.
2. Areas of monitoring which shall, inter-alia, include:
a. Company strategy and performance - operational, financial etc.
b. Industry-level monitoring and possible impact on the investee companies.
c. Quality of company management, board, leadership etc.
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Master Circular for Mutual Funds as on March 31, 2024
d. Corporate governance including remuneration, structure of the board
(including board diversity, independent directors etc.) related party
transactions, etc.
e. Risks, including Environmental, Social and Governance (ESG) risks
f. Shareholder rights, their grievances etc.
3. Identification of situations which may trigger communication of insider
information and the procedures adopted to ensure insider trading regulations are
complied with in such cases.
 Principle 4
Institutional investors should have a clear policy on intervention in their investee
companies. Institutional investors should also have a clear policy for collaboration
with other institutional investors where required, to preserve the interests of the
ultimate investors, which should be disclosed.
Guidance
Institutional investors should have a clear policy identifying the circumstances for
active intervention in the investee companies and the manner of such intervention.
The policy should also involve regular assessment of the outcomes of such
intervention. Intervention should be considered even when a passive investment
policy is followed or if the volume of investment is low, if the circumstances so
demand.
Circumstances for intervention may, inter alia, include poor financial performance
of the company, corporate governance related practices, remuneration, strategy,
ESG risks, leadership issues, litigation etc.
The mechanisms for intervention may include meetings/discussions with the
management for constructive resolution of the issue and in case of escalation
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Master Circular for Mutual Funds as on March 31, 2024
thereof, meetings with the boards, collaboration with other investors, voting
against decisions, etc. Various levels of intervention and circumstances in which
escalation is required may be identified and disclosed. This may also include
interaction with the companies through institutional investor associations (E.g.
AMFI). A committee may also be formed to consider which mechanism to be opted,
escalation of matters, etc. in specific cases.
 Principle 5
Institutional investors should have a clear policy on voting and disclosure of voting
activity.
Guidance
To protect and enhance wealth of the clients/ beneficiaries and to improve
governance of the investee companies, it is critical that the institutional investors
take their own voting decisions in the investee company after in-depth analysis
rather than blindly supporting the management decisions.
This requires a comprehensive voting policy to be framed by the institutional
investors including details of mechanisms of voting, circumstances in which voting
should be for/against/abstain, disclosure of voting, etc. The voting policy, voting
decisions (including rationale for decision), use of proxy voting/voting advisory
services, etc. should be publicly disclosed.
The voting policy shall, inter-alia, include the following:
1. Mechanisms to be used for voting (e.g. e-voting, physically attending meetings,
voting through proxy, etc.)
2. Internal mechanisms for voting including:
a. Guidelines on how to assess the proposals and take decision thereon
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Master Circular for Mutual Funds as on March 31, 2024
b. Guidelines on how to vote on certain specific matters/ circumstances
including list of such possible matters/circumstances and factors to be
considered for a decision to vote for/ against/ abstain
c. Formulation of oversight committee as an escalation mechanism in
certain cases
d. Use of proxy advisors
e. Policy for conflict of interest issues in the context of voting
3. Disclosure of voting including:
a. Periodicity of disclosure
b. Details of actual voting for every proposed resolution in investee
companies i.e. For, Against or Abstain
c. Rationale for voting
d. Manner of disclosure – e.g. in annual report to investors, quarterly basis
on website etc.
4. In case of use of proxy voting or other voting advisory services, disclosures on:
a. Scope of such services
b. Details of service providers
c. Extent to which the investors rely upon/use recommendations made by
such services
 Principle 6
Institutional investors should report periodically on their stewardship activities.
Guidance
Institutional investors shall report to their clients/ beneficiaries periodically on
how they have fulfilled their stewardship responsibilities as per their policy in an
easy-to-understand format.
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Master Circular for Mutual Funds as on March 31, 2024
However, it may be noted that the compliance with the aforesaid principles does
not constitute an invitation to manage the affairs of a company or preclude a
decision of the institutional investor to sell a holding when it is in the best interest
of clients or beneficiaries.
Institutional investors shall report periodically on their stewardship activities in
the following manner:
1. A report may be placed on website on implementation of every principle. Different
principles may also be disclosed with different periodicities. E.g. Voting may be
disclosed on quarterly basis while implementation of conflict of interest policy may
be disclosed on an annual basis. Any updation of policy may be disclosed as and
when done.
2. The report may also be sent as a part of annual intimation to its clients/
beneficiaries.
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Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 11: DECLARATION FORM FOR OPTING OUT OF NOMINATION657
To, Date:
D D D M M Y Y Y Y
Mutual Fund/ AMC’s Name
Mutual Fund/ AMC’s Address
Mutual Fund Folio Number
Sole/First Holder Name
Second Holder Name
Third Holder Name
I/We hereby confirm that I/We do not wish to appoint any nominee(s) for any
mutual fund units held in my/ our mutual fund folio and understand the issues
involved in non-appointment of nominee(s) and further are aware that in case of
death of all the account holder(s), my/our legal heirs would need to submit all the
requisite documents issued by Court or other such competent authority, based
on the value of assets held in the mutual fund folio.
Name and Signature of Unitholder(s)
Unitholder (1) Signature: ______________________ Name: _______________________
Unitholder (2) Signature: ______________________ Name: _______________________
Unitholder (3) Signature: ______________________ Name: _______________________
657 SEBI Circular no. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/82 dated June 15, 2022
572
Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 12: GUIDELINES REGARDING THE MARKET MAKING
FRAMEWORK658
1. Market Making in ETFs
The following broad points shall be considered while designing the market making
framework in ETFs:
1.1. Obligations of AMC: Obligations shall, inter-alia, include:
1.1.1. AMCs to enter into agreement with at least two Market Makers
(MMs) for each ETF.
1.1.2. AMCs may select MMs based on various criteria including
experience in the capital market, capital adequacy, net worth,
infrastructure, volume of business, etc.
1.2. Obligations and responsibilities of a Market Maker: Obligations shall,
inter-alia, include:
1.2.1. Quote: MM shall be mandated to provide a two-way quote during
such minimum time frame for which the MM may be required to
make market. MM shall guarantee execution of orders at quoted
price and quantity for quotes given by it.
1.2.2. Minimum timeframe: The minimum time frame for which the MM
is required to make the market shall be 75% of the time during
market hours of a trading day. Further, MM shall also be mandated
to be present in the Best Buy/Sell order/quote for e.g. top 5
buy/sell order/quote.
1.3. Information to be collected from Stock Exchanges: AMCs to collect
the following information from SEs on daily basis:
658 SEBI Circular No. SEBI/HO/IMD/DOF2/P/CIR/2022/69 dated May 23, 2022
573
Master Circular for Mutual Funds as on March 31, 2024
1.3.1. Total quantity traded by the MM in a particular ETF and its % trade
to total quantity traded in the market of that ETF.
1.3.2. Minimum, Maximum and Median prices at which the MM has
executed the trades.
1.3.3. Minimum, Maximum and Median spread at which the MM has
provided the quotes.
1.4. Compensation of MM: The issue of compensation is to be decided
between the AMC and the MM. It may have recourse to factors such as
trading volume, bid-ask spread in units of ETFs, and such other
information as may be required to formalize performance based incentive
structure.
574
Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 13: ANNEXURES TO CHAPTER 16B659
Annexure-13A
Minimum disclosure requirements for every scheme of Mutual Funds offered for
execution on the EOP:
1. Name of the Mutual Fund. Link to Mutual Fund website whose products
are offered.
2. Name of the scheme of the Mutual Fund. Type and category of the scheme
of Mutual Fund.
3. Name of the Fund Manager.
4. Investment objective of scheme.
5. Scheme performance along with source.
6. Scheme details such as minimum investment, AUM, NAV, Exit Load,
Expense Ratio.
7. Risk-o-Meter of the scheme and Potential Risk Matrix, wherever applicable.
8. Other mandatory disclosures regarding Mutual Fund scheme to the
investors.
9. Any other details / documents as may be specified by SEBI from time to
time.
659 Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-I –PoD1/P/CIR/2023/86 dated July 13,
2023
575
Master Circular for Mutual Funds as on March 31, 2024
Annexure – 13B
The Category 2 EOP shall keep and maintain the following books of account,
records and documents, namely: —
a) Details of investor wise transactions, including time of request for
subscription and redemption.
b) Details of failed transactions, if any and the reasons thereof.
c) Documents pertaining to on-boarding of clients including KYC documents,
client account opening forms and Rights and Obligation documents.
576
Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 14: DETAILS OF STRATEGIES660
1. Exclusion
Exclude securities based on certain ESG related activities, business practices,
or business segments The strategy should specify
i. the characteristic / type of exclusion (Adverse impact, Controversy, Faith)
ii. threshold or condition for exclusion, and
iii. reference, where applicable, to any law/ regulation/ third-party
standard/ guideline/ framework used in the establishment or evaluation of
the criterion.
2. Integration
Explicitly consider ESG related factors that are material to the risk and return
of the investment, alongside traditional financial factors, when making
investment decisions.
3. Best-in-class & Positive Screening
Aim to invest in companies and issuers that perform better than peers on one
or more performance metrics related to ESG matters. The details/specifics of
the metrics should be disclosed.
4. Impact investing
Seeks to generate a positive, measurable social or environmental impact
alongside a financial return and how the Fund Manager intends to achieve the
impact objective.
Provide methodology used to assess the effect that investments have, or may
have, on environmental or social or governance issues. Describe the process
for identifying and avoiding, mitigating, or managing adverse effects that the
scheme or underlying companies' activities have, or may have, on
660 Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-I –PoD1/P/CIR/2023/125 dated July 20,
2023
577
Master Circular for Mutual Funds as on March 31, 2024
environmental or social issues. The fund should seek a non-financial (real
world) impact and evaluate if that impact is being measured and monitored.
5. Sustainable objectives
Aim to invest in sectors, industries, or companies that are expected to benefit
from long-term macro or structural ESG-related trends. Describe the focussed
objective including rationale for focussing on that objective.
6. Transition or transition related investments
Aim to invest in companies and issuers that support/facilitate environmental
transition and just transition. The investment should generate a positive and
measurable social and environmental transition.
******
578
Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 15: UNIT HOLDER PROTECTION COMMITTEE (UHPC)661
1. Membership / constitution:
a) The Chairperson of the Committee shall be an independent director.
b) The UHPC of AMC shall have minimum three directors as members.
c) At least two-third members of the UHPC shall be independent directors of AMC.
If two-third of the total strength results into fraction, then higher number after
rounding up shall be considered.
d) The members of the UHPC will be appointed by the board of directors of AMC.
e) The UHPC shall invite expert / representative of unit holders as an invitee for
matters as it may deem fit necessary.
2. Meetings:
a) The Chairperson of the UHPC shall call the meeting as and when required.
However, at least four meetings shall be held in a financial year.
b) The quorum for meeting shall either be two members or one third of the mem-
bers of the UHPC, whichever is greater, with at least two independent directors.
c) If one-third of the total strength results into fraction, then higher number after
rounding up shall be considered for the quorum.
3. Reporting:
a) The AMC shall present agenda of the UHPC to its members. This shall also in-
clude reports on findings / observations w.r.t matters relating to protection of unit
holders’ interest, arising from audits / reviews etc. undertaken by the AMC, Inter-
nal Auditors etc.
b) The UHPC of AMC shall brief board of directors of the AMC on the proceedings
of the meeting. Further, minutes of the meeting of the UHPC shall also be placed
before the board of directors of Trustee Company.
4. Powers and responsibilities
4.1 Unit holder complaints and redressal
661 SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/117 dated July 07, 2023
579
Master Circular for Mutual Funds as on March 31, 2024
a) Review of unit holder complaints and grievances with ageing of outstanding
complaints on a periodical basis
b) Review of complaints / grievances handling mechanism including reported in-
stances of mis-selling and frauds, if any. Analyse the root cause of investor
complaints, identify market conduct, issues and advise the management appro-
priately about rectifying systemic issues, if any.
c) Review measures and steps taken to reduce unit holder complaints
4.2 Investor education and awareness
a) Recommendation of policy on utilisation of investor education and awareness
funds
b) Review of various investor education and awareness steps taken by the AMC
in-cluding effective utilisation of investor education and awareness funds on
period-ic basis
4.3 Regulatory and other functions
a) Ensure that the AMC adopts a standard operating procedure for its processes
including timeframe for processing and confirmation of financial and non-financial
transactions, treats unit holders fairly and equally and there is no pref-erential
treatment given to different classes of investors.
b) Ensure compliances with applicable laws with respect to resolving, reporting
and disclosures of complaints and grievances
c) Review of unclaimed amounts of dividend and redemptions and measures taken
by AMC to reduce the quantum of such unclaimed amounts.
d) Review of measures taken by AMC for exit options, voting and obtaining con-
sents as prescribed under the MF Regulations.
e) Review of transfer, transmission, and nomination process.
f) Review of adherence to service standards adopted with respected to various
services adopted by the AMC being rendered by the RTA.
g) Review of measures taken for ensuring timely receipt of dividend and redemp-
tion proceeds, annual reports, and other regulatory communications/disclosures.
h) Ensure timeliness and adequacy of disclosures of material information to the
in-vestors.
580
Master Circular for Mutual Funds as on March 31, 2024
i) Review other activities carried out by the AMC (under Regulation 24 (b) of MF
Regulations and its impact on the unit holders of Mutual Fund.
j) Ensure that all conflicts are adequately managed and/or disclosed as per the
conflict-of-interest policy.
k) Review of all investors/scheme compensation to ensure they are fair and appro-
priate.
l) Review instances of market abuse by employees of AMC.
4.4 Review of Unitholder Protection (UP) metrics
a) Ensure that the AMC has approved internal policy for measurement of various
parameters (such as cases of investor compensation, investor complaints, fraud
incidents impacting any investor/ scheme, consistent underperformance of any
scheme, number of incidents where the agreed Turn Around Time (TAT) has ex-
ceeded with respect to investor related transactions such as redemptions/ re-
dressal of investor complaints/ non-financial transactions, etc., system issues/
incidents/ BCP events impacting investors, data privacy / cyber security incidents
impacting investors) through appropriate UP metrics. The UP metrics should be
approved by the Committee, along with the targeted level / benchmark for each
parameter, where possible.
b) Put in place a mechanism for reporting of the UP metrics to the Committee.
c) Review the reports generated with respect to the UP metrics at least once in a
half year.
581
Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 16A: APPROACH TO PURCHASE PRICING662
Approach to purchase pricing:
1. While it may not be possible to pre-empt the events and scenarios prevailing at
the point of time when purchase of securities is being undertaken by CDMDF,
the investment policy may provide for following indicative factors for
determining purchase price of corporate debt securities:
1.1. Valuation policies prescribed for Mutual Funds (based on the principles of
fair valuation).
1.2. Previous day’s valuation of securities by valuation agencies before the date
of Purchase.
1.3. Average 10 days valuation prior to start of market dislocation.
1.4. Mark-up in yield over previous day may be limited to arrive at floor price.
For eg: it may be 25/50/75 bps over AAA/AA/Below AA securities
respectively.
1.5. Consideration of Spread over benchmark/ spread over sovereign yields.
1.6. Qualitative factors that may have bearing on arriving at fair price.
2. The investment policy shall be duly approved & reviewed periodically by the
Board of Trustee, Investment Committee & Governance Committee. CDMDF
shall adhere to investment framework laid down in the investment policy & the
fund documents.
3. However, in case the Investment Manager is at variance from the aforesaid
factors, they may, after recording reasons in writing and approval from
Investment Committee, take such price as deemed fit with an objective of
achieving the fair pricing (adjusted for liquidity risk, interest rate risk and
credit risk). Such instances shall be apprised to Governance Committee and
Board of Trustees on a regular basis.
4. Investment framework of CDMDF:
4.1. CDMDF would buy securities from secondary market of only investment
grade, listed and having residual maturity of upto 5 years.
4.2. CDMDF shall not buy any unlisted, below investment grade or defaulted
debt securities or securities in respect of which there is a material
662 Inserted by SEBI Circular No. SEBI/HO/IMD/POD2/P/CIR/2023/128 dated July 27, 2023
582
Master Circular for Mutual Funds as on March 31, 2024
possibility of default or adverse credit news or views. The rationale for the
same shall be documented.
4.3. Purchase of securities to be done as per the above fair pricing guidelines
to be adjusted if considered appropriate by the IM for liquidity risk, interest
rate risk, and credit risk. Buying/trading to be at fair price but not at
distress price.
4.4. Selling at breakeven/profit as market stabilize, to reduce borrowing as
soon as possible.
4.5. Valuation of portfolio shall be governed by existing norms on valuation
under the Mutual Fund regulatory framework.
583
Master Circular for Mutual Funds as on March 31, 2024
ANNEXURE 16B: LOSS WATERFALL ACCOUNTING FOR CDMDF663
Based on deliberations with Mutual Fund industry, the following shall be the
approach for reflection of waterfall in the NAV of units of CDMDF
A. There shall be three classes of units to be allotted by CDMDF, which shall
be as follows:
1. Class A1 and Class B units shall be allotted to AMCs and Sponsor/IM
respectively (against one time contribution of 0.02% of AUM of
specified debt schemes and Sponsor/IM commitment). Class A1 units
and Class B units are treated at par and referred as Class A1 units
only.
2. Class A2 units shall be allotted to specified debt schemes
(contributing 0.25% of AUM of specified debt schemes)
3. Class A3 units shall be allotted to Mutual Fund schemes selling debt
securities to the Fund (where 10% of the consideration is in the form
of units of CDMDF, called A3 units)
B. Daily NAV should reflect the fair value of each unit class including the effect
of differential treatment of A3 unit class. The loss waterfall based on CDMDF
Framework is as follows:
Level of loss Particulars Hereinafter referred
absorption as
1st Up to 10% by MF Class A3 units
schemes selling debt
securities to the Fund
(i.e., equivalent to the
units outstanding of
the selling MF schemes
issued to them against
sale of securities to
CDMDF)
2nd Contribution of Class A1 and A2 units
specified debt oriented
MF Schemes and
AMCs
3rd Government NA
Guarantee
C. The following process shall be followed:
663 Inserted by SEBI Circular No. SEBI/HO/IMD/POD2/P/CIR/2023/128 dated July 27, 2023
584
Master Circular for Mutual Funds as on March 31, 2024
1. All profits/losses/income/gains/expenses to be apportioned to A1
and A2 unit class in ratio of their AUM during the normal times.
2. A3 units to be allotted at the same NAV as that of A1 & A2 at the time
of opening of market dislocation.
3. All profits/losses/income/gains/expenses (including cost of leverage)
to be apportioned to all the 3 class of units during the market
dislocation and subsequently till A3 units exits (i.e A1/A2/A3), except
that the NAV of A1 and A2 should not drop below their opening NAV
(opening NAV at the time of market dislocation). Since A1 and A2
units are to be protected at their opening NAV to that extent the
excess/unabsorbed loss/expense would be debited to only A3 unit
class. This would mean the NAV of A3 units could drop below the NAV
of A1&A2
4. Any subsequent profits/gains/income will be first credited to the A3
unit class to an extent that they come back at par with A1 & A2 NAV,
and then the balance to be apportioned to all the three unit class.
5. A3 units will not get any exit till there is an outstanding portfolio from
market dislocation and leverage is completely paid.
6. Any subsequent allotment of A3 units would be at the same NAV as
that of the existing A3 units (if they exist), otherwise at opening NAV
of A1 and A2. There will be only one class/bucket of A3 units
irrespective of whether they were issued in subsequent tranche of
purchase during a particular phase of market dislocation or were
issued during another phase of market dislocation. Therefore any
adjustment for loss/expense will be carried out to the entire bucket o
A3 units irrespective of when they were allotted.
7. There will not be any segregation of portfolio linking to different phase
or tranches of purchase during the market dislocation, entire portfolio
will be one common pool, both during the normal times or during the
market dislocation including if there is any security that exist from
normal times and is continued during the market dislocation
8. The accounting of A3 and certain adjustments of NAV may require
manual workings by the fund accountant and will not be completely
system driven. Such manual workings can be subject to second check
by the concurrent auditor.
D. The above is as per various scenarios that have been envisaged currently. There
may be a need that may arise with some other scenarios emerging and the same
would be dealt with appropriately through relevant committee.
585
Master Circular for Mutual Funds as on March 31, 2024
Loss Waterfall accounting for CDMDF
Allocation Mechanism
Investment
INR A1 A2 A3 Total GSEC/CBLO MD-INVT A3 Situation System
Subscription 1,000 1,000 - 2,000
Face value 10.00 10.00 -
Number of units 100 100 -
Part A
Scenario - 1 2,000 2,010 Investment in Government Securities and T-Bills System driven calculation
MTM Gain is proportionately allocated to all the unit holders (except A3
MTM Gain 5 5 - 10 doesn't exist as of now)
NAV of the unit 10.05 10.05 -
NAV of the Corpus 1,005 1,005 - 2,010
Scenario - 2 2,002 Investment in Government Securities and T-Bills System driven calculation
MTM loss is proportionately allocated to all the unit holders (except A3
MTM Loss -4 -4 - -8 doesn't exist as of now)
NAV of the unit 10.01 10.01 -
NAV of the corpus 1,001 1,001 - 2,002
Scenario - 3 2,006 Investment in Government Securities and T-Bills System driven calculation
Gain is proportionately allocated to all the unit holders (except A3 doesn't
Realised gain 2 2 - 4 exist as of now)
NAV of the unit 10.03 10.03 -
NAV of the Corpus 1,003 1,003 - 2,006
Scenario - 4 2,004 Investment in Government Securities and T-Bills System driven calculation
loss is proportionately allocated to all the unit holders (except A3 doesn't
Realised loss -1 -1 - -2 exist as of now)
NAV of the unit 10.02 10.02 -
NAV of the corpus 1,002 1,002 - 2,004
Scenario - 5 204 2,000 Market Dislocation triggered System driven calculation
Opening NAV of the Corpus 1,002 1,002 - 2,004
Number of opening units 100 100 -
Opening NAV of the unit 10.02 10.02 -
Additional Capital - - 200 200
A3 NAV assumed to be same as A1 and A2 while allotting the units. A1
NAV at the which the units to be allotted 10.02 10.02 10.02 and A2 NAV will be the opening NAV for the market dislocation trigger
Number of additional units - - 19.96
Total corpus (NAV) 1,002 1,002 200 2,204
Part B
system driven except the FA needs to now start monitoring the NAV of A1 and A2 should not
Scenario - 6 214 2,000 MTM profit drop below their opening NAV of Rs. 10.02 till A3 NAV is positive
MTM Gain 4.5 4.5 0.9 10 MTM gain gets apportioned to all the unit class
NAV of the unit 10.07 10.07 10.07
NAV of the Corpus 1,007 1,007 201 2,214
586
Master Circular for Mutual Funds as on March 31, 2024
system driven except the FA needs to now start monitoring the NAV of A1 and A2 should not
Scenario - 7 206 2,000 MTM Loss drop below their opening NAV of Rs. 10.02 till A3 NAV is positive
MTM gain gets apportioned to all the unit class, however the NAV of A1
MTM Loss -3.6 -3.6 -0.7 -8 and A2 should not drop below opening NAV of 10.02
NAV of the unit 10.03 10.03 10.03
NAV of the corpus 1,003 1,003 200 2,206
system driven except the FA needs to now start monitoring the NAV of A1 and A2 should not
Scenario - 8 710 1,500 Realised Gain drop below their opening NAV of Rs. 10.02 till A3 NAV is positive
Realised gain 1.8 1.8 0.4 4 Realised gain gets apportioned to all the unit class
NAV of the unit 10.05 10.05 10.05
NAV of the Corpus 1,005 1,005 201 2,210
Scenario - 9 908 1,300
system driven except the FA needs to now start monitoring the NAV of A1 and A2 should not drop
Realised loss -0.9 -0.9 -0.2 -2 Realised Loss below their opening NAV of Rs. 10.02 till A3 NAV is positive
NAV of the unit 10.04 10.04 10.04
NAV of the corpus 1,004 1,004 200 2,208 Realised Loss gets apportioned to all the unit class
Scenario - 10 888 1,300 Significant MTM loss Manual working and intervention required
MTM loss -9.1 -9.1 -1.8 -20
with the loss getting apportioned to all the 3 unit classes, the NAV of A1
NAV of the unit 9.95 9.95 9.95 and A2 is falling below their opening NAV of 10.020
NAV of the corpus 995 995 199 2,188
Manual working and adjustment to be carried out 888 1,300
Current NAV of units 10.04 10.04
Less: Protection to opening NAV 10.02 10.02
Surplus to absorb the w/off 0.02 0.02
Number of units 100 100
Loss to be absorbed by A1 and A2 1.82 1.82 3.64
NAV post the loss absorption 10.02 10.02 which is same as the opening NAV
Unabsorbed loss entirely to A3 -16.36 -16.36
Corpus NAV of A3 units post absorbing the
waterfall loss 184
Now A3 unit NAV drops below the NAV of A1 and A2. this is manual
A3 class unit NAV post absorbing the waterfall adjustment to be done in the system where there should be transfer of
loss 9.22 value between the unit class based on such workings
Closing corpus( NAV) 1,002 1,002 184 2,188
Scenario - 11 1,858 300 Significant cash loss (realised loss) Manual working and intervention required
Cash loss -13.7 -13.7 -2.5 -30
with the loss getting apportioned to all the 3 unit classes, the NAV of A1
NAV of the unit 9.88 9.88 9.09 and A2 is falling below their opening NAV of 10.020
NAV of the corpus 988 988 181 2,158
Manual working and adjustment to be carried out
Current NAV of units 10.02 10.02
Less: Protection to opening NAV 10.02 10.02
Surplus to absorb the w.off - -
Number of units 100 100
Loss to be absorbed by A1 and A2 - - -
NAV post the loss absorption 10.02 10.02 which is same as the opening NAV
Unabsorbed loss entirely to A3 -30 -30
Corpus NAV of A3 units post absorbing the
waterfall loss 154
Now A3 unit NAV drops below the NAV of A1 and A2. this is manual
A3 class unit NAV post absorbing the waterfall adjustment to be done in the system where there should be transfer of
loss 7.72 value between the unit class based on such workings
Closing corpus( NAV) 1,002 1,002 154 2,158
587
Master Circular for Mutual Funds as on March 31, 2024
Additional Security of Rs 1000 purchased and A3 units issued for 10%
Scenario -12 1,038 1,300 & MTM Gain of 80 Manual working and intervention required
Current NAV of units 10.02 10.02 7.72
Number of units 100 100 19.96
Additional units 12.96
Additional Capital - - 100 100
Shortfall in A3 NAV Corpus 2.30
Cash profit to be first adjusted to bridge the
shortfall 75.87 80
Corpus NAV post bridging the gap 1,002.00 1,002.00 329.87 2,333.87
Balance Cash profit to be distributed 4.13
Distribution of balance profits 1.77 1.77 0.58 4.13
Closing corpus NAV 1,003.77 1,003.77 330.45 2,338
Number of units 100 100 32.92
NAV per unit 10.04 10.04 10.04
Scenario -13 1,313 1,000 A3 portfolio sold of Rs 300 at Realised loss of Rs 40 & MTM of Rs 15 Manual working and intervention required
MTM Gain - - - 15
Cash Loss -40
Current NAV of units 10.04 10.04 10.04
Less: Protection to opening NAV 10.02 10.02
Surplus to absorb the w/off 0.02 0.02
Number of units 100 100
Loss to be absorbed by A1 and A2 -1.77 -1.77 -3.55
NAV post the loss absorption 10.02 10.02
Unabsorbed loss entirely to A3 -21.45 -21.45
A3 class unit NAV post absorbing the waterfall
loss 9.39
NAV of all unit holders post loss allocation 10.02 10.02 9.39
Number of units across unit holders 100.00 100.00 32.92 232.92
Corpus NAV post bridging the gap 1,002 1,002 309 2,313
-
MTM gain gets apportioned to A3 until the Opening NAV and then to
Scenario -14 1,343 1,000 all remaining unit holders Manual working and intervention required
MTM Gain 30
NAV of the unit 10.02 10.02 9.39
Shortfall in A3 (2)NAV Corpus 0.63
Cash profit to be first adjusted to bridge the
shortfall 20.87
Corpus NAV post bridging the gap 1,002.00 1,002.00 329.87 2,334
Balance Cash profit to be distributed 9.13
Post gains apportioned to A3 balance MTM gain gets apportioned to all the
Distribution of balance profits 3.92 3.92 1.29 9.13 unit class
Corpus AUM post bridging the gap 1,005.92 1,005.92 331.16 2,343
Units Held by unit holders 100.00 100.00 32.92
NAV after distribution 10.06 10.06 10.06
Notes:
1. Post achieving parity in NAV again the normal accounting would start
588
Master Circular for Mutual Funds as on March 31, 2024
FORMATS
Placed below are the formats prescribed by SEBI, standardizing disclosure
by the AMC to unitholders as well as reporting to SEBI. Please note that,
as a compliance of SEBI Regulations is a continuous process, you are
advised to incorporate the modifications/additions under the relevant
sections of the format, based on amendments to the
Regulations/guidelines issued in the future from time to time.
589
Master Circular for Mutual Funds as on March 31, 2024
INDEX OF FORMATS
1. FORMAT OF BIO DATA ............................................................................. 592
A. BIO-DATA OF DIRECTOR OF AMC/ TRUSTEE COMPANY ........................................... 592
B. BIO-DATA OF KEY PERSONNEL ................................................................................. 596
2. REPORTS ................................................................................................. 599
A. NEW SCHEME REPORT ............................................................................................. 599
B. COMPLIANCE TEST REPORT ..................................................................................... 603
C. HALF-YEARLY TRUSTEE REPORT .............................................................................. 627
D. MONTHLY CUMULATIVE REPORT.............................................................................. 634
E. ANNUAL STATISTICAL REPORT (ASR) ........................................................................ 639
F. DAILY TRANSACTION REPORT.................................................................................... 640
G. REPORT TO TRUSTEES BY AMC ................................................................................ 643
H. TREATMENT OF CORPORATE ACTIONS .................................................................... 656
I. FORMAT FOR OVERSEAS INVESTMENTS REPORT ..................................................... 657
3. FINANCIALS ............................................................................................. 659
A. HALF YEARLY FINANCIAL RESULTS FOR THE YEAR ENDED ....................................... 659
B. ABRIDGED SCHEME-WISE ANNUAL REPORT FORMAT .............................................. 663
C. MONTHLY PORTFOLIO DISCLOSURE AND HALF YEARLY PORTFOLIO
DISCLOSURES ............................................................................................................... 672
D. DISCLOSURE OF MONTHLY AAUM ............................................................................ 679
E. FORMATS FOR FINANCIAL STATEMENTS OF THE MUTUAL FUND SCHEMES AS PER
INDIAN ACCOUNTING STANDARDS (IND AS) .................................................................. 681
F. INDICATIVE FORMAT OF HALF-YEARLY CONSOLIDATED ACCOUNT STATEMENT ..... 698
4. APPLICATION FOR OVERSEAS INVESTMENTS ......................................... 699
5. STANDARD OFFER DOCUMENTS .............................................................. 701
A. SCHEME INFORMATION DOCUMENT (SID) ................................................................ 701
B. STATEMENT OF ADDITIONAL INFORMATION (SAI) .................................................... 721
C. KEY INFORMATION MEMORANDUM (KIM) ................................................................. 728
D. PLACEMENT MEMORANDUM .................................................................................... 731
6. STANDARD OBSERVATIONS ..................................................................... 743
A. STANDARD OBSERVATION FOR SCHEME INFORMATION DOCUMENT (SID) ............. 743
B. STANDARD OBSERVATIONS FOR STATEMENT OF ADDITIONAL INFORMATION (SAI) 747
7. DISCLOSURES .......................................................................................... 749
A. INDICATIVE FORMAT OF DISCLOSURE ON PERFORMANCE OF OTHER SCHEMES
MANAGED BY THE FUND MANAGER ............................................................................. 749
B. BROKERAGE AND COMMISSION PAID TO ASSOCIATES ............................................ 750
C. ROLE OF MUTUAL FUNDS IN CORPORATE GOVERNANCE OF PUBLIC LISTED
COMPANIES ................................................................................................................... 751
590
Master Circular for Mutual Funds as on March 31, 2024
D. DISCLOSURE OF INVESTOR COMPLAINTS WITH RESPECT TO MUTUAL FUNDS ....... 752
E. FORMAT FOR DISCLOSURE OF TOTAL EXPENSE RATIO (TER) OF MUTUAL FUND
SCHEMES ...................................................................................................................... 757
F. FORMAT FOR DISCLOSURE OF CALL OPTIONS WRITTEN .......................................... 758
G. REPORTING FORMATS FOR CREDIT DEFAULT SWAPS (CDS) .................................... 759
8. FORMAT FOR REPORTING OF ALL TRANSACTION IN DEBT AND MONEY
MARKET SECURITIES ..................................................................................... 761
9. FORM TO REPORT ON AI AND ML TECHNOLOGIES – TO BE SUBMITTED
QUARTERLY INTIMATION TO AMFI FOR THE USE OF THE AI AND ML APPLICATIONS
AND SYSTEMS ................................................................................................. 762
10. EXCEPTION (OBSERVATION) REPORTING FORMAT ................................. 764
11. FORMAT FOR TEMPLATE TO BE MAINTAINED WITH RESPECT TO INTER
SCHEME TRANSFERS ...................................................................................... 769
12. INVESTOR CHARTER FOR MUTUAL FUNDS ............................................. 772
13. REPORTING FORMATS FOR OFFSITE INSPECTION.................................. 780
A. FORMATS PERTAINING TO MFS AND RTAS ............................................................... 780
B. DATA FROM MUTUAL FUNDS .................................................................................... 780
C. DATA FROM RTAs – TABLE C1-C11 ........................................................................... 814
D. DETAILS OF REPORTING REQUIREMENTS AS PER THE PROVISIONS OF THE MASTER
CIRCULAR...................................................................................................................... 825
591
Master Circular for Mutual Funds as on March 31, 2024
1. FORMAT OF BIO DATA
A. BIO-DATA OF DIRECTOR OF AMC/ TRUSTEE COMPANY664
I. Identification:
1. Name:
2. Father’s name:
3. Date of birth:
4. Sex (Please tick): Male/Female
5. Present residential address:
6. Permanent address:
7. Appointment as Director of (Please tick): AMC / Trustee Co.
II. Educational Qualifications:
Experience (During last 10 years):
Name & Place of Position held Nature of job Period
Organization responsibilities From – To
If retired more than 10 years back, please indicate last position held.
For AMC directors, details of professional experience in finance and
financial services field [Reg. 21(b)]:
III. Particulars of Present Directorship and Trusteeship:
Organization Any association Position held Nature of job Period
Name with the sponsor responsibilities From – To
664 MFD/CIR /11/354/2001 dated December 20, 2001 & MFD/CIR/13/16799/2002 dated August
29, 2002
592
Master Circular for Mutual Funds as on March 31, 2024
IV. Relationship with Sponsor or AMC:
1. Are you associated with the sponsors or with any of its associate
companies in any manner during the last 3 years?
2. Are you relative of sponsor or any of the directors of the sponsor company
or relative of associate directors of the AMC or the Trustee Company?
3. Do you have personal holding in AMC or are you a nominee of an entity
having stake in AMC?
4. Have you been providing any professional service to the mutual fund,
AMC, Trustee Company or Sponsor?
5. Do you have any pecuniary relationship with the mutual fund, AMC,
Trustee Company or Sponsors?
V. Record of Regulatory Violations/Criminal Offence (if any):
1. Have you ever been convicted by a court for any criminal offence or any
other offence involving moral turpitude or fraud or have been found guilty
of any economic offence at any time in the past?
2. Has any organization of which you were an employee or director or over
which you exercise/exercised management or policy control ever been
convicted of any criminal offence or any criminal suit filed during your
association with them?
3. Have you ever been found guilty by any court / regulatory body / self-
regulatory organization / stock exchange for any offence related to
securities market in India or abroad?
4. Have you ever been associated with any organization as a director or an
employee against which SEBI had initiated action of suspension or
cancellation of certificate of registration or initiated action under Section
11(B) of SEBI Act or any prosecution launched for acts committed during
your association?
(If the answer to any of the above questions is in affirmative, please furnish
details. Please disclose any such pending proceedings also).
VI. Other Details: Achievements, Awards, Publications, etc.:
Declaration:
I affirm that all the information given above is true and complete to the best of
my knowledge and belief. I have been adequately briefed on my responsibilities
and duties under SEBI (Mutual Funds) Regulations, 1996 and agree to abide by
the same. Regarding the information contained within paragraphs VI and VII
above, SEBI would be informed immediately on any changes.
Signature:
Name:
593
Master Circular for Mutual Funds as on March 31, 2024
(New/Proposed Director)
Date:
Place:
For Use of Trustees:
1. Mr. / Ms. ------------------------- who is appointed / proposed to be
appointed as a director of AMC/Trustee Co. is a person of ability, integrity
and standing (Reg.16(2)(a).
2. In case of Chairman/ Director including independent director of AMC, he
is not a trustee of any mutual fund (Reg. 16(3) and Reg. 21(1)(e))2
3. In case of a Trustee, he is not on board of any other AMC or Trustee Co.
of any mutual fund.665
4. After his induction, the board would consist of the following members
Member’s name Status (associate / independent)
1.
2.
3….
5. (i) The trustees were discerning in the appointment of this director
(Reg.18(25)(A)(I)).
(ii) The independent directors of the trustees and AMC have paid specific
attention in the selection and nomination of this director (Reg. 18(27)(iii)
and (v)).
(iii) The director does not have any material pecuniary relationship with
the mutual fund, AMC, Trustee Company or Sponsor which in the
judgment of the Trustee may affect independence of Director (applicable
in case of independent directors also.)
6. SEBI would immediately be informed on any changes pertaining to
Paragraphs VI and VII in the Bio-Data and other requirements as specified
in Regulations would be complied with.
Signature:
Name:
(Trustee Authorized by the Board of Trustees)
665 SEBI/IMD/CIR No.14 /84243/07 dated January 15, 2007
594
Master Circular for Mutual Funds as on March 31, 2024
Date:
Place:
595
Master Circular for Mutual Funds as on March 31, 2024
B. BIO-DATA OF KEY PERSONNEL666
I. IDENTIFICATION
1. Name :
2. Fathers’ Name :
3. Date of Birth :
4. Sex :
5. Present Residential
Address :
6. Permanent Residential
Address :
II. EDUCATIONAL
QUALIFICATIONS :
III. EMPLOYMENT DETAILS :
a) Current Employer
1. Name of employer :
2. SEBI Regn. No. of employer :
3. Regd. Office of employer :
4. Address of office where employed :
b) Ten year history of employment starting with current employment:
NAME OF DESCRIBE PRIMARY OTHER REPORTING
THE FUNCTIONS RESPONSI RESPONSIBI- RELATIONSHIP
EMPLOYER -BILITIES LITIES
666 IIMARP/MF/CIR/05/788/97 dated April 28, 1997
596
Master Circular for Mutual Funds as on March 31, 2024
IV. OTHER BUSINESS
1. Brief Description of any other business, full time or part time in self name
or in name of close relative (parent-spouse-child):
2. Details of business of close relatives:
V. RECORD OF REGULATORY VIOLATIONS/CRIMINAL OFFENCE (IF ANY):
(i) Have you ever been convicted by a court for any criminal offence? :
Yes / No
(ii) Have you ever been convicted by any court or authorised body for any
offence related to the securities industry? : Yes / No
(iii)Have you or any organisation over which you exercised management
or policy control ever been convicted of any criminal offence? : Yes
/ No
(iv) Are there any proceedings against you or any organisation over which
you exercised management or policy control? : Yes / No
(v) Have you been accused of or convicted for any offence by a regulatory
of the securities or financial industry, a self-regulatory organization,
stock exchange in India or from any foreign country? : Yes / No
(vi) If the answer to any of the following questions is yes, please furnish
details. N.A.
OATH OVER SIGNATURE
I affirm that I have read and understood the items in this form and that my
answers including attachments are true and complete to the best of my
knowledge and belief. I understand that I may be subject to administrative, civil
or criminal liabilities if I give false and misleading answers.
Date: Signature of applicant
Name of the applicant
(in block print)
597
Master Circular for Mutual Funds as on March 31, 2024
Certificate from the Employer
The information provided by the applicant is currently true and complete to the
best of our knowledge and belief. We have taken appropriate steps to verify the
accuracy and completeness of the information contained in this application.
I agree to update this form by causing an amendment to be filed on a timely
basis whenever changes occur to answers previously reported. Further, to the
extent that information previously given is not amended, the information
provided in this form is currently accurate and complete.
Date: Signature of appropriate signatory
Name of appropriate signatory
(in block letters)
Name and Regn. No. of Organisation
598
Master Circular for Mutual Funds as on March 31, 2024
2. REPORTS
A. NEW SCHEME REPORT667
NAME OF THE MUTUAL FUND:
I. SCHEME DETAILS:
A. Scheme Name :
B. Scheme Type ( ) : Open Ended/Close Ended/Interval
C. Date of Opening :
D. Date of Closing of Scheme/
Initial Subscription Period/ Transaction Period :
E. Maximum Subscription Amount
acceptable as per Offer Document :
F. Minimum Target Amount to be raised (Rs) :
II. SUBSCRIPTION / ALLOTMENT DETAILS
1. No. of applicants :
 Direct -
 Broker -
2. No. of applicants rejected & their total value (Rs):
3. NFO expenses incurred (Rs) :
4. Entry Load incurred (Rs) :
5. Subscription Received (Rs) :
 Direct -
 Broker -
6. Allotment Date :
7. Listing (Names of stock exchanges) :
III. DATE OF DESPATCH OF REFUND ORDERS
(If subscription received is less than minimum target amount to be raised).
IV. UNIT HOLDING PATTERN
Sr.No. Unit holding No. of No. of units Holding as % of
pattern Unitholders held net asset
Direct Broker Direct Broker Direct Broker
667 SEBI/ MFD/CIR/ 09/247/02 dated July 23, 2002, SEBI/ MFD/CIR/ 12/ 16588 /02 dated
August 28,2002 & SEBI/IMD/CIR No. 13/118899/08 dated February 29, 2008
599
Master Circular for Mutual Funds as on March 31, 2024
1 Individuals
2 NRIs/OCBs
3 FIIs
4. Corporates/
Institutions/
Others
TOTAL
V (a) COMMUNICATION TO THE UNITHOLDERS
Please confirm whether the number of investors holding more than 25% of
the net assets of the scheme and total holdings by such investors in
percentage terms have been communicated to all unit holders through
allotment letters/ account statements :
Yes/ No
(b) DISTRIBUTION SCHEDULE
If any unit holder is holding more than 25% of the net assets of the
scheme, please give the following details:
Sr. Name of Classification Address No. of Holding
No the unit (Individuals, units as % of
holder NRIs/OCBs, FIIs, held net asset
Corporate/Institutions/
Others)
1
2
TOTAL
600
Master Circular for Mutual Funds as on March 31, 2024
VI. GEOGRAPHICAL DISPERSION
1. Please list state wise geographical dispersion of unit holders in the following
format:
Sr. Name of the Mode of No. of unit Amount mobilised as
No. State Entry holders % of total assets
mobilised
1 Direct
Broker
2 Direct
Broker
Direct
Broker
TOTAL Direct
Broker
2. Total number of cities from which subscriptions have been received:
VII. DETAILS OF TOP TEN AGENTS/DISTRIBUTORS
Please list names of top ten agents/distributors in the descending order of
commission paid in the following format:
Sr. No. Name of Amount mobilized in Commission paid Rs.
Agent/Distributors Rs. Cr. Cr
1
2
TOTAL
601
Master Circular for Mutual Funds as on March 31, 2024
Name and Signature of the Compliance Officer/Authorised Signatory:
Date:
Instructions 1. Broker implies broker/agent/distributor
2. Give all amounts in Rs. Crore
602
Master Circular for Mutual Funds as on March 31, 2024
B. COMPLIANCE TEST REPORT668
[Compliance Tests for Mutual Funds regulated by SEBI under SEBI (Mutual
Funds) Regulations, 1996 (MF Regulations) and Circulars issued thereunder]
1. AMC shall submit CTR on the activities of Mutual Funds/AMC to SEBI within
21 days from the end of respective quarters (March, June, September and
December).
2. AMC need to mention ‘Yes’/’No’ with respect to each compliance item and
wherein there is non-compliance and AMC has mentioned ‘No’, details
regarding the nature of non-compliance should be given along with the
corrective action taken, if any.
3. Anything given in the format shall not be interpreted as modification of any
MF Regulations or Circulars issued thereunder.
4. AMC shall also report any other compliances as prescribed by SEBI from time
to time.
5. The Format is indicative only. Any other non-compliances during the period
over and above the regulations/clauses specified in the format shall also be
reported by AMC.
Compliance Test Report for the Quarter end…
Name of the Mutual Fund :
Name of the Asset Management Company :
Name of the Chief Compliance Officer :
I. General Compliance Test
II. Investment Compliance Test
III. Investor Services Compliance Test
I. General Compliance Test
Sl. Regulations Particulars Remarks669
No.
668 SEBI Circular No SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/550 dated April 12, 2021
669 (Indicate ‘Yes’ if complied with the MF Regulations and various circulars issued thereunder
and ‘No’ for non-compliance). Further, in case of non-compliance, kindly provide the details
regarding the non-compliance and the corrective action(s) taken, if any.
603
Master Circular for Mutual Funds as on March 31, 2024
1 Sub-regulation 11 of Each trustee has filed the details of
regulation 18 his transactions of dealing in
securities on a quarterly basis within
the specified timeline.
2 Sub-regulation 27 of Independent directors of trustee or
regulation 18 asset management company have
paid specific attention and
commented in their reports on clause
(i) to (ix) of this sub regulation.
3 Clause (f) of sub- Networth of the AMC is computed as
regulation 1 of per the definition under Clause (qa) of
regulation 21 sub-regulation 1 of regulation 2 and
the networth is more the regulatory
requirement of INR 10 Cr./ 50 Cr./
100 Cr. Further, the networth is
maintained on a continuous basis.
4 Clause (a) of The asset management company is
regulation 24 not acting as a trustee of any mutual
fund.
5 Clause (b) of The asset management company is
regulation 24 not undertaking any other business
activities other than in the nature of
management and advisory services
provided to pooled assets including
offshore funds, insurance funds,
pension funds, provident funds, or
such categories of foreign portfolio
investor subject to the conditions
specified by the Board from time to
time. Such activities are not in
conflict with the activities of the
mutual fund.
6 First proviso to If the asset management company
clause (b) of may itself or through its subsidiaries
regulation 24 undertake activities as mentioned in
clause (b) of regulation 24, provided
the conditions laid under paragraph
(i) to (viii) of the first proviso are
satisfied.
604
Master Circular for Mutual Funds as on March 31, 2024
7 Second proviso to The asset management company
clause (b) of may, itself or through its
regulation 24 subsidiaries, undertake portfolio
management services and advisory
services for other than broad based
fund till further directions, as may be
specified by the Board, subject to
compliance with the following
additional conditions:
(i) that the key personnel of the
asset management company, the
systems, back office, bank and
securities accounts are segregated
activity wise and there exist systems
to prohibit access to inside
information of various activities.
(ii) that the capital adequacy
requirements, if any, separately for
each such activity, are met and has
obtained separate approval, if
necessary, under the relevant
regulations.
8 Third proviso to An asset management company may
clause (b) of become a proprietary trading member
regulation 24 for carrying out trades in the debt
segment of the recognised stock
exchanges, on behalf of its mutual
fund schemes and may also become
a self-clearing member of the
recognised clearing corporations to
clear and settle trades in the debt
segment on behalf of its mutual fund
schemes.
9 Sub-regulation 1 of The asset management company has
regulation 25 taken all reasonable steps and has
exercised due diligence to ensure that
the investment of funds pertaining to
any scheme is not contrary to the
provisions of these regulations and
the trust deed.
605
Master Circular for Mutual Funds as on March 31, 2024
10 Sub-regulation 2 of The asset management company has
regulation 25 exercised due diligence and care in all
its investment decisions as is
exercised by other persons engaged
in the same business.
11 Sub-regulation 3 of The asset management company has
regulation 25 ensured that there are no acts of
commissions or omissions by its
employees or the persons whose
services have been procured by the
asset management company.
12 Sub-regulation 4 of The asset management company has
regulation 25 submitted to the trustees Quarterly
Reports (QRs) of each year on its
activities and the compliance with the
MF Regulations.
13 Sub-regulation 8 of The asset management company has
regulation 25 not utilized the services of the
sponsor or any of its associates,
employees or their relatives, for the
purpose of any securities transaction
and distribution and sale of
securities.
14 First proviso to sub- If the asset management company
regulation 8 of has utilized the services of the
regulation 25 sponsor or any of its associates,
employees or their relatives, for the
purpose of any securities transaction
and distribution and sale of
securities, the asset management
company has ensured that disclosure
to that effect is made to the unit
holders and the brokerage or
commission paid is also disclosed in
the half yearly/ annual accounts of
the mutual fund.
15 Second proviso to The Mutual Fund has disclosed in the
sub-regulation 8 of half yearly & yearly accounts :
the regulation 25 (i) any underwriting obligations taken
by the Scheme in respect of issues of
securities of associate companies &
606
Master Circular for Mutual Funds as on March 31, 2024
(ii) devolvement, if any,
(iii) subscription in issues lead
managed by associate companies &
(iv) subscription to any issue of equity
or debt on private placement basis
where the sponsor or its associate
companies has acted as arranger or
manager.
16 Sub-regulation 9 of The asset management company has
regulation 25 filed with the trustees the details of
transactions in securities by the key
personnel of the asset management
company in their own name or on
behalf of the asset management
company.
17 Sub-regulation 10 of In case the asset management
regulation 25 company has entered into any
securities transactions with any of its
associates a report to that effect be
sent to the trustees at its next
meeting.
18 Sub-regulation 11 of In case any company has invested
regulation 25 more than 5 per cent of the net asset
value of a scheme, the investments
made by that scheme or by any other
scheme of the same mutual fund in
that company or its subsidiaries have
been brought to the notice of the
trustees by the asset management
company indicating the names of
companies/schemes in which such
investments have been made and
have been disclosed in the half yearly
and annual accounts of the
respective schemes with justification
for such investment. Provided the
latter investment has been made
within one year of the date of the
former investment calculated on
either side.
607
Master Circular for Mutual Funds as on March 31, 2024
19 Sub-regulation 12 of The asset management company has
regulation 25 filed with the trustees and SEBI the
following :
(i) detailed bio-data of all its directors
along with their interest in other
companies within fifteen days of their
appointment; and
(ii) any change in the interests of
directors every 6 months
(iii) a quarterly report to the trustee
giving details and adequate
justification in respect of the
purchase and/or sale of the
securities of the group companies of
the sponsor or the AMC by the
mutual fund.
20 Sub-regulation 13 of The directors of the AMC shall file the
regulation 25 details of transactions in securities
with the Trustees on quarterly basis.
21 Sub-regulation 14 of The asset management company has
regulation 25 not appointed any person as key
personnel who has been found guilty
of any economic offence or involved in
violation of securities laws.
22 Sub-regulation 15 of The asset management company has
regulation 25 appointed registrars and share
transfer agents who are registered
with the Board.
23 Proviso sub- If the work relating to the transfer of
regulation 15 of units is processed in-house, the
regulation 25 charges at competitive market rates
have been debited to the scheme and
for rates higher than the competitive
market rates, prior approval of the
trustees has been obtained and
reasons for charging higher rates
have been disclosed in the annual
accounts.
24 Sub-regulation 16 of The asset management company has
regulation 25, Clause abided by the Code of Conduct as
b of Sub-regulation of
608
Master Circular for Mutual Funds as on March 31, 2024
6B of Regulation 25 specified in Part A & Part B of the
and Clause b of Sub- Fifth Schedule of MF Regulations.
regulation of 6C of
Regulation 25
25 Sub-regulation 17 of The asset management company has
regulation 25 not invested in any of its scheme,
unless full disclosure of its intention
to invest has been made in the offer
documents, in case of schemes
launched after the notification of
Securities and Exchange Board of
India (Mutual Funds) (Amendment)
Regulations, 2011.
26 Proviso to Sub- If the asset management company
regulation 17 of has invested in any schemes, it has
regulation 25 not charged any fee on its investment
in that scheme.
27 Sub-regulation 18 of The asset management company has
regulation 25 not carried out its operations
including trading desk, unit holder
servicing and investment operations
outside the territory of India.
28 Sub-regulation 19 of The asset management company has
regulation 25 computed and carried out valuation
of investments made by its scheme(s)
in accordance with the investment
valuation norms specified in Eighth
Schedule and has published the
same.
29 Sub-regulation 20 of The asset management company and
regulation 25 the sponsor of the mutual fund
compensated the affected investors
and/or the scheme for any unfair
treatment to any investor as a result
of inappropriate valuation.
30 Sub-regulation 21 of The asset management company has
regulation 25 read reported and disclosed all the
with following SEBI transactions in debt and money
Circulars & market securities, including inter
provisions of Master scheme transfers, as specified by
SEBI.
609
Master Circular for Mutual Funds as on March 31, 2024
Circular for Mutual
Funds:
 SEBI/CFD/DIL/BO
ND/1/2006/12/12
dated December 12,
2006,
 SEBI/CBM/BOND/
01/2007/01/03
dated March 01,
2007,
 SEBI/CBM/BOND/
02/2007 /13/04
dated April 13,
2007,
 SEBI/IMD/DOF-
1/BOND/Cir-3/
2009 dated
July 31, 2009
 IMD/DOF-
I/BOND/ 174666/
2009 dated August
27, 2009,
 Paragraphs 9.2.3,
9.9 & 9.13 of the
Master Circular for
Mutual Funds
 SEBI/IMD/DOF-
1/BOND/Cir-
4/2009 dated
October 16, 2009,
 CIR/IMD/DF/6/20
10 dated July 30,
2010,
 Chapter 13 of the
Master Circular for
Mutual Funds
 CIR/MRD/DP/10/
2014 dated March
21, 2014
31 Sub-regulation 4 of The sponsor or asset management
regulation 28 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
610
Master Circular for Mutual Funds as on March 31, 2024
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 specified by
the Board.
32 Sub-regulation 1 of The asset management company has
regulation 29A provided an option to the unitholder
to nominate, in the manner specified
in Fourth Schedule, a person in
whom the units held by him shall
vest in the event of his death.
33 Regulation 30 Advertisements are in conformity
with the Advertisement Code as
specified in the Sixth Schedule and
shall be submitted to the Board
within 7 days from the date of issue.
The AMC has complied with each of
the clauses under Sixth Schedule
and Paragraphs 5.7, 10.5, 13 & 15.5
of Master Circular for Mutual Funds
while releasing scheme specific
advertisement, sales literature,
newsletters, web sites and any other
advertisement pertaining to the
mutual fund.
34 Regulation 31 The offer document and
advertisement materials are not
misleading or contain any statement
or opinion which are incorrect or
false.
35 Regulation 32 Every close ended scheme, other than
an equity linked savings scheme, are
listed on a recognised stock exchange
within the time period and subject to
such conditions as specified by the
Board.
611
Master Circular for Mutual Funds as on March 31, 2024
36 Paragraph 1.8 & 6.13 Disclosure of benchmark returns and
of the Master Circular review of performance of schemes by
for Mutual Funds the Boards of AMC and Trustees on a
periodical basis.
37 Chapter 15 of the Certification programme for
Master Circular for agents/distributors of mutual funds
Mutual Funds units and employees of mutual
 SEBI Letter No. funds.
OW/14970/2012
dated July 5,
2012.
38 Chapter 4 of the Risk Management System in areas of
Master Circular for operations like Fund Management,
Mutual Funds operations, customer service, market
and distribution, disaster recovery
and business contingency etc.
39 Paragraph 12.17 of Reconciliation of Government
the Master Circular Securities.
for Mutual Funds
40 Chapter 15 of the Registration of Intermediaries
Master Circular for (Distributors).
Mutual Funds
41 Paragraph 6.6 of the The AMC has complied with
Master Circular for Investment / Trading Guidelines by
Mutual Funds the employees of AMC and Mutual
Fund Trustee Company.
42 Paragraph 15.6 of the Code of Conduct (Distributors).
Master Circular for
Mutual Funds
43 Paragraph 6.11 of the Minimum Number of Investors in
Master Circular for Schemes/ Plans and minimum
Mutual Funds number of holdings by single
investor.
44 Paragraph 8.4 & 8.5 Uniform cut-off timings for
of the Master Circular applicability of Net Asset Value (NAV)
for Mutual Funds of Mutual Fund scheme(s)/plan(s).
45 Paragraph 8.1 & 8.2 Time limit for updating NAV on AMFI
of the Master Circular / AMC website.
612
Master Circular for Mutual Funds as on March 31, 2024
for Mutual Funds
Prominently disclose the NAVs of all
schemes under a separate head on
website of the Fund and on the
website of AMFI and further, Mutual
Funds to also extend facility of
sending latest available NAVs to
unitholders through SMS, upon
receiving a specific request.
46 Paragraph 13.6 of the Prohibition of Indicative Portfolios
Master Circular for and Yields in Mutual Fund schemes.
Mutual Funds
47 Paragraph 3.7 & 5.19 Disclosures and review of Capital
of the Master Circular Protection Oriented Scheme.
for Mutual Funds
48 Paragraph 4.5 & Risk Management Framework for
12.16 of the Master liquid and Overnight Funds:
Circular for Mutual
Funds · Liquid Funds and Overnight Funds
shall not park funds pending
deployment in short term deposits of
scheduled commercial banks.
· Liquid Funds and Overnight Funds
shall not invest in debt securities
having structured obligations (SO
rating) and/ or credit enhancements
(CE rating). However, debt securities
with government guarantee shall be
excluded from such restriction.
49 Regulation 24(b) & The asset management company is
Paragraph 17.3 of the not undertaking any other business
Master Circular for activities other than in the nature of
Mutual Funds management and advisory services
provided to pooled assets including
offshore funds, insurance funds,
pension funds, provident funds, or
such categories of foreign portfolio
investor subject to such conditions,
as maybe specified by the Board from
time to time, if any of such activities
are in conflict with the activities of
613
Master Circular for Mutual Funds as on March 31, 2024
the mutual fund.
50 Paragraph 4.5 & 4.6 Requirement of minimum holding of
of Master Circular for atleast 20% of net assets in liquid
Mutual Funds funds.
Requirement of minimum holding of
atleast 10% of net assets in all open
ended debt schemes.
51 Paragraph 12.19 of Guidelines with respect to Overseas
Master Circular for investment.
Mutual Funds
52 Paragraph 6.16 of Guidelines for votes cast by Mutual
Master Circular for Funds.
Mutual Funds
Place:
Date:
Signature of the Chief Compliance Officer:
614
Master Circular for Mutual Funds as on March 31, 2024
II. Investment Compliance Test
S.N. Regulations Particulars Remarks670
1 Clause 1 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 read respect to single
with Paragraph 12.3 of the Master issuer limit.
Circular for Mutual Funds
2 Clause 1A of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 read respect to
with Paragraph 12.1 of the Master investment in
Circular for Mutual Funds Unlisted debt
instruments and
Unrated debt
instruments.
3 Clause 2 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 respect to owning
of paid up capital of
any company.
The Mutual Fund
does not own more
than 10% of any
company’s paid-up
capital carrying
voting rights under
all its schemes.
(If yes, give details
of the investments
made in excess of
10% of the paid up
capital of the
company in the
prescribed format
CR1)
4 Clause 3 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 and respect to Inter
paragraph 12.30 of the Master Scheme Transfers.
Circular for Mutual Funds
670 (Indicate ‘Yes’ if complied with the MF Regulations and various circulars issued thereunder
and ‘No’ for non-compliance). Further, in case of non-compliance, kindly provide the details
regarding the non-compliance and the corrective action(s) taken, if any.
615
Master Circular for Mutual Funds as on March 31, 2024
(Give details of
inter scheme
transfers wherein
there is non-
compliance in the
prescribed format
CR2)
5 Clause 4 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 respect to
Aggregate inter
scheme
investments made
by all schemes.
(Give details of
such investments
in the prescribed
format CR 3)
6 Clause 6 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 & sub- respect to:
regulations 1 & 2 of regulation 45
a. Buy and sell
securities on
the basis of
deliveries.
b. Short Selling
of securities.
c. Derivative
transactions.
7 Clause 7 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 respect to
purchase or
transfer of
securities in the
name of the mutual
fund on account of
the concerned
scheme.
8 Clause 8 of seventh schedule of SEBI Restrictions with
(Mutual Funds) Regulations, 1996 respect to
and Paragraph 12.16 of Master investments in
Circular for Mutual Funds Short Term
Deposits of
616
Master Circular for Mutual Funds as on March 31, 2024
Scheduled
Commercial
Banks.
9 Clause 9 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 respect of
investment in:
a. Unlisted
security of
an associate
or group
company of
the Sponsor.
b. Securities
issued by
way of
private
placement
by an
associate or
group
company of
the sponsor.
c. Listed
securities of
group
companies of
the sponsor
which is in
excess of 25
per cent of
the net
assets.
10 Clause 9A of seventh schedule to sub- Restriction with
regulation 1 of regulation 44 respect to
investment in
Fund of Funds
scheme.
11 Clause 10 of seventh schedule to sub- Restriction with
regulation 1 of regulation 44 and respect to
617
Master Circular for Mutual Funds as on March 31, 2024
Paragraph 12.5 & 12.22 of Master investment limit in
Circular for Mutual Funds the equity shares
or equity related
instruments of any
company.
[Give details of all
cases where the
investments have
exceeded the limit
of 10% including
the exempted cases
under the proviso
to clause 10 in the
prescribed format
CR 4]
12 Clause 11 of seventh schedule to sub- Restriction with
regulation 1 of regulation 44 respect to
investments in
equity shares and
equity related
instruments in
only listed or to be
listed securities.
13 Clause 12 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 respect of
investment by
Fund of Funds
scheme.
14 Clause 13 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 respect of
investment in the
units of REITs and
InvITs.
15 Clause 14 of seventh schedule to sub- Restrictions with
regulation 1 of regulation 44 and respect of
paragraph 12.26 of the Master investment in
Circular for Mutual Funds Exchange Traded
Commodity
Derivatives.
618
Master Circular for Mutual Funds as on March 31, 2024
16 Sub-regulation 2 of regulation 44 Restrictions with
respect to
borrowings by
mutual fund.
(Give details of
borrowings by the
scheme wherein
there is non-
compliance as per
the prescribed
format CR 5)
17 Sub-regulation 3 of Regulation 44 Restrictions with
respect to loans by
mutual fund.
18 Sub-regulation 4 of Regulation 44 Restrictions with
respect to lending
and borrowing of
securities
borrowings by
mutual fund.
19 Sub-regulation 5 of Regulation 44 Restrictions with
respect to
investments by a
gold exchange
traded fund
scheme.
20 Sub-regulation 7 of regulation 25 Restrictions with
respect to business
done through
brokers.
(Give details of
transactions done
through such
brokers, by
amount, as per the
prescribed format
in CR 6, please
mark * against the
names of
associates.)
(Further, Inter
scheme transfer
and direct deals
with the companies
619
Master Circular for Mutual Funds as on March 31, 2024
should not be
included in the
aggregate
transaction
amount used as
the basis for the
computation of the
total business to
the brokers)
21 Sub-regulation 11 of regulation 25 Disclosure
requirements
under Regulation
25 (11) have been
complied with.
22 Paragraph 12.27 of the Master Restrictions with
Circular for Mutual Funds respect to
investments by
Close ended debt
schemes and
Interval schemes.
23 Paragraph 12.9 of the Master Circular Restrictions with
for Mutual Funds respect to Sector
Level Exposure.
24 Paragraph 12.9 of the Master Circular Restrictions with
for Mutual Funds respect to Group
Level Exposure.
Place:
Date:
Signature of the Chief Compliance Officer:
620
Master Circular for Mutual Funds as on March 31, 2024
III. Investors Service Compliance Test
S Regulation Particulars Remarks671
No
1 Sub-clause The unit certificates are transferred and
2 of returned to the transferees within 30 days
regulation from the date of production of
37 instruments of transfer together with
relevant unit certificates.
2 Sub-clause The dividend payments have been
(a) of dispatched to the unit holders within 15
regulation days from the record date.
53
(Give details wherein dividend warrants
were not dispatched within the timelines
as per the prescribed format CR 8).
3 Sub-clause The repurchase/redemption proceeds
(b) of have been dispatched within 10 working
regulation days from the date of receipt of requests
53 for repurchase/redemption.
4 Sub-clause The AMC has paid interest @15% for the
© of period of delay in the event of failure to
regulation dispatch the redemption or repurchase
53 proceeds or dividend payments within the
stipulated time. Details of interest paid
enclosed in the format specified CR7 &
CR8 below.
(Give details wherein interest is required
to be paid for failure to dispatch the
redemption or repurchase proceeds
within the stipulated time as per the
prescribed format CR 7).
Give details regarding the status of investor complaints forwarded by SEBI
during the quarter and at the beginning of the quarter period as per the
following format :
671 (Indicate ‘Yes’ if complied with the MF Regulations and various circulars issued thereunder
and ‘No’ for non-compliance). Further, in case of non-compliance, kindly provide the details
regarding the non-compliance and the corrective action(s) taken, if any.
621
Master Circular for Mutual Funds as on March 31, 2024
Number of Number of Number of Number of
complaints pending complaints complaints complaints pending
at the beginning of forwarded by redressed* at the end of the
the period. SEBI during during the period
the period period
Give details regarding the status of investor complaints received directly by the
mutual fund during the quarter period as per the following format :
Number of Number of Number of Number of
complaints complaints complaints complaints pending
pending at the received redressed* at the end of the
beginning of during the during the period
the period. period period
* All complaints which have been fully resolved and a communication thereof
has been sent to the complainant shall be deemed to have been redressed.
Place
Date
Signature of the Chief Compliance Officer
622
Master Circular for Mutual Funds as on March 31, 2024
CR 1: Report of investment in Companies in excess of 10% of their paid up
capital carrying voting rights
Date Name of the Purchase Value Holding as % of
Company Price (INR lacs) company’s paid-
up capital
carrying voting
rights
Signature of the Chief Compliance Officer
CR 2: Inter Scheme Transfers (ISTs)
Date Name of Name of Name of Details of Transfer Market Reasons
the the the rate (if of
Transferor Transferee company unquoted/ transfer
Scheme Scheme and type unlisted
of and basis
security of rate)
Quantity Rate Value
(INR
lacs)
Signature of Chief Compliance Officer
CR 3: Intra and Inter Scheme Investments
Investee Scheme Investor Scheme Total
investment
s by
schemes as
% of net
assets of
the
investee
schemes*
Name Resourc Nam Net Investment Investment
es e asset s (INR lacs) as % of net
mobilis s assets
ed / net (INR
assets lacs)
623
Master Circular for Mutual Funds as on March 31, 2024
(INR
lacs)
Name
*Information to be given only in the case of intra scheme investments.
Signature of the Chief Compliance Officer.
CR 4: Details of investments in excess of the limits specified in Clause 10
of the Seventh Schedule of SEBI (Mutual Funds) Regulations 1996 read with
Paragraphs 5.25 & 12.22 of the Master Circular for Mutual Funds
(1 (2) (3) (4) (5) (6) * (7)
)
Sl Sche Scri Date/s of Holding in Applica Name &
. me p violation/s the scrip as a ble closing
N (First and each % of the NAV limit value of
o of the of the the
subsequent scheme, benchma
ones due to consequent rk index
incremental to the / sub-
investments, if investment index(if
any) applicabl
e)
* For the sector /industry specific schemes, the applicable (upper) limit is
the weightage of the scrip in the representative sectoral index/sub index
or 10% of the NAV whichever is higher, as specifically disclosed in the offer
document.
For index funds/schemes, the upper limits shall be in accordance with the
weightage of the scrips as disclosed in the offer document
For all other schemes, the applicable upper limit for holding in each scrip
is 10% of NAV.
Signature of the Chief Compliance Officer
624
Master Circular for Mutual Funds as on March 31, 2024
CR 5: Report on borrowings of Mutual Funds
Na Nature Sourc Pur Dat Date of Rat Am Coll Am Am Ave
me of e pos e of repay e of ou ate oun oun rag
of instru (Insti e borr ment bor nt ral t of t of e
the ments/ tutio owi of row bor use int int Por
sch mode ns/ ng borrow ing ro d (if ere ere tfol
em of bank ing we any st st io
e borrowi s/ (specif d bor bor Yiel
and ngs other y the as ne ne d
cat s) period % by by dur
ego of of the AM ing
ry borrow net Sch C the
ing) ass em per
ets e iod
Signature of the Chief Compliance Officer
CR 6: Report on transactions through Brokers
Name of the Value of Brokerage Broker wise % of gross
broker business paid contracts business
(INR lacs) outstanding done
(INR lacs) for more
than 60 days
Signature of Chief Compliance Officer
625
Master Circular for Mutual Funds as on March 31, 2024
CR 7: Statement of Interest paid to the investors for delays in transfer of
redemption/ repurchase proceeds672
Investor PAN/PEKR Date of Date of Period of Amount
Name N of Receipt of transfer of Delay of
Investor Redemptio Redemptio Interest
n/ n/ Paid
Repurchas Repurchas (INR)
e Request e
Signature of Chief Compliance Officer
CR 8
Statement of interest paid to the investors for delays in transfer of dividend
payments673
Investor PAN/PEKR Record Date of Period of Amount
Name N of Date transfer of Delay of
Investor Dividend Interest
Paid (INR)
Signature of Chief Compliance Officer
(Annexure to the CTR can be as per the requirements to be reported)
672 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 dated November 25, 2022
673 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 dated November 25, 2022
626
Master Circular for Mutual Funds as on March 31, 2024
C. HALF-YEARLY TRUSTEE REPORT674
1. Trustees shall submit HYTR on the activities of Mutual Funds/AMCs to SEBI
within two months for the half year ended September and March along with
summary of instances of non-compliances in addition to the main report.
2. Anything given in the format shall not be interpreted as modification of any
MF Regulations or Circulars issued thereunder.
3. Trustees shall also report any other compliance/reporting requirements as
prescribed by SEBI from time to time.
4. The Format is indicative only. HYTR shall contain any other non-compliances
during the period over and above the regulations/clauses specified in the
format along with the corrective action(s) taken by AMC and Trustees.
The report of the Trustees should give specific comments on the following:
1. Performance of schemes.
2. Activities of the AMC with specific reference to transactions with
associates, concentration of business with associate brokers, compliance
with investment restrictions and net worth of the AMC.
3. Ability of the AMC/sponsor to honour the guaranteed returns in case of
any scheme guaranteeing returns.
4. Deployment of funds of the scheme in accordance with investment
objectives and not for any option trading or short selling or carry forward
transactions.
5. Valuation and pricing of units – whether in accordance with the
Regulations. Further, please provide instances where prices provided by
Valuation Agencies were not considered for valuation of securities along
with justifications for the same.
6. Publication of Annual Report and furnishing of half yearly and annual
accounts to unit holders and SEBI.
674 SEBI Cir No SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/550 dated April 12, 2021
627
Master Circular for Mutual Funds as on March 31, 2024
7. Listing of scheme on stock exchange as per terms of the scheme
information document, despatch of account statement to unit holders
within 5 business days from closure of New Fund Offer and timely
despatch of repurchase/ redemption proceeds and dividend warrants.
8. Action taken on deficiency and warning letters issued by SEBI.
9. Before launch of scheme, AMC had systems in place for back office etc.
appointed all key personnel, auditors, compliance officer, prepared
manual, specified norms, etc.
10. AMC shall appoint Registrar & Share Transfer Agents, who are registered
with SEBI. If the work is done in-house, then the rates charged must be
competitive and for higher rates reasons for charging higher rates must
be disclosed.
11. AMC has been diligent in empanelling brokers, in monitoring securities
transactions and avoiding undue concentration with any broker.
12. AMC has not given undue and unfair advantage to any associate.
13. In case any company has invested more than 5% of NAV scheme, an
investment made by the scheme or by any other scheme of the same
mutual fund in that company or its subsidiaries shall be justified.
14. Whether the AMC has dealt with any associate broker more than 5% of
the quarterly business done by a mutual fund.
15. In case the AMC has dealt through any other broker other than an
associate broker in excess of 5% or more of the aggregate purchase and
sale of securities made by the mutual fund in all its schemes, the AMC
has recorded in writing the justification for the same and whether all such
investments have been reported to the trustees on a quarterly basis.
16. Utilisation of the services of the sponsor or any of its associates,
employees, etc. by AMC – whether disclosures made in the annual
accounts.
17. Whether AMC submitted quarterly report on its activities and complied
with Regulations.
18. Transactions of mutual fund are in accordance with the trust deed.
628
Master Circular for Mutual Funds as on March 31, 2024
19. Funds pertaining to a scheme have been invested in accordance with the
Regulations.
20. All activities of AMC are in accordance with the Regulations.
21. Details of transaction in securities by key personnel in their own name
or on behalf of the AMC.
22. Whether AMC filed with the trustees detailed bio-data of all directors of
AMC along with their interest in other companies within 15 days of their
appointment and any change in the interest of directors every six months.
23. Whether directors of the AMC filed with the trustees, a statement of
holding of securities at the end of each financial year along with dates of
acquisition.
24. No conflict of interest between the manner in which the AMC has
deployed its networth and the interest of the unitholders.
25. Remedial steps, as necessary, taken by the trustees in case the conduct
and business of the mutual fund is not in accordance with the
Regulations.
26. Certification that Trustees have satisfied themselves that there have been
no instances of self- dealing or front running by any of the trustees,
directors and key personnel of the AMC.
27. Certification that AMC has been managing the schemes independently of
any other activities and the unitholders’ interest has been protected.
28. Comments of the independent trustee on the report received from the
AMC regarding the investments by the mutual fund in the securities of
the group companies of the sponsor.
29. Confirmation that the mutual fund has not made any investment in - any
unlisted security of an associate or group company of the sponsor, any
security issued by way of private placement by an associate or group
company of the sponsor or listed securities of group companies of the
sponsor which is in excess of 25% of the net assets of all the schemes of
the mutual fund.
30. In case the mutual fund has an aggregate of securities which are worth
Rs.10 crore or more as on the latest balance sheet date, whether
629
Master Circular for Mutual Funds as on March 31, 2024
transactions on or after January 15, 1998 are only through
dematerialised securities.
31. Whether unitholders’ consent obtained wherever necessary in
accordance with Regulations.
32. Compliance with the Guidelines on recording of investment decisions and
other related compliances viz. investment in unlisted and privately placed
securities, unrated debt securities, securities classified as below
investment grade or default, transactions where associates are involved
and the instances where there is poor performance of the schemes.
33. Compliance with respect to provisions related to investment/Trading in
Securities by Employees of Asset Management Companies and Mutual
Fund Trustee Companies.
34. Compliance with respect to provisions related to AMFI/ NISM
Certification Programme for agents/ distributors and employees of AMC.
35. Compliance status on selection of Benchmarks for comparison of
performance of schemes.
36. Compliance with respect to provisions regarding monitoring of
compliance with Code of Conduct for intermediaries.
37. Comments on the adequacy of risk management systems.
38. Compliance with reconciliation procedure for investment in Government
Securities.
39. Compliance with respect to provisions related to registration of
Intermediaries.
40. Compliance with respect to provisions related to minimum number of
investors and maximum holdings by a single investor in scheme / plan
of mutual fund.
41. Compliance with respect to provisions related to monitoring the portfolio
structure of the capital protection oriented scheme.
42. Compliance with respect to provisions related to uniform cut-off timings
for applicability of Net Asset Value (NAV) of Mutual Fund
scheme(s)/plan(s).
630
Master Circular for Mutual Funds as on March 31, 2024
43. Compliance with respect to provisions related to parking of funds in short
term deposits of scheduled commercial banks pending deployment.
44. Compliance with respect to provisions of Risk Management Framework
for liquid and overnight funds.
45. Compliance of guidelines on overseas Investments by Mutual Funds.
46. Compliance with requirements of securities lending arrangement.
47. Compliance with requirements of simplification and updation of Offer
Document and Key Information Memorandum of Mutual Funds Scheme.
48. Compliance with respect to provisions related to prohibition on disclosure
of Indicative Portfolios and Yields in Mutual Fund schemes.
49. Whether the assets of Gold ETF are invested in gold or gold related
instruments as per the asset allocation mentioned in the Scheme
Information document.
50. Whether physical verification of gold held in schemes was conducted by
statutory auditors.
51. Compliance with requirements for participation in repo in corporate debt
securities.
52. Whether Mutual Fund/AMC has set apart at least 2 basis points on daily
net assets within the maximum limit of TER as per regulation 52 of the
Regulations for investor education and awareness initiatives on annual
basis and whether Mutual Fund has made complete disclosures in the
half yearly trustee report to SEBI regarding the investor education and
awareness initiatives undertaken.
53. Details of efforts undertaken by AMC to increase geographical
penetration of mutual funds and the details of opening of new branches,
especially at locations beyond top 15 cities.
54. Compliance with requirements for participation of mutual funds in Credit
Default Swaps (CDS) Market.
55. Review and confirmation of Voting summary and scrutinizer’s comments,
if any.
56. Compliance with requirements of minimum Average AUM of Rs. 20 crore
on half yearly rolling basis in open ended debt oriented Schemes.
631
Master Circular for Mutual Funds as on March 31, 2024
57. Stress testing of prescribed open-ended debt oriented schemes.
58. Exposure of a mutual fund, across all its schemes, towards individual
issuers, group companies and sectors.
59. Compliance with requirements with respect to Categorization and
Rationalization of Mutual Fund Schemes.
60. Compliance with requirements with respect to charging of Total Expense
Ratio (TER) in both direct and regular plans.
61. Compliance with requirements with respect to performance disclosure
for Mutual Funds.
62. Compliance with guidelines on Segregated Portfolio.
63. Compliance with requirements with respect to Cyber Security and Cyber
Resilience framework for Mutual Funds / Asset Management Companies
(AMCs).
64. Compliance with requirements of System Audit framework for Mutual
Funds / Asset Management Companies (AMCs). Further, Trustees should
furnish the open item pertaining to system audits.
65. Comments on securities classified as below investment grade or default
66. Compliance with requirements relating to Trade Execution and Allocation
67. Compliance with guidelines on Inter Scheme Transfers of Securities.
68. Compliance with requirements with respect to Policy on Internal Credit
Risk Assessment at the AMC and measures taken for the early warning
signals (including yield-based alerts) on deterioration of credit profile of
the issuer.
69. Compliance with respect to monitoring the activities of their distributors,
agents, brokers to ensure that they do not indulge in any malpractice or
unethical practice while selling or marketing Mutual Fund units and
reporting of any non-compliance with the Mutual Funds Regulations and
Guidelines pertaining to Mutual Funds especially guidelines on
advertisements and/ or sales literature and/or Code of Conduct in the
periodic meetings of the Board of the AMC and the Board of Trustees.
70. Trustees have abided by the Code of Conduct as specified in Part A of the
Fifth Schedule.
632
Master Circular for Mutual Funds as on March 31, 2024
71. Trustees have ensured that the Chief Executive Officer of AMC has
complied with the provisions of Clause b of Sub-regulation 6A of
Regulation 25.
72. [Compliance with the requirement of standing arrangements with
independent firms for special purpose audit and/or to seek legal
advice.]675
73. Any other matter the trustees would like to report to SEBI.
675 Inserted by SEBI Circular SEBI/HO/IMD/IMD-I –PoD1/P/CIR/2023/126 dated July 26,
2023
633
Master Circular for Mutual Funds as on March 31, 2024
D. MONTHLY CUMULATIVE REPORT676
Name of the Mutual Fund:_________________
MCR for the month of _______ (Month), 20XX
Sr. Scheme Category No. of No. of Funds Repurchas Net Net Assets Average No. of Net Assets
No. scheme Folio mobilize e/ Inflow Under Net Assets segregate Under
s as on s as d for the Redemptio (+ve)/ Manageme under d Manageme
____ on period n for the Outflo nt as on Manageme portfolios nt in
____ (Since period w (-ve) ____ nt for the created segregated
April 01, (Since for the _____, as on portfolios
20XX April 01, period INR in 20XX ____ as on
to____) 20XX to (Since crore (Month ______
_____) April Year)
INR in 01, INR in
crore INR in 20XX INR in crore
crore to crore
_____)
INR in
crore
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
A Open ended
Schemes
I Income/Debt
Oriented
Schemes
i. Ov ernight Fund
ii. Liq uid Fund
iii. Ult ra Short
Duration Fund
iv. Low Duration
Fund
v. Mo ney Market
Fund
vi. Sh ort Duration
Fund
vii. Me dium
Duration Fund
viii. Me dium to Long
Duration Fund
ix. Lon g Duration
Fund
x. Dy namic Bond
Fund
xi. Co rporate Bond
Fund
xii. Cre dit Risk
Fund
xiii. Ba nking and
PSU Fund
xiv. Gil t Fund
xv. Gil t Fund with
10 year constant
duration Fund
xvi. Flo ater Fund
Sub total - I
II Growth/Equity
Oriented
Schemes
i. Mu lti Cap Fund
ii. Lar ge Cap Fund
iii. Lar ge & Mid Cap
Fund
iv. Mi d Cap Fund
v. Sm all Cap Fund
676 SEBI Circular SEBI/HO/MD/DF3/CIR/P/2019/020 dated January 22, 2019 and
SEBI/HO/IMD/DF3/CIR/P/2021/014 dated January 29, 2021
634
Master Circular for Mutual Funds as on March 31, 2024
Name of the Mutual Fund:_________________
MCR for the month of _______ (Month), 20XX
Sr. Scheme Category No. of No. of Funds Repurchas Net Net Assets Average No. of Net Assets
No. scheme Folio mobilize e/ Inflow Under Net Assets segregate Under
s as on s as d for the Redemptio (+ve)/ Manageme under d Manageme
____ on period n for the Outflo nt as on Manageme portfolios nt in
____ (Since period w (-ve) ____ nt for the created segregated
April 01, (Since for the _____, as on portfolios
20XX April 01, period INR in 20XX ____ as on
to____) 20XX to (Since crore (Month ______
_____) April Year)
INR in 01, INR in
crore INR in 20XX INR in crore
crore to crore
_____)
INR in
crore
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
vi. Div idend Yield
Fund
vii. Va lue
Fund/Contra
Fund
viii. Fo cused Fund
ix. Sec toral/Themat
ic Funds
x. EL SS
xi. Fle xi Cap Fund
Sub total - II
III Hybrid
Schemes
i. Co nservative
Hybrid Fund
ii. Ba lanced Hybrid
Fund/
Aggressive
Hybrid Fund
iii. Dy namic Asset
Allocation /
Balanced
Advantage Fund
iv. Mu lti Asset
Allocation Fund
v. Arb itrage Fund
vi. Eq uity Savings
Fund
Sub total - III
IV Solution
Oriented
Schemes
i. Re tirement
Fund
ii. Ch ildrens' Fund
Sub total - IV
V Other Schemes
i. Ind ex Funds
ii. Go ld ETFs
iii. Oth er ETFs
iv. Fu nd of funds
investing
overseas
Sub total - V
Total A-Open
ended Schemes
B Close Ended
Schemes
635
Master Circular for Mutual Funds as on March 31, 2024
Name of the Mutual Fund:_________________
MCR for the month of _______ (Month), 20XX
Sr. Scheme Category No. of No. of Funds Repurchas Net Net Assets Average No. of Net Assets
No. scheme Folio mobilize e/ Inflow Under Net Assets segregate Under
s as on s as d for the Redemptio (+ve)/ Manageme under d Manageme
____ on period n for the Outflo nt as on Manageme portfolios nt in
____ (Since period w (-ve) ____ nt for the created segregated
April 01, (Since for the _____, as on portfolios
20XX April 01, period INR in 20XX ____ as on
to____) 20XX to (Since crore (Month ______
_____) April Year)
INR in 01, INR in
crore INR in 20XX INR in crore
crore to crore
_____)
INR in
crore
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
I Income/Debt
Oriented
Schemes
i. Fix ed Term Plan
ii. Ca pital
Protection
Oriented
Schemes
iii. Inf rastructure
Debt Fund
iv. Oth er Debt
Scheme
Sub total - I
II Growth/Equity
Oriented
Schemes
i. EL SS
ii. Oth er Equity
Schemes
Sub total - II
III Other Schemes
Total B -Close
ended Schemes
C Interval
Schemes
I Income/Debt
Oriented
Schemes
II Growth/Equity
Oriented
Schemes
III Other Schemes
Total C -
Interval
Schemes
Grand Total
Fund of Funds
Scheme
(Domestic)
Notes:
1. In column number (3), number of schemes shall include series / serial plans
636
Master Circular for Mutual Funds as on March 31, 2024
2. In column number (3), segregated portfolios created in a scheme shall not be
treated as a separate scheme.
3. In column number (4), number of folios shall not include folios of segregated
portfolios
4. In column number (8) and (9), AUM of segregated portfolios shall be included
5. In column number (9), AAUM is the average of the daily AUM of the Mutual
Fund for the month.
6. In column number (10), number of segregated portfolios created in a scheme
can be more than one
7. Inter scheme investments are excluded from the above data
Instructions for Calculating AUM677
1. To have uniformity in calculating Net assets under management (NAUM)
and average assets under management (AAUM), the following methodology
should be adopted.
 The AUM as on the last calendar day of each month shall be
included in NAUM. In liquid funds, purchases on the first day of the
next month shall not be considered in calculating NAUM for the
current month.
 AAUM of the mutual fund shall be the aggregate of the daily AUM of
the Mutual Fund over calendar days in the relevant month
irrespective of the date of allotment/maturity of the scheme.
Additional Reporting format678 on the overseas investment by Mutual Funds
in ADRs/ GDRs, foreign securities and overseas Exchange Traded Funds (ETFs)
Instruments Amount Invested Redemption Value of overseas
investments (as on
last date of the
month)
in terms In terms of US in terms In terms of US in terms of In
of Rs. $ of Rs. $ Rs. terms
of US
$
ADR/GDR
Equity of overseas
companies
677 SEBI/IMD/CIR No 3/124444/08 dated April 30, 2008
678 SEBI/IMD/CIR No. 15/87045/2007 dated February 22, 2007
637
Master Circular for Mutual Funds as on March 31, 2024
Foreign debt securities
Government Securities
of AAA rated countries
Overseas ETFs
Units/securities issued
by overseas Mutual
Funds
Number of Schemes
investing in foreign
securities
Name of the country Amount invested
in terms of Rs. In terms of US $
* Conversion rate as on last date of the month. Adjustment of conversion of US $ into
India Rupee as per the RBI reference rate by Foreign Exchange Dealer Association of
India (FEDAI)
638
Master Circular for Mutual Funds as on March 31, 2024
E. ANNUAL STATISTICAL REPORT (ASR)679
This report is to be submitted each financial year in order to reach SEBI latest
by 30th of April.
NAME OF THE MUTUAL FUND: ______________________
Unitholding Pattern of Mutual Fund as on March 31, ______________
Category Number of Net Asset
Folios Value
Individuals
NRIs/OCBs
FPIs
Corporate/Institutions/Others
TOTAL
Note: Data is to be provided for all the schemes put together and not individual
scheme-wise.
679 SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
639
Master Circular for Mutual Funds as on March 31, 2024
F. DAILY TRANSACTION REPORT
To monitor trends of investment, mutual funds are required to submit details of
transactions in secondary market on daily basis in both soft and hard copies.
Information must be submitted for the total repurchases/ sales of equity/ debt
and not for each individual scrip. Information on total purchases/ sales of
sensitive index scrips need not be sent.
Format and Specification of the Daily Transaction Report680
Operational notes on Reporting of transactions by registered Mutual Funds
DAILY REPORTS
1. The format of DTR, explanation of codes, field widths etc are enclosed in
Format "2.F1" below.
2. The data as per DTR would be submitted in "TEXT" format with fields
separated by "|" (i.e. a pipe).
3. All transaction will have a unique transaction identification number which
would be given by the AMCs/custodians at their end.
4. In case of any change in transaction already reported to SEBI, such change
can be reported as amendment transaction with the following
characteristics
a. Transaction type is to be reported as "A’
b. Transaction ID shall be the same as that of earlier reported
transaction.
c. Correct details
In other words the system will cancel the earlier reported transaction and will
only consider the amended transaction for processing.
REPORTING TYPE - R_TYPE
N - New Transaction
A - Amendment in earlier transaction.
D - Deletion of earlier reported transaction.
General Aspects:
1. The date format to be used all the reports submitted to SEBI would be DD-
MON-YYYY.
2. All Transaction values are In CRORES.
3. The file names to be used for submitting the report in soft copies are
DTR: D<ddmm><3 char of Custodian code No>.txt
680 SEBI Cir No - MFD/CIR/07/384/99 dated December 17, 1999 and MFD/CIR/08/23026/99
dated December 23, 1999
640
Master Circular for Mutual Funds as on March 31, 2024
For e.g. Custodian code No: 001 for the date Dec 02
The file name would be D0212001.TXT
Format “2.F1”
DTR (List and field description of codes in DTR)
SR. CODE EXPLANATION FIELD TYPE FIELD
NO. WIDTH
1 CUST_CODE CUSTODIAN CHARACTER 3
CODE
2 TRN_ID UNIQUE CHARACTER 12
IDENTIFICATION
NUMBER
3 TRN_DATE TRANSACTION CHARACTER 11
DATE
DD-MON-YYYY
4 REPORT_DT DATE OF CHARACTER 11
REPORT
(DD-MON-YYYY
5 R_TYPE REPORTING CHARACTER 1
TYPE
6 TOT_PUR_EQ TOTAL NUMBER (12,2)
PURCHASE
(EQUITY)
7 TOT_SAL_EQ TOTAL SALES NUMBER (12,2)
(EQUITY)
8 TOT_PUR_DEBT TOTAL NUMBER (12,2)
PURCHASE
(DEBT)
9 TOT_SAL_DEBT TOTAL SALES NUMBER (12,2)
(DEBT)
(1) NUMBER (12,2) -- Number with 10 integer and 2 decimal digits.
(2) All transaction values to be reported in crores.
641
Master Circular for Mutual Funds as on March 31, 2024
Format "2.F2"
Format of the text file:
File Name : D0212001
Cust_ MF Trn Trn. Report _Dt R_Type Tot_Pur_Eq Tot_Sal
Code Reg. _ID _dt _Eq
No.
C (3) C C(12) 02- 02-DEC- C(1) N(12,2) N(12,2)
(12) DEC- 1999
1999
Tot_Pur_Debt Tot_Sal_Debt Tot_Pur_Eq_ Tot_Sale_
BSE Eq_ BSE
N(12,2) N(12,2) N(12,2) N(12,2)
A B C D E F
001|MF/001/93/1|ID01|02-DEC-1999|02-DEC-
1999|N|2.25|5.23|20.55|66.12|39.1|2.3|
Amendment:
For e.g.
Original Record is
001|MF/001/93/1|ID01|02-DEC-1999|02-DEC-
1999|N|2.25|5.23|20.55|66.12|39.1|2.3|
Suppose Tot_Pur_Eq has to be changed from 2.25 to 25.5 then the amended
record would be
001|MF/001/93/1|ID01|02-DEC-1999|04-DEC-
1999|A|25.5|5.23|20.55|66.12|39.1|2.3|
and reported on 4th December, 1999.
A: TOT_PUR_EQ
B: TOT_SAL_EQ
C: TOT_PUR_DEBT
D: TOT_SAL_DEBT
E: TOT_PUR_EQ_BSE (Sensitive Index out of A)
F: TOT_SAL_EQ_BSE (Sensitive Index out of B)
642
Master Circular for Mutual Funds as on March 31, 2024
G. REPORT TO TRUSTEES BY AMC681
FORMAT FOR QUARTERLY REPORT (QR) FROM AMCs TO TRUSTEES
1. AMCs shall submit QR on the activities of Mutual Funds/AMCs to trustees
within 21 days from the end of respective quarters (March, June, September
and December).
2. The report shall, inter alia, contain the following details and shall contain
such other information/compliances as required by Trustees and / or as
prescribed by SEBI from time to time:
(I) Details about the Schemes of the Mutual Fund
(i) Number of live schemes as on ____ (last day of the quarter end):
Type of Scheme Open Close Interval Total
ended ended
Overnight/Liquid/Money Market
Funds
Gilt Funds
Debt Schemes (other than assured
return schemes)
Debt Schemes (assured return
schemes)
Infrastructure Debt Funds
ELSS
Other Growth / Equity Schemes
Hybrid Schemes
Solution Oriented Schemes
Other Schemes (including ETFs)
Total
Fund of Funds Schemes (Investing
overseas)
Fund of Funds Schemes (Domestic)
(ii) Details of Schemes launched during the quarter including schemes
which were launched but could not be constituted for any reason:
Schem Scheme Open/ Date Closi Allo Subscription No. of Folios
e Categor Closed of ng tme Received
Name y (As / Lau Date nt (INR Cr.)
per Interva nch Date
MCR) l
681 SEBI Circular SEBI/HO/IMD/IMD-I DOF2/P/CIR/2021/550 dated April 12, 2021
643
Master Circular for Mutual Funds as on March 31, 2024
Direct Regular Direct Regular
Plan Plan Plan Plan
(iii)Details of Existing Schemes Matured/ wound up during the quarter:
Scheme Scheme Open/ Amount Numbe Maturity/
Name Category (As per Close/ redeeme r of Pay-out
MCR) Interval d at the Unit- Date * (for
time of holders wound up
maturity schemes)
/
winding
up (INR
Cr.)
For schemes which have been wound up, details of payout should be
provided during each quarter till the last payout for such schemes.
(iv) Details of Schemes merged during the quarter:
Merging Scheme Surviving Scheme Effecti Exit
ve Period of
Date of 30 days
Name Schem Open/ Name Scheme Open/
Merger From:
of the e Close/ of the Categor Close/
To:
Sche Catego Interv Sche y (As Interval
me ry (As al me per
per MCR)
MCR)
(v) Details of close-ended Schemes Rolled-over during the quarter:
Sche Scheme Original Date of Perio Extend Amount
me Category (As Maturity Roll d of ed Rolled
Name per MCR) Date over Roll Maturit Over (INR
over y Date Cr.)
(vi) Details of Schemes that underwent fundamental attribute change
during the quarter:
644
Master Circular for Mutual Funds as on March 31, 2024
Scheme Scheme Open/ Effective Date Descriptio
Name Category (As Close/ of n of the
per MCR) Interval Fundamental Change
Attribute
Change
(vii) Clearance received from SEBI to launch New Schemes during the
quarter:
Scheme Name Scheme Category Open/ SEBI Validity of
(As per MCR) Close/ clearance SEBI
Interval date clearance
(viii) Details of Assets Under Management (AUM):
Scheme Scheme Number AUM as Total Total AUM as
Name Category of Folios on last Inflow Outflow on last
(As per day of (INR (INR Cr.) day of
MCR) previous Cr.) current
quarter quarter
(INR Cr.) (INR Cr.)
(II) AMC related Activities and Reporting:
(i) Details of other Permissible activity under Regulation 24(b) of SEBI
(Mutual Funds) Regulations, 1996 (MF Regulations):
1. Whether the other activities of the AMC are as per MF Regulations, and
2. Whether AMC continues to meet the networth requirements for each of
the activities?
3. Provide explanation for the difference between the performance of
various schemes (if the difference is more than 10%), managed by the
same fund manager (i.e. mutual fund scheme versus other permissible
activity). Confirm that the disclosure in this regard is also made on the
website of the AMC.
(ii) Net worth of the AMC: Provide the networth of the AMC and its
deployment and confirm absence of conflict of interest in its deployment.
(iii)Conflicts of Interest:
645
Master Circular for Mutual Funds as on March 31, 2024
1. Provide confirmation that there is no conflict of interest between the
activities allowed under Regulation 24(b) of MF Regulations and the
mutual fund operation.
2. Provide confirmation w.r.t. compliance with Guidelines for dealing with
Conflicts of Interest of Intermediaries, Recognised Stock Exchanges,
Recognised Clearing Corporations, Depositories and their Associated
Persons in Securities Market.
(iv) Details of change in the AMC Directors during the quarter.
(v) Details of change in the interest of AMC Directors during the quarter.
(vi) Transactions in Securities:
1. Provide details of transactions in securities by the key personnel of the
AMC in their own name or on behalf of the AMC to trustees giving
details of names of the personnel, name of the security, purchase / sale
details like quantity, rate, value, name of broker, whether transaction
is on personal account or immediate family or fiduciary.
2. Provide confirmation w.r.t. compliance of the guidelines on Investment
by Employees of AMC on a continuous basis and reporting of any
violations and remedial action taken to Trustees.
(vii) Enhancing disclosures on proxy votes cast by Mutual Funds: Review
and ensure that AMC has voted on all resolutions and the rationale
recorded for vote decision is prudent and adequate.
(viii) Provide status of compliance on Cyber Security and Cyber
Resilience framework for Mutual Funds / Asset Management
Companies (AMCs)
(ix) Regulatory Actions: Details of all regulatory actions initiated or taken
during the quarter such as enforcement proceedings, warning,
deficiency, if any, received from SEBI and/or other regulators or Govt.
Agencies along with corrective actions taken.
(III) SEBI mandated Reporting
A. Products Related
1) Necessary systems in place: AMCs to confirm that it has necessary
systems in place for back office etc., appointed all key personnel, auditors,
compliance officer, registrars, prepared compliance manual, specified
broker empanelment norms, obtained in-principle approvals from stock
exchanges, etc.
646
Master Circular for Mutual Funds as on March 31, 2024
2) Easy availability of Offer Documents: AMCs to confirm that it has
adopted the Scheme Information Document (SID) and Key Information
Memorandum (KIM) formats as specified by SEBI and ready availability of
offer documents such as SID, KIM and Statement of Additional
Information (SAI) with distributors/ ISCs of Mutual Funds and also on its
website.
3) Launch of Additional Plans under existing Schemes: AMCs to confirm
that the additional plans/schemes launched during the quarter were not
for a particular investor on any arbitrary date and these were open for
subscription for all the investors.
4) Capital Protection Oriented Scheme: AMCs to confirm that there is
disclosure in offer documents and continuous monitoring of the structure
of the portfolio of the Capital Protection Oriented Scheme and also
quarterly review of ratings were done.
5) Guaranteed return Schemes: AMCs to confirm that it has ability to
honour guaranteed commitment in respect of any guaranteed return
scheme. No guaranteed return is provided in a scheme, unless such
returns are fully guaranteed by the sponsor or the AMC; and unless a
statement indicating the name of the person who will guarantee the return,
is made in the offer document; and the manner in which the guarantee is
to be met has been stated in the offer document.
B. Performance Related
1) Selection of Appropriate Benchmarks: AMC to confirm that the scheme
specific benchmarks assigned to each schemes are appropriate.
2) Performance along with Benchmark returns: Performance of all
schemes vis-à-vis its benchmark and additional benchmark as on the end
of the quarter in 1-year, 3-year, 5-year, 10-year and since the date of
allotment of the units.
C. Investments Related
1) Investments: AMCs to confirm that the investments in mutual fund
schemes have been made in accordance with MF Regulations and various
circulars issued there under, Trust Deed, investment objective of the
Schemes and are in the interest of unitholders.
2) Exposure of a mutual fund, across all its schemes, towards individual
issuers, group companies and sectors: AMC to confirm that the exposure
of mutual fund in debt and money market instruments, across all its
schemes, towards individual issuers, group companies and sectors are in
647
Master Circular for Mutual Funds as on March 31, 2024
compliance with the regulatory requirements and regular review of such
exposure is undertaken.
3) Exposure in equity in excess of 10% of the paid up capital of a
Company: Details of the date of purchase, name of the company, purchase
price, value and holding percent in the capital carrying voting rights,
whether any of such companies are Associates of the Sponsor / AMC,
justification for making the investment.
4) Intended Portfolio Allocation: Details on the disclosed portfolio
allocation and the actual portfolio of close ended debt oriented schemes
launched during the quarter.
5) Inter-scheme Investments: Details of inter-scheme investments
happened during the quarter including name of the schemes, date of
investment, price, value, charges levied, if any, etc.
6) Recording of Investment decisions by the AMC, Investments in
unlisted, privately placed securities, if any: Details of investments in
unlisted and privately placed securities, if any during the quarter including
the performance of such investments and also details of the due diligence
being exercised while making such investment decisions. AMCs to confirm
that such investments and its valuation were in compliance with the
regulatory requirements.
7) Investment in unrated debt instruments: Details of investments in
unrated debt instruments during the quarter, if any along with details of
due diligence being exercised while making such investment decisions.
AMCs to confirm that such investments and its valuation were in
compliance with the regulatory requirements.
8) Comments on investments downgraded to below investment grade or
default: Details of investments downgraded to below investment grade or
default during the quarter. Comments on steps taken or to be taken by
the AMC.
9) Overseas Investments by Mutual Funds: Comments on necessary due
diligence in making investment decisions, detailed analysis of risks and
returns of overseas investment and how these investments would be in the
interest of investors. Further, in case of investment in overseas mutual
fund schemes, the details w.r.t. management fees & other expenses
charged by the underlying schemes and also by the investing scheme may
be provided. AMCs to confirm that such investments and its valuation were
in compliance with the regulatory requirements.
10) Parking of funds in Short Term Deposits of Scheduled Commercial
Banks (SCBs): Confirms that provisions of MF Regulations and various
648
Master Circular for Mutual Funds as on March 31, 2024
circulars issued thereunder pertaining to parking of funds in short term
deposits pending deployment are complied with at all points of time.
Details of funds parked in Short-term Deposits of SCBs due to pending
deployment, during the quarter.
11) Participation in Repo on Corporate Debt Securities, Credit Default
Swaps (CDS), REIT, InvIT, Commodity Derivatives, etc.: AMC to
confirm that participation of mutual fund schemes in repo on corporate
debt securities, Credit Default Swaps, REITs, InvITs, commodity
derivatives, etc. were in compliance with the regulatory requirements and
in the interest of investors.
12) Carry Forward Transactions: AMCs to confirm that the funds of a scheme
shall not in any manner be used in carry forward transactions. Give details
of such transactions which resulted in carry forward transactions – date,
scrip, name of the broker, rate and quantity in custody, etc.
13) Stock / Securities Lending: Details with regard to securities lending
during the quarter, in terms of value, volume and intermediaries and also
earnings and/or losses, value of collateral security, etc. and confirm that
the same is not, in any way, detrimental to the interests of the unit-holders
of the scheme.
14) Borrowings: Data on borrowing by mutual fund schemes during the
quarter with certain details such as date, nature of borrowing, source,
amount borrowed, purpose of borrowing, interest rate, security offered for
the borrowing, percent of borrowing to net asset on date of borrowing, date
of repayment or proposed manner of liquidation of the debt, amount borne
by the scheme, amount borne by the AMC and the average portfolio yield
during that period, etc. Further, if borrowing is from any associate of the
sponsor or AMC, provide reasons for borrowing from such entity and
competitiveness of the terms.
15) Inter-Scheme Transfers (ISTs): Details on ISTs during the quarter such
as dates, name of transferor and transferee schemes, securities
transferred and price, value of transfer and specific reasons for the
transfer.
16) Cross Investments: In case any company has invested more than 5 per
cent of the net asset value of a scheme, the details of investment made by
that scheme or by any other scheme of the same mutual fund in that
company or its subsidiaries shall be provided to the trustees with
justification for such investment, provided the latter investment has been
made within one year of the date of the former investment calculated on
either side.
649
Master Circular for Mutual Funds as on March 31, 2024
17) Code of Conduct for Fund Managers and Dealers: Confirm that the code
of conduct as specified for fund managers and dealers in MF Regulations
were complied with during the quarter.
18) Valuation of Investments:
i. AMC to confirm that the valuation of all debt and money market
instruments during the quarter were done in compliance with the
regulatory requirements. Report the justification for deviations, if any,
from indicative haircut and / or valuation price for securities below
investment grade provided by valuation agencies.
ii. AMC to confirm that valuation of investments made by its scheme(s)
was in accordance with the Investment Valuation Norms specified in
Eighth Schedule of MF Regulations, and publishing the same. Periodic
review of the valuation policy by the AMC and annual review by the
Statutory Auditors.
iii. AMC to confirm that in case of change in terms of the issue of any
security, the same has been communicated to the Valuation Agencies.
19) Trade Execution and Allocation: AMC to confirm compliance with
regulatory requirements relating to Trade Execution and Allocation
prescribed by SEBI. Further, any non-compliance and material
information, if any, in this regard needs to be reported to trustees.
D. Risk Management Related
1) Risk Management Framework for MFs: Details of outcomes of the risk
management framework for mutual funds along with steps taken to
address the same. Confirm that the existing risk management framework
of mutual fund is in compliance with the regulatory requirements and
ensures protection of interest of investors.
2) Stress Testing: Details of outcomes of the stress testing of open ended
mutual fund schemes along with steps taken to address the same.
E. Empanelment of Broker for purchase or Sale of Securities
1) Confirm that the AMC has not dealt with any associate broker for purchase
or sale of securities, which is average of 5% or more of the aggregate
purchases and sale of securities made by the mutual fund in all its
schemes for a block of three months.
2) Conform that in case the AMC has dealt through any other broker other
than a associate broker in excess of 5% or more of the aggregate purchase
and sale of securities made by the mutual fund in all its schemes, the AMC
650
Master Circular for Mutual Funds as on March 31, 2024
has recorded in writing the justification for the same. In this regard provide
details such as date of transactions, name of broker, value of business,
brokerage paid, percent of business to total business for the day, whether
the broker is associated with the sponsor or through a firm which is an
associate of the sponsor, etc.
3) Diligence in empaneling the brokers, monitoring securities transactions
with brokers and avoiding undue concentration of business with any
broker.
F. Operations Related
1) Scheme-wise segregation of Assets and liabilities & Bank Accounts
and Securities Accounts: Confirm that the assets and liabilities of each
scheme are segregated and ring-fenced from other schemes of the mutual
fund; and bank accounts and securities accounts of each schemes are
segregated and ring-fenced.
2) Identification and Appropriation of Expenses:
i. Confirm that all scheme related expenses including commission paid
to distributors, by whatever name it may be called and in whatever
manner it may be paid, was paid from the scheme only within the
regulatory limits and not from the books of the Asset Management
Companies (AMC), its associate, sponsor, trustee or any other entity
through any route.
ii. Confirm that in case certain expenses are paid from the AMC books
then they are in compliance with the regulatory requirements and are
within the permissible limit of 2 bps and are properly recorded and
audited.
3) Maintenance of proper Books of Accounts, Records and Documents:
Confirm that the books of accounts, records and documents for each
scheme are kept and maintained properly and intimated to SEBI the place
where such books of account, records and documents are maintained
4) Reconciliation of investment in Government Securities: With respect
to investments in Government securities, the AMC has reconciled the
balances in their Subsidiary General Ledger (SGL) / Constituent
Subsidiary General Ledger (CSGL) Account with the statement issued by
RBI, at monthly intervals. The AMC has also submitted a compliance
certificate on a quarterly basis to RBI. The reconciliation procedure is a
part of internal audit and the auditors check on a continuous basis about
the status of reconciliation and submit a report to the Audit Committees.
These reports are placed in the meetings of Boards of AMCs and Trustees.
651
Master Circular for Mutual Funds as on March 31, 2024
G. Investor Related
1) Minimum Investors and Maximum Holding during the quarter:
Confirm that the regulatory requirements w.r.t. minimum number of 20
investors and no single investor hold more than 25% of the net assets of
the scheme were complied with during the quarter.
2) Investments by any company amounting to more than five percent of
the net asset value of a scheme: Indicate names of companies / schemes
and their association with the Sponsor or the AMC, if any.
3) Uniform cut-off timings for applicability of Net Asset Value (NAV) of
Mutual Fund scheme(s)/plan(s): Confirm compliance with the regulatory
requirements with regard to uniform cut-off timings for applicability of
NAV. Provide details of manual time stamping of applications during the
quarter along with adequate justification for the same and also steps taken
to avoid occurrence of the same in future. Also list instances of damages
of the seal and/or breakdown of the electronic time stamping process, if
any.
4) Despatch of redemption proceeds and Transfer of Units: Confirm that
all redemption and dividend payments are made with in the regulatory
limits. In case of delay in payment within the period specified, interest is
paid to the unitholders, for the period of such delay, at such rate as
specified by the SEBI.
5) Status of Investor Complaints: Provide the status of investor complaints
received through various modes and the redressal of the same by the AMC
including ageing schedule and reasons.
Category No. of Complaints Ageing analysis of pending complaints Reaso
n for
pendi
ng
compl
aints
Receiv Redresse Pending 0-3 4-7 8-20 21- 41- Beyon
ed d days day days 40 60 d 60
s days days days
TOTAL
6) KYC and AML Compliance including requirements on PAN, FATCA,
etc.:
Confirm that the regulatory requirement for Know Your Customer (KYC)
norms and the Anti-Money Laundering/ Countering the Financing of
Terrorism (AML/CFT) Obligations under the Prevention of Money
652
Master Circular for Mutual Funds as on March 31, 2024
Laundering Act, 2002 and Rules framed thereunder (PMLA) are complied
with.
7) Consent of Unitholders: Confirm that wherever required, consent of
unitholders were taken during the quarter in terms of MF Regulations.
H. Distributor Related
1) Distributor Empanelment: Number of new distributors empanelled by
the AMC during the quarter, for the purpose of selling and distribution of
units of mutual fund schemes with the following details:
(a) List of Domestic Distributors empanelled
(b) List of Overseas Distributors
(c) List of New cadre Distributors
In cases where the ARN of distributors expired, whether the commission
payable to the distributor is withheld by the AMC?
Due Diligence: At the time of empanelment of distributors and during the
period of review, AMCs has undertaken a due diligence process to satisfy
‘fit and proper’ criteria.
2) Certification and Registration of Intermediaries (Distributors) and
Employees:
(a) Certification of agents / distributors and employees of AMC: The
distributors/agents empanelled for selling and distribution of mutual
funds and also the employees of the AMC engaged for selling and
distribution were having the required certification.
(b) Brokerage on own Investments: No brokerage has been paid to the
brokers on their own investments.
(c) Code of Conduct for Intermediaries (Distributors): Confirm that the
activities of their agents/distributors are monitored on continuous
basis to ensure that they do not indulge in any kind of malpractice or
unethical practice while selling/marketing mutual fund units. If any
intermediary (distributor) did not comply with the code of conduct, the
same has been reported to AMFI and SEBI. There was no dealing with
those intermediaries (distributor) who do not follow the code of conduct.
3) Indicative portfolio and indicative yield: Confirm that no indicative
portfolio and indicative yield has been communicated in any manner
whatsoever by the MF/ Distributors:
653
Master Circular for Mutual Funds as on March 31, 2024
I. Service Provider Related
1) Service Contracts: Confirm the following:
(a) Review of all service contracts such as custody arrangements, transfer
agency of the securities to ensure that such contracts are executed in
the interest of the unitholders [Regulation 18(19)]
(b) All service providers are holding appropriate registrations from SEBI or
concerned regulatory authority [Regulation 18(25)A(iv)]
(c) The trust property is properly protected, held and administered by
proper persons and by a proper number of such persons. [Regulation
18(25)A(iii)]
2) Specific attention by Independent Directors of Trustees or AMC:
Confirm that the independent directors have given specific attention on
the areas mentioned under Regulation 18(27) of SEBI (Mutual Funds)
Regulations, 1996. Details of comments, if any, to be provided to trustees.
3) Any Special Developments: Details of any special developments in the
mutual fund during the quarter shall be provided to trustees.
(IV) Associate Transactions
a. Confirm that utilisation of services of the sponsor or any of its associates,
employees or their relative for any securities transaction; and distribution
and sale of securities; and the brokerage and commission paid for such
services; were disclosed and were in accordance with the regulatory
requirements.
b. Details of securities transactions in terms of Second Proviso to Regulation
25(8) of the Regulations:
 Any underwriting obligations undertaken by the schemes of the mutual
funds with respect to issue of securities of associate companies and
devolvement, if any.
 Subscription by the schemes in the issues lead managed by associate
companies; and
 Subscription of securities by the Schemes to any issue on private
placement basis where the Sponsor or its associate companies have
acted as arranger or manager.
c. Details of investments made by the schemes during the period in securities
of any of the associate companies
d. Details pertaining to securities transactions during the period where
associates are the counter parties.
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Master Circular for Mutual Funds as on March 31, 2024
e. Details with justification about purchase and sale of securities of the
Sponsor, group companies or associates of the Sponsor or AMC during the
quarter.
f. Confirm that no investment by mutual fund scheme is made in any
unlisted or privately placed securities of an associate or group company of
the sponsor.
g. Investments/ redemption by the AMC, Sponsor, any associate or group
company of the Sponsor in any of the schemes during the quarter.
*****
655
Master Circular for Mutual Funds as on March 31, 2024
H. TREATMENT OF CORPORATE ACTIONS682
(i) Involuntary corporate actions: In case of corporate actions where investors
have no choice in the matter, for example: demerger of companies, etc, the
compliance status of RGESS demat account shall not change.
(ii) Voluntary corporate actions: In case of corporate actions where investors
have the option to exercise his choice and thereby result in debit of
securities, for example: buy-back, etc, the same shall be considered as a
sale transaction for the purpose of the scheme.
Consolidated list of ‘corporate actions’
Sr. Corporate Action Classification (Involuntary or
No. Voluntary)
1 Amalgamation Involuntary
2 Scheme of Arrangement Involuntary
3 Reduction of Capital Involuntary
4 Bonus issue Involuntary
5 Buy Back of Shares Voluntary (Involuntary in case
of court intervention)
6 Stock Split Involuntary
7 Consolidation of Shares Involuntary
8 Conversion of Partly Paid up Involuntary
9 Dividend [Final/ Interim/ Involuntary
Special]
10 Exchange of Share Certificate Involuntary
[Name change]
11 Rights Issue Voluntary
12 Conversion (compulsory)* Involuntary
13 Conversion (optionally)* Involuntary
14 Redemption Involuntary (voluntary, if there
is option to continue with
revised terms)
15 Dividend on Mutual Fund Involuntary
16 Redemption of Mutual Fund Involuntary on maturity
(voluntary, if there is option to
shift between different
scheme(s) or on account of exit
option due to change in
fundamental attributes of
scheme)
* Considering any conversion into equities (e.g.: Conversion of warrants
into equities)
682 SEBI Circular No.CIR/MRD/DP/32/2012 dated December 6, 2012
656
Master Circular for Mutual Funds as on March 31, 2024
I. FORMAT FOR OVERSEAS INVESTMENTS REPORT683
Overseas Investments Report as on DD/MM/YYYY
New Fund Offers (NFOs) - Overseas Investments (other than Overseas ETFs)
Name Name Intended Date of Date of Limit utilized Unutilized
of the of the Investment Completion Completion as at the Balance
Mutual Scheme as of NFO of 6 month end Amount
Fund disclosed calendar DD/MM/YYYY (in USD
in Scheme months (in USD mn) mn)
Documents from (4)
(in USD
mn)
(1) (2) (3) (4) (5) (6) (7)
New Fund Offers (NFOs) – Overseas ETFs
Name Name Intended Date of Date of Limit utilized Unutilized
of the of the Investment Completion Completion as at the Balance
Mutual Scheme as of NFO of 6 month end Amount
Fund disclosed calendar DD/MM/YYYY (in USD
in Scheme months (in USD mn) mn)
Documents from (4)
(in USD
mn)
(1) (2) (3) (4) (5) (6) (7)
683 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/225 dated November 05, 2020
657
Master Circular for Mutual Funds as on March 31, 2024
Ongoing Schemes
Particular Name Limit Averag Addition Limit % of the Unutilized
s of the utilized e AUM al limit/ utilized as (5) on Balance
Mutua as at the for Headroo at the maximum Amount
l Fund end of previo m month entitled (in USD
previous us available end investme mn)
month three based on DD/MM/Y nt limit
DD/MM/ calend 20% of YYY
YYYY ar (3) (in USD
(in USD month mn)
mn) s
(1) (2) (3) (4) (5) (6) (7)
Overseas
Investment
s (other
than
Overseas
ETFs)
Overseas
ETFs
658
Master Circular for Mutual Funds as on March 31, 2024
3. FINANCIALS
A. HALF YEARLY FINANCIAL RESULTS FOR THE YEAR ENDED684
FORMAT FOR HALF YEARLY FINANCIAL RESULTS FOR THE PERIOD
ENDED______
SR.NO PARTICULARS SCHEME
NAMES
1.1 Unit Capital at the beginning of the half year
period [Rs. in Crores]
1.2 Unit Capital at the end of the period [Rs. in
Crores]
2 Reserves & Surplus [Rs. In Crores]
3.1 Total Net Assets at the beginning of the half year
period [Rs. in Crores]
3.2 Total Net Assets at the end of the period [Rs. in
Crores]
4.1 NAV at the beginning of the half year period [Rs.]
4.2 NAV at the end of the period [Rs.]
4.3 Dividend paid per unit during the half-year [Rs.]
5.1 Income
5.2 Dividend [Rs. in Crores]
5.3 Interest [Rs. in Crores]
5.4 Profit/(Loss) on sale/redemption of investments
(other than inter scheme transfer/sale) [Rs. in
Crores]
5.5 Profit/(Loss) on inter-scheme transfer/sale of
investments [Rs. in Crores]
5.6 Other Income (indicating nature) [Rs. in Crores]
684 MFD/CIR/1/200/2001 dated April 20,2001
659
Master Circular for Mutual Funds as on March 31, 2024
Total Income (5.1 to 5.5) [Rs. in Crores]
6.1 Expenses
- Commission
- Other expenses
6.2 Management Fees [Rs. in Crores]
6.3 Trustee Fees [Rs. in Crores]
6.4 Total Recurring Expenses (including 6.1 and 6.2)
[Rs. in Crores]
6.5 Percentage of Management Fees to daily net
assets [%]
Total Recurring expenses as a percentage of
daily net assets [%] at plan level
7.1 Returns during the half-year * [ (+) (-) ]
7.2 Compounded Annualised yield in case of schemes
in existence for more than 1
Year **
i. Last 1 year [%]
ii. Last 3 years [%]
iii. Last 5 years [%]
iv. Since launch of the scheme (date of launch to
be given) [%]
8 Provision for Doubtful Income/Debts [Rs. in
Crores]
9 Payments to associate/group companies (if
applicable) [Rs. in Crores]
10 Investments made in associate/group companies
(if applicable) [Rs. in Crores]
Considering the movement of NAV during the half year and after adjustment of
dividend, bonus, etc.
** For the calculation of compounded annualized yield, the procedure prescribed
in Standard Offer Document shall be followed. All performance calculations shall
be based only on NAV and the payouts to the unit holders. The calculation of
returns shall assume that all payouts during the period have been reinvested in
660
Master Circular for Mutual Funds as on March 31, 2024
the units of the scheme at the then prevailing NAV. The type of plan/option of
the scheme for which yield is given shall also be mentioned.
Notes:
1. Effect of changes in the accounting policies on the above items to be disclosed
by way of notes.
2. Details of transactions with associates in terms of Regulation 25(8), if
applicable, to be given by way of note.
3. Details of investments made in companies which have invested more than 5%
of the NAV of a scheme in terms of Regulation 25(11), if applicable, to be given
as a note.
4. Details of large holdings (over 25% of the NAV of the scheme), if applicable,
including information about the no. of such investors and total holdings by
them in percentage terms, to be given as a note.
5. Any bonus declared during the half-year in respect of any of the schemes to
be disclosed by way of a note.
6. Omitted.
7. Borrowings if any, above 10% of the net assets of any scheme of a mutual
fund to be disclosed.
8. Exposure if any, of more than 10% of the net assets of any scheme of a mutual
fund investing in derivative products to be disclosed.
9. All other disclosures as specifically stipulated in the SEBI (Mutual Funds)
Regulations, 1996, amended from time to time.
10. Performance of benchmark indices shall be disclosed below the returns of
specific schemes for the same period. Mutual Funds can give the performance
of more than one benchmark index also, if they so desire. Mutual funds may
also give the perception of the management on the performance of their
schemes685.
685 SEBI Circular - SEBI/MFD/CIR No. 6 / 12357 /03 June 26, 2003
661
Master Circular for Mutual Funds as on March 31, 2024
11. Schemewise percentage of investments made in foreign securities shall be
disclosed as a footnote686.
686 SEBI Circular – SEBI/IMD/Cir No 7/104753/07 dated September 26, 2007
662
Master Circular for Mutual Funds as on March 31, 2024
B. ABRIDGED SCHEME-WISE ANNUAL REPORT FORMAT687
Auditors' Report
Append the Auditors' Report to the financial statements of schemes, drawn up
in conformity with SEBI (Mutual Funds) Regulations, 1996.
ABC Mutual Fund
Address
Trustee Report
1 Scheme Performance, Future Outlook and Operations of the
Schemes
Brief commentary on the scheme's one year and since inception
performance vis-à-vis the benchmark. Performance to be as of the period
/ year end. Future Outlook of the Fund and Operations of the Schemes.
2 Brief background of Sponsors, Trust, Trustee Co. and AMC co.
a.___________Mutual Fund
_______________ Mutual Fund (_____MF) was set up as a Trust by the
Settlers, _______________ on _______________ with _____________Trustee
Company (the Trustee Company) as a Trustee in accordance with the
provisions of the Indian Trust Act, 1882 and is duly registered under the
Indian Registration Act, 1908. The Trustee has entered into an Investment
Management Agreement dated _____________ with _____________ Ltd. (the
AMC) to function as the Investment Manager for all the Schemes of ___MF.
____MF was registered with SEBI on ____________.
b.___________Trustee Company
The Trustee is the exclusive owner of the Trust Fund and holds the same
in trust for the benefit of the unitholders. The Trustee has been
discharging its duties and carrying out the responsibilities as provided in
the Regulations and the Trust Deed. The Trustee seeks to ensure that the
Fund and the Schemes floated there under are managed by the AMC in
accordance with the Trust Deed, the Regulations, directions and
guidelines issued by the SEBI, the Stock Exchanges, the Association of
687 SEBI Circular No. IMD/CIR No.8/132968/2008 dated July 24, 2008
663
Master Circular for Mutual Funds as on March 31, 2024
Mutual Funds in India and other regulatory agencies
3 Investment Objectives of the Schemes
4 Significant Accounting Policies: a Note confirming that "Accounting
policies are in accordance with Securities Exchange Board of India
(Mutual Fund) Regulations 1996." Deviation, if any, should be
reported.
5 Unclaimed Dividends & Redemptions
Summary of No. of Investors & Corresponding amount schemewise
Unclaimed Dividends Unclaimed Redemptions
Scheme Amount (Rs.) No. of Amount (Rs.) No. of
Investors Investors
Scheme A
Scheme B
6 Statutory Information:
a. The Sponsors are not responsible or liable for any loss resulting from
the operation of the Schemes of the Fund beyond their initial contribution
(to the extent contributed) of Rs. __________ for setting up the Fund, and
such other accretions / additions to the same.
b. The price and redemption value of the units, and income from them,
can go up as well as down with fluctuations in the market value of its
underlying investments.
c. Full Annual Report shall be disclosed on the website (www...........) and
shall be available for inspection at the Head Office of the mutual fund.
Present and prospective unit holder can obtain copy of the trust deed, the
full Annual Report of the Fund / AMC at a price.
For ____ Trustee Company
Director
Place:
Date:
664
Master Circular for Mutual Funds as on March 31, 2024
ABC MUTUAL FUND
Address
Abridged Balance Sheet as at
_____________
Rupees
in
Lakhs
Scheme A Scheme B Scheme C
As at As at As at As at As at As at
Current Previou Current Previou Current Previou
Year s Year Year s Year Year s Year
LIABILITIES
1 Unit Capital
2 Reserves & Surplus
2.1 Unit Premium Reserves
2.2 Unrealised Appreciation Reserve
2.3 Other Reserves
3 Loans & Borrowings
4 Current Liabilities & Provisions
Provision for doubtful
4.1 Income/Deposits
Other Current Liabilities &
4.2 Provisions
TOTAL
ASSETS
1 Investments
1.1. Listed Securities:
1.1.1 Equity Shares
1.1.2 Preference Shares
1.1.3 Equity Linked Debentures
1.1.4 Other Debentures & Bonds
1.1.5 Securitised Debt securities
1.2 Securities Awaited Listing:
1.2.1 Equity Shares
1.2.2 Preference Shares
665
Master Circular for Mutual Funds as on March 31, 2024
1.2.3 Equity Linked Debentures
1.2.4 Other Debentures & Bonds
1.2.5 Securitised Debt securities
1.3 Unlisted Securities
1.3.1 Equity Shares
1.3.2 Preference Shares
1.3.3 Equity Linked Debentures
1.3.4 Other Debentures & Bonds
1.3.5 Securitised Debt securities
1.4 Government Securities
1.5 Treasury Bills
1.6 Commercial Paper
1.7 Certificate of Deposits
1.8 Bill Rediscounting
1.9 Units of Domestic Mutual Fund
1.10 Foreign Securities
Total Investments
2 Deposits
3 Other Current Assets
3.1 Cash & Bank Balance
Triparty repo on Government
securities or treasury bills
3.2 / Reverse Repo Lending
3.3 Others
4 Deferred Revenue Expenditure
(to the extent not written off)
TOTAL
Notes to Accounts - Annexure I
ABC MUTUAL FUND
Address
Abriged revenue account for the year/ Period Ended _____
Rupees
in Lakhs
Scheme A Scheme B Scheme C
666
Master Circular for Mutual Funds as on March 31, 2024
Current Current Current
Previous Previous Previous
Year / Year / Year / Year / Year / Year /
Period Period Period Period Period Period
ended Ended ended ended ended ended
___ ___ ___ ___ ___ ___
1 INCOME
1.1 Dividend
1.2 Interest
1.3 Realised Gain / (Loss) on
Foreign Exchange
Transactions
1.4 Realised Gains /
(Losses) on Interscheme
sale of investments
1.5 Realised Gains /
(Losses) on External sale
/ redemption of
investments
1.6 Realised Gains /
(Losses) on Derivative
Transactions
1.7 Other Income1
( A )
2 EXPENSES2
2.1 Management fees
2.2 Goods & Service Tax
on Management fees
2.3 Transfer agents fees and
expenses
2.4 Custodian fees
2.5 Trusteeship fees
2.6 Commission to Agents
2.7 Marketing &
Distribution expenses
2.8 Audit fees
2.9 Other operating
expenses
( B )
3 NET REALISED GAINS
/ (LOSSES) FOR THE
YEAR / PERIOD (A -B =
C)
4 Change in Unrealised
Depreciation in value of
investments (D)3
5 NET GAINS / (LOSSES)
FOR THE YEAR /
667
Master Circular for Mutual Funds as on March 31, 2024
PERIOD
(E=(C-D))
6 Change in unrealised
appreciation in the value
of investments (F)4
7 NET SURPLUS /
(DEFICIT) FOR THE
YEAR / PERIOD
( E + F = G )
7.1 Add: Balance transfer
from Unrealised
Appreciation Reserve
7.2 Less: Balance transfer to
Unrealised Appreciation
Reserve
7.3 Add / (Less):
Equalisation
8 Total
9 Dividend appropriation
9.1 Income Distributed
during the year / period
9.2 Tax on income
distributed during the
year / period
10 Retained Surplus /
(Deficit) carried
forward to Balance
sheet
Notes to Accounts - Annexure I
Guidance Note
1 : Provide details of significant items indicating nature & corresponding amount in Notes to
accounts
2 : State in the notes to accounts that expenses other than management fee is inclusive of Goods
& Service Tax where applicable.
3. Unrealized Depreciation to be computed by each asset category and shown on an aggregated
basis. This should take into account change in unrealized depreciation for the year/period and
write back of unrealized depreciation provided in the previous year end.
4. Unrealized Appreciation to be computed by each asset category and shown on an aggregated
basis. This should take into account change in unrealized appreciation for the year/period and
write off of unrealized appreciation provided in the previous year end.
ABC Mutual Fund
Address
Notes to Accounts - Annexure I to the Abridged Balance Sheet and
Revenue Account for the Year / Period ended _____________
1 Investments: -
1.1. Note confirming that Investments of the Schemes are registered in the
name of the Trustees for the benefits of the Schemes Unitholders.
668
Master Circular for Mutual Funds as on March 31, 2024
1.2. Open Position of derivatives (outstanding market value & % to Net
Assets as of the Year end).
1.3. Investments in Associates and Group Companies: Provide details of
issuer, nature of instruments, amount, aggregate investments by all
schemes.
1.4. Open position of Securities Borrowed and / or Lend by the scheme.
1.5. Details of securities classified as below investment grade or default688:
Aggregate market value and provision thereof.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial Year
/ Period and percentage to net assets.
1.7. Aggregate Value of Purchase and Sale with Percentage to average
assets.
1.8. Non-Traded securities in the portfolio: Provide Aggregate Value of
Equity, Debt & Money Market Instruments and percentage to net
assets.
2 Details of Transaction with Associates under regulation 25(8). Provide
details of name of associate, nature of payment and amount
3 "Large Holdings in the Scheme (i.e. in excess of 25% of the net assets).
Provide details of No. of Investors and total holdings by them in
percentage terms."
4 Unit Capital movement during the year ended / period ended.
Planwise details of movement in units - opening, subscription,
redemption, closing. Indicate plan wise face value of units.
5 Prior Year Comparison - a suitable statement that prior year figures
have been reclassified wherever necessary to conform to current
years' presentation.
6 Contingent Liability. Provide details of nature and amount.
Guidance Note: Provide corresponding previous year/period figures for all the
above disclosures.
ABC MUTUAL FUND
Address
688 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
669
Master Circular for Mutual Funds as on March 31, 2024
Key Statistics for the year / period ended _____________
Scheme A Scheme B Scheme C
Current Previous Current Previous Current Previous
Year/ year/ Year/ year/ Year/ year/
Period Period Period Period Period Period
ended ended ended ended ended ended
1. NAV per
unit (Rs.):
Open
High
Low
End
2. Closing
Assets Under
Management
(Rs. in Lakhs)
End
Average
(AAuM)
3.Gross
income as % of
AAuM1
4. Expense
Ratio:
a. Total
Expense as %
of AAuM (plan
wise)
b.
Management
Fee as % of
AAuM (plan
wise)
5. Net Income
as a
percentage of
AAuM2
6. Portfolio
turnover ratio4
7. Total
Dividend per
unit
distributed
during the
year / period
(plan wise)
8. Returns:
670
Master Circular for Mutual Funds as on March 31, 2024
a. Last
One Year
Scheme
Plan
____
Plan
____
Benchmark
b. Since
Inception
Scheme
Plan
____
Plan
____
Benchmark
1. Gross income = amount against (A) in the Revenue account i.e. Income.
2. Net income = amount against (C) in the Revenue account i.e. NET REALISED GAINS / (LOSSES)
FOR THE YEAR / PERIOD
3. Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year/period.
4. AAuM=Average daily net assets
671
Master Circular for Mutual Funds as on March 31, 2024
C. MONTHLY PORTFOLIO DISCLOSURE689 AND HALF YEARLY PORTFOLIO
DISCLOSURES690
Name of the Mutual Fund:
Name of the scheme:
Half-yearly Portfolio Statement for the period ended __
Name of the instrument Quantity Mkt value (Rs in % to NAV
lakhs)
Equity & Equity related -
(a) listed / awaiting listing on Stock
Exchanges
1
2
3
Total
(b) Unlisted
1
2
3
Total
Debt Instruments -
(a) listed/awaiting listing on stock
exchanges
Rating
689 SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012,
SEBI/HO/IMD/DF2/CIR/P/2017/109 dated September 27, 2017 and
SEBI/HO/IMD/DF3/CIR/P/2020/130 dated July 22, 2020
690 MFD/CIR/9/120/2000 dated November 24, 2000, MFD/CIR/14/18337/2002 dated September
19, 2002
672
Master Circular for Mutual Funds as on March 31, 2024
1
2
3
Total
(b) Privately Placed/Unlisted
Rating
1
2
3
(C) Securitized Debt Instruments691
Total
Money Market Instruments
1
2
3
Total
Interest Rate Derivatives (both IRS/IRF) 692
1
2
3
Total
Others – cash etc. (please specify)
Grand Total
691 SEBI Circular No. IMD/CIR No 8/132968/2008 dated July 24, 2008
692 SEBI/HO/IMD/DF2/CIR/P/2017/109 dated September 27, 2017
673
Master Circular for Mutual Funds as on March 31, 2024
The portfolio disclosure for derivative positions including IRF693 shall be made as
follows:
Hedging Positions through Futures as on …
Underlying Long / Futures Price Current Margin
Short when price of the maintained
purchased contract in Rs. Lakhs
Total %age of existing assets hedged through futures
For the period ended … specify the following for hedging transactions
through futures which have been squared off/expired
Total Number of contracts where futures were bought
Total Number of contracts where futures were sold
Gross Notional Value of contracts where futures were bought
Gross Notional Value of contracts where futures were sold
Net Profit/Loss value on all contracts combined
Exposure created due to over hedging through futures (quantity of hedging
position exceeding the quantity of existing position being hedged) shall be
reported in the next table.
Other than Hedging Positions through Futures as on…
Underlying Long / Futures Price Current Margin
Short when price of the maintained
purchased contract in Rs. Lakhs
Total exposure due to futures (non hedging positions) as a %age of net
assets
For the period ended … specify the following for non-hedging
transactions through futures which have been squared off/expired
Total Number of contracts where futures were bought
Total Number of contracts where futures were sold
Gross Notional Value of contracts where futures were bought
Gross Notional Value of contracts where futures were sold
Net Profit/Loss Value on all contracts combined
Hedging Positions through Put Options as on …
693 SEBI Circular No. Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010 and
SEBI/HO/IMD/DF2/CIR/P/2017/109 dated September 27, 2017
674
Master Circular for Mutual Funds as on March 31, 2024
Underlying Number of Contracts Option Current
Price when Option Price
purchased
Total %age of existing assets hedged through put options
For the period ended … specify the following for hedging transactions
through options which have already been exercised/expired
Total Number of contracts entered into
Gross Notional Value of contracts
Net Profit/Loss on all contracts (treat premium paid as loss)
Exposure created due to over hedging through options (quantity of hedging
position exceeding the quantity of existing position being hedged) shall be
reported in the next table.
Other than Hedging Positions through Options as on …
Underlyin Call / Put Number of Option Price Current Price
g contracts when
purchased
Total Exposure through options as a %age of net assets
For the period ended … with regard to non-hedging transactions
through options which have already been exercised/expired specify:
Total Number of contracts entered into
Gross Notional Value of contracts
Net Profit/Loss on all contracts (treat premium paid as loss)
Hedging Positions through swaps as on …
Swaps should be disclosed separately as two notional positions in the underlying
security with relevant maturities. For example, an interest rate swap under
which a mutual fund is receiving floating rate interest and paying fixed rate will
be treated as a long position in a floating rate instrument of maturity equivalent
to the period until the next interest fixing and a short position in a fixed rate
instrument of maturity equivalent to the residual life of the swap.
675
Master Circular for Mutual Funds as on March 31, 2024
The aforementioned provisions for disclosure on derivatives shall be applicable
for all new schemes launched post the issue of the circular694. For all existing
schemes, compliance with these provisions shall be effective from October 01,
2010.
The following guidelines should be observed by the AMC when preparing the half
yearly portfolio statement for the unitholders:-
1. Entire portfolio irrespective of the quantity, market value and percentage
to NAV of any scrip should be disclosed in descending order of weightage
within each sub-group. If percentage to NAV of any security is less than
0.01%, it may be indicated by giving asterisk or any other mark instead of
showing 0.00.
2. An asterisk/ suitable mark should be given against debt instruments
which are below investment grade or default695in accordance with SEBI
Regulations and guidelines.
3. A double asterisk mark should be given against thinly traded/ non traded
securities and illiquid securities as defined in SEBI Regulations and
guidelines.
4. The following information may be given by way of footnotes:
a. If a security is in default beyond its maturity date, then disclosure
to this effect shall be provided. Such disclosure shall include details
of the security including ISIN, name of security, value of the security
considered under net receivables (i.e. value recognized in NAV in
absolute terms and as % to NAV) and total amount (including
principal and interest) that is due to the scheme on that investment.
Further, this disclosure shall continue till the value of the security
recognized in the NAV is received or for a period of 3 years from the
date of maturity of security, whichever is later.696
b. Total value and percentage of illiquid equity shares.
694 SEBI Circular No. Cir/ IMD/ DF/ 11/ 2010 dated August 18, 2010
695 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
696 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019
676
Master Circular for Mutual Funds as on March 31, 2024
c. NAV at the beginning and end of the half-year period and any
dividend, bonus etc declared during the period.
d. Total outstanding exposure in derivative instruments at the end of
the period.
e. Total investments in foreign securities/ADRs/GDRs at the end of
the period.
5. For Equity Oriented Schemes, in addition to the above, the following are
required to be disclosed:
a. Portfolio Turnover Ratio to be disclosed as a footnote.
b. The name of the industry against the name of each security in
accordance with industry classification as recommended by AMFI. The
same industry classification may also be followed by the Mutual Funds
while making disclosures of portfolios to investors, distributors and
others, which are non statutory in nature.
6. For Debt Oriented Schemes, in addition to the above, the following are
required to be disclosed
a. Average maturity period to be disclosed as a footnote.
7. Half Yearly portfolio statements shall disclose all funds parked in short
term deposit(s) under a separate heading. Details shall also include name
of the bank, amount of funds parked, percentage of NAV697.
Further, all term deposits placed as margins for trading in cash and
derivatives market shall be disclosed under a separate heading. Details
shall include name of the bank, amount of term deposits, duration of term
deposits, percentage of NAV698.
697 SEBI/IMD/CIR No.1/91171/07 dated April 16, 2007
698 SEBI Circular No. SEBI/IMD/Cir No.7/129592/08 dated June 23, 2008.
677
Master Circular for Mutual Funds as on March 31, 2024
8. Investments in foreign securities shall be disclosed in the prescribed
format under a separate heading "Foreign Securities and/or overseas
ETF(s)"699
9. The format of monthly and half yearly portfolio should reflect the
investment in ETCDs. 700
699 SEBI Cir SEBI/IMD/CIR No.7/104753/07 dated September 26, 2007
700 SEBI Cir SEBI/HO/IMD/DF2/CIR/P/2019/65 dated May 21, 2019
678
Master Circular for Mutual Funds as on March 31, 2024
D. DISCLOSURE OF MONTHLY AAUM701
D.1 Format For MAAUM Disclosure:
XYZ Mutual Fund: Net Assets Under Management (AUM) as on …. (All figures in Rs. Crore)
Through Direct Plan Through Associate Distributors Through Non - Associate Distributors
N
S
o
l.
.
Sc
S
h
c
e
h
m
e
e
m
C
e
a
N
t
a
e
m
go
e
r y/
T30 B30 T30 B30 T30 B30 GRAND
I II I II I II I II I II I II TOTAL
123451234512345123451234512345123451234512345123451234512345
INCOME / DEBT
A ORIENTED SCHEME S
(i) Liquid/ Money Market
Scheme names
(a) Sub-Total
(ii) Gilt
Scheme names
(b) Sub-Total
(iii) FMP
Scheme names
(c) Sub-To tal
(iv) Debt (assured return)
Scheme names
(d) Sub- Total
Infrast ructure Debt
(v) Funds
Scheme names
(e) Sub-To tal
(vi) Other Debt Schemes
Scheme names
(f) Sub-Total
Grand Sub-Total
(a+b+c+d+e+f)
GROWTH / EQUITY
B ORIEN TED SCHEMES
(i) ELSS
Scheme names
(a) Sub-Total
(ii) Others
Scheme names
(b) Sub-Total
Grand Sub-Total (a+b)
C BALANCED SCHE MES
(i) Balanced schemes
Scheme names
Grand Sub-Tota l
EXCHA NGE TRADED
D FUND
(i) GOLD ETF
Scheme names
(a ) Sub-Total
(ii) Other ETFs
Scheme names
(b) Sub-Total
Grand Sub-Total (a+b)
FUND OF FU NDS
INVESTING
E OVERSEAS
Fund of fu nds investing
(i) overseas
Scheme names
Grand Sub-Total
GR AND TOTAL (A+B+C+D+E ) `
F Fund of Funds Scheme ( Domestic)
Scheme names
Grand Sub-Total
T30 : Top 30 cities as identified by AMFI Category of Investor
B30 : Other than T30 1 : Retail Inves tor
2 : Corporates
I : Contribution of sponsor and its associates in AUM 3 : Banks/ FIs
II : Contribution of other than sponsor and its associates in AUM 4 : FIIs/FPIs
5 : High Networth Individuals
701 SEBI Circular CIR/IMD/DF/05/2014 dated March 24, 2014, SEBI Circular
CIR/IMD/DF/07/2014 dated April 2, 2014 and SEBI Circular
SEBI/HO/IMD/DF2/CIR/P/2018/16 dated February 02, 2018.
679
Master Circular for Mutual Funds as on March 31, 2024
D.2 Format for State Wise/ Union Territory Wise contribution to AUM of
category of schemes:
680
Master Circular for Mutual Funds as on March 31, 2024
S l. N o .
1234567891
0
1 1
1 2
1 3
1 4
1 5
1 6
1 7
1 8
1 9
2 0
2 1
2 2
2 3
2 4
2 5
2 6
2 7
2 8
2 9
3 0
3 1
3 2
3 3
3 4
3 5
3 6
T o ta l
N o te: N
T a b le sh o w in g S ta te w ise /U n io n T errito ry w ise co n trib u tio n to A U M o f ca teg o
X Y Z M u tu a l F u n d (A ll fig u res in R s. C ro re)
N a m e o f th e S ta tes/ L IQ U ID O T H E R G R O W T H / B A L A N C E D F U N D O F
U n io n T errito ries S C H E M E S D E B T E Q U IT Y S C H E M E S F U N D S E
O R IE N T E D O R IE N T E D IN V E S T IN G
S C H E M E S S C H E M E S O V E R S E A S
A n d am an an d N ico b ar
Islan d s
A n d h ra P rad esh
A ru n ach al P rad esh
A ssam
B ih ar
C h an d ig arh
C h h attisg arh
D ad ra an d N ag ar H av eli
D am an an d D iu
G o a
G u jarat
H aryan a
H im ach al P rad esh
Jam m u an d K ash m ir
Jh ark h an d
K arn atak a
K erala
L ak sh ad w eep
M ad h ya P rad esh
M ah arash tra
M an ip u r
M eg h alaya
M izo ram
N ag alan d
N ew D elh i
O rissa
O th ers
P o n d ich erry
P u n jab
R ajasth an
S ik k im
T am il N ad u
T rip u ra
U ttar P rad esh
U ttarak h an d
W est B en g al
am e o f n ew states / u n io n territo ries sh all b e ad d ed alp h ab etically
ry o f sch
G O L D
X C H A N
T R A D E
F U N D
em
G E
D
es a
E
s o n _ _
O T H E R
X C H A N G
T R A D E D
F U N D
E
T O T A L F U N
F U
IN V E
D O M
D O F
N D S
S T IN G
E S T IC
E. FORMATS FOR FINANCIAL STATEMENTS OF THE MUTUAL FUND
SCHEMES AS PER INDIAN ACCOUNTING STANDARDS (IND AS) 702
Contents of scheme-wise Balance Sheet (at Scheme level)
Rupees in
Lakhs
Figures as at the Figures as at the
Note
Particulars end of current end of previous
reporting period reporting period
No.
Assets
Financial Assets
Cash and cash equivalents 1
Balances with Bank/(s) 2
Derivative financial 3
instruments
Receivables 4
Investments 5
Other Financial assets 6
Non-Financial Assets
Investment Property 7
Other Non -Financial assets 8
Total Assets (A)
Financial Liabilities
Derivative financial 9
instruments
Payables 10
Borrowings 11
702 SEBI Circular no SEBI/HO/IMD-II/DOF8/P/CIR/2022/12 dated February 04, 2022 (effective
from April 1, 2023).
681
Master Circular for Mutual Funds as on March 31, 2024
Other Financial Liabilities 12
Non-Financial Liabilities
Provisions
Other Non-Financial 13
Liabilities
Total Liabilities (B)
Net assets attributable to
holder of redeemable units
The Notes referred to herein form an integral part of the Balance Sheet
Statement of changes in net asset attributable to unit holders of scheme:
Rupees in Lakhs
Figures for the current reporting Period
Reserves & Surplus (Rs.)
Unit
Other
Particulars Total
Capital Unit Unrealised Revenu
Reserves (to
(Rs.)
(Rs.) Premium Appreciati e
be
Reserves o n Reserve
specified)
Reserves s
Balance at the
beginning of the
reporting period
Changes in accounting
policy/prior period
errors
Movement during the
reporting period
Transfer from/ to
Revenue account
Equalisation Account
Surplus distribution
Others ( to be specified)
682
Master Circular for Mutual Funds as on March 31, 2024
Balance at the end of
the reporting period
Figures for the previous reporting Period
Particulars Unit Reserves & Surplus (Rs.) Total
Capita Unrealised Other (Rs.)
l
(Rs.) Unit Appreciati Reserves
Reve
Premiu on (to be
nue
m specified)
Reserves
Reser
Reserves
ves
Balance at
the beginning of
the reporting
period
Changes in accounting
policy/prior period
errors
Movement during the
reporting period
Transfer from/ to
Revenue
account
Equalisation Account
Surplus distribution
Others (to be specified)
Balance at the end of
the reporting period
683
Master Circular for Mutual Funds as on March 31, 2024
Movement of Unit Capital
Rupees in Lakhs
Figures for the Figures for the
current previous
Particulars reporting reporting period
period
No of No of
(Rs.) (Rs.)
Units Units
Balance of unit capital at the beginning
of the reporting period
New fund / plan offer during period,
Capital issued during period (including
dividend reinvestment) etc.
Redemptions during the period
Balance of unit capital at the end of the
period
Note: Provide break-up of unit capital plan/option wise.
Contents of Revenue Account (at Scheme level)
Rupees in Lakhs
Figures for the Figures for the
Not
Particulars
current previous
e
reporting reporting period
No.
Period
Income
Interest Income
Dividend Income
Rental Income
Gain on fair value changes 14
684
Master Circular for Mutual Funds as on March 31, 2024
Gain on Sale/Redemptions of 15
Investments
Others ( to be specified)
Total Income (A)
Expenses
Finance Costs
Fees and commission expenses 16
Loss on fair value changes 17
Loss on Sale/Redemptions of 18
Investments
Others ( to be specified) 19
Total Expense (B)
Surplus/ Deficit for the Reporting
Period (A-B)
The Notes referred to herein form an integral part of the Revenue Account
Notes to Balance Sheet and Revenue Account
Note 1
Cash and cash equivalents
Figures as at the Figures as at the
Particulars end of current end of the
reporting period previous
reporting period
Reverse repurchase transactions /
Triparty Repo (TREPs) etc.
Cash on Hand
685
Master Circular for Mutual Funds as on March 31, 2024
Total
Note 2
Balances with Bank/(s) #
Figures as at the Figures as at the
Particulars end of current end of the
reporting period previous
reporting period
Balances with banks in current account
Deposits with scheduled banks - (Specify
the nature as ASBA deposits, Margin
deposits etc.)
Others ( to be specified)
Total
Note 3
Derivative financial instruments receivable
Figures as at Figures as at the
Particulars the end of end of the
current previous
reporting reporting period
period
Stock Futures/ Options
Index Futures/ Options
Commodity Futures/Options
Interest Rate Futures/ Swaps
Currency Futures
Others (to be specified)
Total
686
Master Circular for Mutual Funds as on March 31, 2024
Note 4
Receivables #
Figures as at Figures as at the
Particulars the end of the
end of current previous
reporting reporting period
period
Contracts for sale of investments in
securities
Receivable from AMC
Receivable from other schemes of Mutual
Fund
Others (to be specified)
Total
Note 5
Investments
Figures as at Figures as at the
Particulars the end of end of the
current previous
reporting reporting period
period
Equity shares
Preference shares
Debentures/bonds
Central and State Government Securities
Treasury bills
Commercial Paper
Certificate of Deposits
Units of Domestic Mutual Fund
Commodities (Gold, Silver etc.)
Foreign Securities
Exchange Traded Funds ( ETFs)
687
Master Circular for Mutual Funds as on March 31, 2024
Infrastructure Investment Trust units
(INVITS)
Real Estate Investment Trust (REITs)
Calls paid in advance
Securitized Assets
Others (to be specified)
Total
Wherever applicable, the assets shall be further classified according to
its nature such as
- Listed/Awaiting listing/ Unlisted
- Convertible/Non-convertible
- Investment Grade/Below Investment Grade
Note 6
Other Financial assets #
Figures as at Figures as at the
Particulars the end of the
end of current previous
reporting reporting period
period
Interest Accrued
Dividend Receivable
Margin money
Shares/debentures application money,
pending allotment
Others (to be specified)
Total
688
Master Circular for Mutual Funds as on March 31, 2024
Note 7
Non-Financial Assets - Investment Property
Figures as at Figures as at the
Particulars the end of end of the
current previous
reporting reporting period
period
Real Estate Assets
Residential *
Commercial *
Others ( to be specified)
Total
* Shall be sub-classified on the basis of developers, location and project.
Particulars shall include area, cost, fair value, basis of fair value, and legal
disputes, etc. Specify non- performing Investment properties separately.
Note 8
Other Non - Financial assets #
Figures as at Figures as at the
Particulars the end of end of the
current previous
reporting reporting period
period
Fixed Assets @
Tax credit receivable
Others (to be specified)
Total
@ Depreciated cost of the Fixed Assets as a whole or net block may be
disclosed.
# Allowances for the impairment loss/doubtful receivable/diminution in
the value of the assets shall be disclosed under relevant heads of this
notes.
689
Master Circular for Mutual Funds as on March 31, 2024
Note 9
Derivative financial instruments payable
Figures as at Figures as at the
Particulars the end of end of the
current previous
reporting reporting period
period
Stock Futures/ Options
Index Futures/ Options
Commodity Futures/Options
Interest Rate Futures/ Swaps
Currency Futures
Others (to be specified)
Total
Note 10
Payables
Figures as at Figures as at the
Particulars the end of the
end of current previous
reporting reporting period
period
Contract for purchase of investments in
securities
Income distribution payable
Payable to AMC
Payable to other schemes of Mutual Fund
Payable on redemption of units
Others (to be specified)
Total
Note 11
690
Master Circular for Mutual Funds as on March 31, 2024
Borrowings
Figures as at Figures as at the
Particulars the end of end of the
current previous
reporting reporting period
period
Loans/Borrowings
From Reserve Bank of India
From Settlor/Sponsor
From other Commercial Banks
From Triparty Repo (TREPs)
From others ( to be specified)
Total
If the above loans/borrowings are secured, the nature and extent of
security should be disclosed.
Loans/Borrowings by the scheme with amount, rate of interest,
source and other terms shown separately, source-wise.
Note 12
Other Financial Liabilities
Figures as at Figures as at the
Particulars the end of the
end of current previous
reporting reporting period
period
Finance Cost on Loans/Borrowing/(s)
Management Fees Payable
Trusteeship Fees Payable
Commission to Distributors Payable
Custodian Fees and Expenses Payable
Registrar Fees and Expenses Payable
Marketing/Publicity/Advertisement
Expenses Payable
691
Master Circular for Mutual Funds as on March 31, 2024
Audit Fees Payable
Investor Communication Expense
Payable
Investor Education & Awareness
Expenses
Payable
Brokerage & Transaction Costs Payable
Unclaimed dividend/income distribution
Unclaimed redemptions
Sundry Creditors
Others (to be specified)
Total
Note 13
Other Non-Financial Liabilities
Figures as at Figures as at the
Particulars the end of the
end of current previous
reporting reporting period
period
Statutory taxes payable
Others ( to be specified)
Total
692
Master Circular for Mutual Funds as on March 31, 2024
Note 14
Gain on fair value changes
Figures for the Figures for the
Particulars
current previous
reporting reporting
Period period
Gross change on account of Gain on fair
value changes (MTM)
Gross change on account of Gain on fair
value changes - Derivative Instruments
(MTM)
Change in unrealised gain in the value of
investments due to foreign exchange
fluctuation
Others ( to be specified)
Total
Note 15
Gain on Sale/Redemptions of
Investments
Figures for the Figures for the
Particulars
current previous
reporting reporting period
Period
Profit on sale/redemption of investments
(Gross)
Profit on inter-scheme sale of
Investments (Gross)
Profit on derivatives transactions (Gross)
Profit on sale of real estate assets
Profit on inter-scheme sale of real estate
assets (Gross)
693
Master Circular for Mutual Funds as on March 31, 2024
Others (to be specified)
Total
Note 16
Fees and commission expenses
Figures for the Figures for the
Particulars current previous
reporting Period reporting period
Management Fees
GST on Management Fees
Trusteeship Fees
Commission to Distributors
Total
Note 17
Loss on fair value changes
Figures for the Figures for the
Particulars Current previous
reporting Period reporting period
Gross change on account of Gain on fair
value changes (MTM)
Gross change on account of Gain on fair
value changes - Derivative Instruments
(MTM)
Change in unrealised gain in the value of
investments due to foreign exchange
fluctuation
Others ( to be specified)
Total
694
Master Circular for Mutual Funds as on March 31, 2024
Note 18
Loss on Sale/Redemptions of
Investments
Figures for the Figures for the
Particulars current previous
reporting reporting
Period period
Loss on sale/redemption of investments
(Gross)
Loss on inter-scheme sale of Investments
(Gross)
Loss on derivatives transactions (Gross)
Loss on exchange rate fluctuation
Loss on sale of real estate assets
Loss on inter-scheme sale of real estate
assets (Gross)
Others ( to be specified)
Total
Note 19
Expenses – Others
Figures for the Figures for the
Particulars current previous
reporting reporting
Period period
Custodian Fees and Expenses
Registrar Fees and Expenses
Marketing/Publicity/Advertisement
Expenses
Audit Fees
Investor Communication Expenses
695
Master Circular for Mutual Funds as on March 31, 2024
Investor Education and Awareness
expenses
Brokerage & Transaction Costs
Insurance & Security Expenses
Statutory Taxes
Advisory Fee in respect of real estate
asset
Repairs and Maintenance in case of real
estate asset.
Registration and local charges
Legal & Title Search Fee
Depreciation of fixed assets
Other Operating expenses
Others (to be specified)
Total
Notes
(i) All disclosures required by Indian Accounting Standards (IND AS) shall
be applicable with respect to preparation of annual statements of
accounts of the schemes, shall form part of notes to account.
(ii) Accounting policy in respect of recognition of revenue and income from
investments (including dividend and interest in case of securities and
rental income in case of real estate asset) shall be disclosed by way of
a note.
(iii) If a security is in default beyond its maturity date, then disclosure to
this effect shall be provided. Such disclosure shall include details of
the security including ISIN, name of security, value of the security
considered under net receivables (i.e. value recognized in NAV in
absolute terms and as % to NAV) and total amount (including principal
and interest) that is due to the scheme on that investment. Further,
this disclosure shall continue till the value of the security recognized
696
Master Circular for Mutual Funds as on March 31, 2024
in the NAV is received or for a period of 3 years from the date of
maturity of security, whichever is later.
(iv) The total income and expenditure expressed as a percentage of average
net assets, calculated on a Daily Average Net Asset basis should be
indicated. Expenditure expressed as a percentage of average net assets
should be at plan level.
(v) Accounting policy of valuation of Investments shall be disclosed.
(vi) Contingent liabilities disclosure should be made of all contingent
liabilities, showing separately: -
(a) Underwriting commitments;
(b) Uncalled liability on partly paid shares;
(c) Other commitments; and
(d) Others (specifying details).
(vii) The Balance Sheet and the Revenue Account shall be signed by the
Chief Executive Officer, Chief Operating Officer/Chief Finance Officer/
such other KMP as designated by Board of AMC who is responsible for
preparation of financial statements, Chief Investment Officer, scheme
wise fund manager/s, and the Board of Trustees, and reported upon
by the Auditors. The financial statements of the scheme should be
approved at a meeting of the Board of Directors of the Asset
Management Company and also at a meeting of the trustees or in the
case of a trustee company by the Board of Directors of the trustee
company.
(viii) Disclosures as required by the Regulations or as may be prescribed by
the Board from time to time shall form part of notes to accounts.
697
Master Circular for Mutual Funds as on March 31, 2024
F. INDICATIVE FORMAT OF HALF-YEARLY CONSOLIDATED ACCOUNT
STATEMENT703
Col Col
Col 1 Col 2 Col Col 6 Col 7 Col 8 Col 9
4 5
3
Cumulativ Gross commission paid to
Folio No. NAV Market Average Total
Sr. Scheme e distributors2 3 (in absolute
ISIN No. of as Value Expense Ratio1 (In
No. Name Amount terms)
units on as on % terms)
invested (In INR)
(in INR)
Regular Direct
a. XYZ Equity NA NA
Scheme-
Growth -
Direct Plan
b. ABC NA
Medium
Term-
Growth -
Regular Plan
(ARN-
99999)
c. DEF Long NA NA
Term -
Growth -
Direct Plan
Total
1: Total Expense Ratio above represents the average of annualized total expense ratio charged in the respective schemes
during the half-year period within the limits prescribed under SEBI (MFs) Regulations. 1996
2: The gross commission in Col. 9 above includes all direct monetary payments and other payments made in the form of
gifts / rewards, trips, event sponsorships etc. by AMCs/MFs to distributors during the half-year period .... to
3: The commission in Col 9 above indicates gross commission received by the distributor against the respective investment
and does not exclude costs incurred by distributors such as service tax (wherever applicable, as per existing rates),
operating costs, etc.
703 Circular no. SEBI/HO/IMD/DF2/CIR/P/2016/89 dated September 20, 2016
698
Master Circular for Mutual Funds as on March 31, 2024
4. APPLICATION FOR OVERSEAS INVESTMENTS
PROPOSAL FOR INVESTMENTS IN ADRs/GDRs/ FOREIGN
SECURITIES / OVERSEAS ETFs704
Name of the Mutual Fund:
SEBI Registration No.:
Amount Proposed to be Invested in
ADRs /GDRs /Foreign Securities /
Overseas ETFs (in US $)
Schemes of the Mutual Fund Name and Type of scheme(s)
through which investment is
proposed
Whether the investment is
consistent with the Investment
Objectives of the Scheme (s);
Whether the offer document(s)
provides for Overseas Investments
and discloses the attendant risks
Name and Address of the branch of
the bank through which Foreign
Currency Transactions are to be
routed:
Details of all overseas service
providers proposed to be engaged
including custodians, specialised
agencies etc.
(Details must include name &
address, services to be rendered,
details of fee arrangement
proposed, whether their track
record of performance and
regulatory compliance considered,
their valid registration with
overseas regulators details of
experience/expertise, assets under
management/custody, etc.)
704 SEBI Cir No- IMD/CIR No 7/104753/07 dated September 26, 2007
699
Master Circular for Mutual Funds as on March 31, 2024
Declaration:
1. Boards of AMC and Trustees have exercised due diligence as required
under Regulation 25(2) and Guidelines issued in this regard.
2. Board of AMC and Trustees are satisfied that
i. The proposed investments in ADRs/GDRs issued by Indian or foreign
companies or foreign securities or overseas ETFs are consistent with
the investment objectives of the above mentioned scheme(s) and are
in the interest of investors.
ii. The systems and procedures adopted by the AMC including the
arrangements made with the overseas service providers are
adequate to support such investments and to safeguard the interest
of investors.
iii. The overseas service providers have sufficient experience,
competence and a satisfactory track record of performance and
regulatory compliance.
3. A resolution to the above effect has been passed by the Boards of AMC
and Trustees on…(dates)
Place: Signatures
Name:
Date: Designation:
(Authorised by Trustees)
700
Master Circular for Mutual Funds as on March 31, 2024
5. STANDARD OFFER DOCUMENTS705
A. SCHEME INFORMATION DOCUMENT (SID)
Front Cover Page
SCHEME INFORMATION DOCUMENT
SECTION 1
N A M E O F T H E S C H E M E
( T y p e o f S c h e m e )
1. Name and type of the scheme to be aligned with SEBI Circulars
on Categorization and Rationalization of Mutual Fund schemes.
2. As per SEBI Circulars on Potential Risk Class (PRC) Matrix for
debt schemes, type of scheme to include PRC description and
table
3. For Index Funds / Index ETF - Name of scheme shall include
complete name of underlying Index.
4. In case of FOF’s where single fund is underlying (Feeder Funds):
To include the complete name of the underlying fund in the name
of the scheme
5. Product Labelling and Risk-o-meter of the Scheme and
Benchmark should be disclosed
6. In case the scheme is listed/proposed to be listed (ETFs/close
ended etc.), the Scrip Code issued by the stock exchange after
listing to be mentioned below the Scheme Name.
This product is Scheme Benchmark
suitable for Riskometer Riskometer (as
investors who are applicable)
seeking*
As per AMFI Tier 1
Benchmark i.e.
……..(as applicable)
 The above product labelling assigned during the New Fund
Offer (NFO) is based on internal assessment of the scheme
characteristics or model portfolio and the same may vary post
NFO when the actual investments are made
705 SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008
701
Master Circular for Mutual Funds as on March 31, 2024
Offer of Units of Rs. -- each for cash during the
New Fund Offer and Continous offer for Units at NAV based prices
New Fund Offer Opens on: _______
New Fund Offer Closes on: _______
Scheme re-opens on: __________
Name of Mutual Fund :
Name of Asset Management Company :
Name of Trustee Company :
Addresses, Website of the entities
The particulars of the Scheme have been prepared in accordance with the
Securities and Exchange Board of India (Mutual Funds) Regulations 1996,
(herein after referred to as SEBI (MF) Regulations) as amended till date and
circulars issued thereunder filed with SEBI, along with a Due Diligence
Certificate from the AMC. The units being offered for public subscription
have not been approved or recommended by SEBI nor has SEBI certified the
accuracy or adequacy of the Scheme Information Document.
The Scheme Information Document sets forth concisely the information about
the scheme that a prospective investor ought to know before investing. Before
investing, investors should also ascertain about any further changes to this
Scheme Information Document after the date of this Document from the Mutual
Fund / Investor Service Centres / Website / Distributors or Brokers.
The investors are advised to refer to the Statement of Additional
Information (SAI) for details of ________ Mutual Fund, Standard Risk Factors,
Special Considerations, Tax and Legal issues and general information on
www.__________. (website address).
SAI is incorporated by reference (is legally a part of the Scheme
Information Document). For a free copy of the current SAI, please contact
your nearest Investor Service Centre or log on to our website.
702
Master Circular for Mutual Funds as on March 31, 2024
The Scheme Information Document (Section I and II) should be read in
conjunction with the SAI and not in isolation.
This Scheme Information Document is dated ________.
Note:
The wording in italics is explanatory commentary/instructions.
Instructions:
i. A Mutual Fund is free to add any other disclosure, which in the opinion of the
Trustees of the Mutual Fund (Trustees) or the Asset Management Company
(AMC) is material for the investor, provided that such information is not
presented in an incomplete, inaccurate or misleading manner. Care should be
taken to ensure that inclusion of such information does not, by virtue of its
nature, or manner of presentation, obscure or impede understanding of any
information that is required to be included under the Scheme Information
Document.
ii. Since investors who rely on the Scheme Information Document may not be
sophisticated in legal or financial matters, care should therefore be taken to
present the information in the Scheme Information Document in simple language
and in a clear, concise and easily understandable manner.
iii. The scheme shall not have a name or title which may be deceptive or
misleading. Scheme’s name should be consistent with its statement of
investment policy and the scheme name should be in line with SEBI circulars
on categorization.
iv. The type of the scheme would mean whether the scheme is a growth scheme,
income scheme, balanced scheme etc. and whether the scheme is open-ended,
close-ended, an interval fund etc. and the scheme type should be in line with
SEBI circular on categorization.
v. Scheme Information Document has two sections- Section I and Section II. While
Section I contains scheme specific information that is dynamic, Section II
contains elaborated provisions (including references to applicable
Regulations/circulars/guidelines) with reference to information/disclosures
provided in Section I.
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Master Circular for Mutual Funds as on March 31, 2024
PART I. HIGHLIGHTS/SUMMARY OF THE SCHEME
Sr. No. Title Description
I. N ame of the scheme  (As per SEBI circular on categorization and
rationalization of mutual fund schemes)
 Maturity/duration of scheme for close ended/Target
maturity schemes to be mentioned in the name of
the scheme
II. C ategory of the (As per SEBI circular on categorization and rationalization
Scheme of mutual fund schemes)
III. S cheme type  Maturity/duration of scheme for close ended/Target
maturity schemes to be mentioned
 As per SEBI categorization circular – All Debt
schemes to include PRC description and table in the
scheme type
IV. S cheme code (To be disclosed after obtaining scheme code)
V. In vestment objective Clear and concise Investment objective to be stated in SID
and must be true to the scheme label. It shall contain
statement “There is no assurance that the investment
objective of the Scheme will be achieved”
VI. L iquidity/listing Provide Liquidity provisions on ongoing basis. Listing details
only to be provided if the scheme intends to list immediately
details
after NFO
VII. B enchmark (Total  As per AMFI Tier I benchmark
Return Index)  The name and the justification (specific to the
scheme objective) for the use of benchmark index
with which the performance of the scheme can be
compared with.
 Second Tier benchmark if applicable
VIII. N AV disclosure Mention only the Daily Disclosure timings on AMFI and
AMC website. Further Details in Section II.
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Master Circular for Mutual Funds as on March 31, 2024
IX. A pplicable timelines Timeline for
 Dispatch of redemption proceeds,
 Dispatch of IDCW (if applicable) etc.
X.
Plans and Options Plan- Direct Plan/Regular Plan
Plans/Options and sub
Options under each Plan(s)
options under the
Scheme
Growth
 Income Distribution cum Capital Withdrawal (IDCW)
(include facilities if applicable)
XI. L oad Structure  Including Default option/ facility (as applicable)
ExFito rL doeatda:i led disclosure on default plans and options,
kindly refer SAI.
XII.  During NFO:
Minimum Application  On continuous basis:
Amount/switch in  AMC to mention about minimum balance requirements
(if any)
XIII. M inimum Additional
Purchase Amount
XIV. M inimum
Redemption/switch
out amount
XV. NFO opens on:
New Fund Offer NFO closes on:
Period
This is the period Minimum duration to be 3 working days and will not be
during which a new kept open for more than 15 days
scheme sells its units Any changes in dates will be published through notice on
to the investors. AMC website i.e. …………..
The NFO period in case of ELSS schemes shall continue to
be governed by guidelines issued by Government of India.
XVI. N ew Fund Offer price per unit
Price:
This is the price per
unit that the investors
have to pay to invest
during the NFO.
XVII. S egregated Confirmation/disclosure statement only. For Details,
portfolio/side kindly refer SAI
pocketing disclosure
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Master Circular for Mutual Funds as on March 31, 2024
XVIII.S wing pricing Confirmation/disclosure statement only. For Details,
disclosure kindly refer SAI
XIX. S tock lending/short Confirmation/disclosure statement only. For Details,
selling kindly refer SAI
XX. H ow to Apply Summary of process only. Details in section II
XXI. W here can Summary of process only. Details in section II
applications for
subscription/redempt
ion/
switches be
XXII. I nvestor services  Contact details for general service requests:
submitted
 Contact details for complaint resolution:
XXIII. S pecific attribute of
the scheme (such as
lock in, duration in
case of target
maturity
scheme/close ended
schemes) (as
XXIV. S pecial Briefly describe the facilities/products Available
applicable)
product/facility Facilities like:
available during the  Systematic Investment Plan
NFO and on ongoing  Systematic Transfer Plan
basis  Systematic Withdrawal Plan
 For further details of above special products /
facilities, For Details, kindly refer SAI
XXV. W eblink A weblink wherein TER for last 6 months as well as scheme
factsheet shall be made available.
DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY
It is confirmed that:
(i) The Scheme Information Document submitted to SEBI is in
accordance with the SEBI (Mutual Funds) Regulations, 1996 and
the guidelines and directives issued by SEBI from time to time.
(ii) All legal requirements connected with the launching of the Scheme as
also the guidelines, instructions, etc., issued by the Government and
any other competent authority in this behalf, have been duly complied
with.
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Master Circular for Mutual Funds as on March 31, 2024
(iii) The disclosures made in the Scheme Information Document are true,
fair and adequate to enable the investors to make a well informed
decision regarding investment in the Scheme.
(iv) The intermediaries named in the Scheme Information Document and
Statement of Additional Information are registered with SEBI and their
registration is valid, as on date.
(v) The contents of the Scheme Information Document including figures, data,
yields etc. have been checked and are factually correct
(vi) A confirmation that the AMC has complied with the compliance checklist
applicable for Scheme Information Documents and other than cited
deviations/ that there are no deviations from the regulations
(vii) Notwithstanding anything contained in this Scheme Information Document,
the provisions of the SEBI (Mutual Funds) Regulations, 1996 and the
guidelines there under shall be applicable.
(viii) The Trustees have ensured that the (name of the scheme/Fund) approved by
them is a new product offered by (name of the Mutual Fund) and is not a
minor modification of any existing scheme/fund/product (This clause is not
applicable to Fixed Maturity Plans and Close Ended Schemes except for those
close ended schemes which have the option of conversion into open ended
schemes on maturity and also to Interval Schemes.)
Date: Name:
Place: Designation:
PART II. INFORMATION ABOUT THE SCHEME
A. HOW WILL THE SCHEME ALLOCATE ITS ASSETS?
This includes asset allocation table giving the broad classification of assets and
indicative exposure level in percentage terms. The asset allocation should be
consistent with the investment objective of the scheme and SEBI circulars on
Categorization and Rationalization of Mutual Fund Schemes.
Indicative allocations
Instruments (% of total assets)
Maximum Minimum
 Percentage of investment in overseas securities, derivatives for non-
hedging purposes, stock lending, securitized debt, Debt instruments with
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Master Circular for Mutual Funds as on March 31, 2024
special features (AT 1 and AT 2 Bonds), Debt Instruments with SO / CE,
ReITs and InVITs, Tri-party repos, other mutual funds, repo/ reverse repo
transactions in corporate debt securities, Credit Default Swaps, covered
call option etc). to be indicated.
 In case the Scheme does not intend to invest in these securities, negative
confirmation in a table format should be provided for securities /
instruments in which the scheme will not invest.
 Cumulative gross exposure limits to be adhered in terms of Master
Circular.
 Any other information/disclosure to be added as per applicable
Consolidated checklist of standard observations.
Indicative Table (Actual instrument/percentages may vary subject to applicable
SEBI circulars)
Sl. no Type of Instrument Percentage of Circular references*
exposure
1. Securities Lending
2. Equity Derivatives for
non-hedging purposes
3. Securitized Debt
4. Overseas Securities
5. ReITS and InVITS
6. AT1 and AT2 Bonds
7. Any other instrument
*SEBI circular references (wherever applicable) in support of exposure limits of
different types of asset classes in asset allocation shall be provided.
Portfolio rebalancing: AMC to refer to Clause 1.14.1.2, Clause 2.9, Clause 3.5.3.11
and Clause 3.6.7 of SEBI Master Circular for Mutual Funds and applicable clause
of Consolidated checklist of standard observations for active and passive
breach/es.
B. WHERE WILL THE SCHEME INVEST?
This includes only a list of all instruments in which the scheme will invest.
(Detailed definition and applicable regulations/guidelines for each instrument
shall be included in Section II)
Investment in overseas securities shall be made in accordance with the
requirements stipulated by SEBI and RBI from time to time.
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Master Circular for Mutual Funds as on March 31, 2024
Any other information/disclosure to be added as per applicable Consolidated
checklist of standard observations.
C. WHAT ARE THE INVESTMENT STRATEGIES?
Information about investment approach and risk control should be included in
simple terms. Due care shall be taken in deciding whether the investment
strategy is "Passive"/"Active". Investment strategy shall match the asset
allocation pattern of the scheme. (Example: Fund of Funds with multiple funds
cannot be considered as a scheme with passive investment strategy since fund
manager has scope for active selection and management of funds).
Further, details on generic concepts such as macroeconomic trends may not be
provided unless there are investment strategies derived specifically from these
concepts.
Disclosure for derivatives to be provided in summary form. For detailed derivative
strategies, please refer to SAI.
Further, Portfolio turnover policy, particularly for equity oriented schemes shall
also be disclosed. In discussing the investment strategies, the scheme shall
briefly discuss in the Scheme Information Document the probable effect of such
strategies on the rate of the total portfolio turnover of the scheme, if such effects
are significant and also other consequences which will result from the higher
portfolio turnover rate e.g. higher brokerage and transaction cost.
D. HOW WILL THE SCHEME BENCHMARK ITS PERFORMANCE?
Benchmark (Total Returns Index): AMFI prescribed benchmark for all schemes
except ETFs / Index Funds and FOFs with single underlying Fund. The name
and the justification (specific to the scheme objective) for the use of benchmark
index with which the performance of the scheme can be compared with.
E. WHO MANAGES THE SCHEME?
Name, age, educational qualification and experience of the fund manager to the
scheme to be disclosed. The experience of the fund manager should include last
10 years’ experience and also the name of other schemes under his /her
management.
Dedicated fund manager is mandatory for commodity based funds and overseas
investments as per applicable SEBI circulars
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Master Circular for Mutual Funds as on March 31, 2024
F. HOW IS THE SCHEME DIFFERENT FROM EXISTING SCHEMES OF THE
MUTUAL FUND?
Provide a reference list of existing schemes and a functional website link that
contains detailed comparative table.
G. HOW HAS THE SCHEME PERFORMED (if applicable)
[In case of a new Compounded Scheme Returns Benchmark
Annualised % Returns %
scheme, this is not Returns
Returns for the
applicable hence last 1 year
Returns for the
give the statement- last 3 years
Returns for the
“This scheme is a last 5 years
Returns since
inception
scheme returns %
benchmark returns %
20
15
10
5
0
-5
-10
-15
-20
a-b b-c c-d d-e e-f
Last 5 financial years
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Master Circular for Mutual Funds as on March 31, 2024
new scheme and
does not have any
performance track
record”]
Or
[In case of a scheme
in existence, the
return figures shall
be given for that
scheme only. For a
scheme which is in
Absolute Returns for each financial year for the last 5
existence for more
years
than 1 year, the
returns given will be
Compounded
Annualised Returns
and for scheme which
is in existence for less
than 1 year, the
returns would be
absolute returns
since inception.
Absolute returns for
each financial year
for the last 5 years
shall be represented
by means of a bar
diagram as per the
adjacent format.]
-5
-10
-15
-20 711
a-b b-c c-d d-e e-f
Master Circular for Mutual Funds as on March 31, 2024
Last 5 financial years
H. ADDITIONAL SCHEME RELATED DISCLOSURES
i. Scheme’s portfolio holdings (top 10 holdings by issuer and fund
allocation towards various sectors to be provided through a functional
website link that contains detailed description.)
ii. Disclosure of name and exposure to Top 7 issuers, stocks, groups and
sectors as a percentage of NAV of the scheme in case of debt and equity
ETFs/index funds through a functional website link that contains
detailed description
iii. Functional website link for Portfolio Disclosure - Fortnightly / Monthly/
Half Yearly.
iv. Portfolio Turnover Rate particularly for equity oriented schemes shall
also be disclosed.
v. Aggregate investment in the Scheme by:
Sr. Category of Persons Net Value
No.
1. Concerned scheme’s Fund Units NAV per unit
Manager(s)
For any other disclosure w.r.t investments by key personnel and AMC directors
including regulatory provisions in this regard kindly refer SAI.
vi. Investments of AMC in the Scheme – Details to be provided vide
functional website link.
The AMC shall not invest in any of the schemes unless full disclosure of
its intention to invest has been made in the Scheme Information
Document and that the AMC shall not be entitled to charge any fees on
such investment
PART III- OTHER DETAILS
A. COMPUTATION OF NAV
Disclosure pertaining to illustration on computation of NAV and Methodology for
calculation of sale and re-purchase price of the units of mutual fund scheme.
Disclosure to the effect that the repurchase price shall not be lower than 95% of
the NAV. For other details such as policies w.r.t computation of NAV, rounding
off, investment in foreign securities, procedure in case of delay in disclosure of
NAV etc. refer to SAI
B. NEW FUND OFFER (NFO) EXPENSES
These expenses are incurred for the purpose of various activities related to the NFO
like sales and distribution fees paid marketing and advertising, registrar expenses,
printing and stationary, bank charges etc. Details of source for meeting these
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Master Circular for Mutual Funds as on March 31, 2024
expenses may be disclosed. AMC to ensure that no NFO expenses will be / were
charged to the Scheme.
C. ANNUAL SCHEME RECURRING EXPENSES
These are the fees and expenses for operating the scheme. These expenses
include Investment Management and Advisory Fee charged by the AMC, Registrar
and Transfer Agents’ fee, marketing and selling costs etc. as given in the table
below:
The AMC has estimated that upto _____ % of the daily average net assets of the
scheme will be charged to the scheme as expenses (Give slab wise break up
depending on the assets under management. Give plan/option wise break up if the
expense structures are different). For the actual current expenses being charged,
the investor should refer to the website of the mutual fund.
% p.a. of daily
Net Assets*
Expense Head
(Estimated
p.a.)
Investment Management & Advisory Fee
Audit fees/fees and expenses of trustees
Custodial Fees
Registrar & Transfer Agent Fees including cost of providing account statements
/ IDCW / redemption cheques/ warrants
Marketing & Selling Expenses including Agents Commission and statutory
advertisement
Costs related to investor communications
Costs of fund transfer from location to location
Cost towards investor education & awareness
Brokerage & transaction cost pertaining to distribution of units
Goods & Services Tax on expenses other than investment and advisory fees
Goods & Services Tax on brokerage and transaction cost
Other Expenses (to be specified as per Reg 52 of SEBI MF Regulations)
Maximum Total expenses ratio (TER) permissible under Regulation 52
(6) (c)
Additional expenses under Regulations 52(6A)(c)
Additional expenses for gross new inflows from specified cities
*Impact of TER on returns of both Direct plan and Regular plan through an illustration may be
provided.
In case of Fund of Funds scheme, it shall be disclosed that the investors are bearing the recurring
expenses of the scheme, in addition to the expenses of other schemes in which the Fund of Funds
Scheme makes investments
Any other information/disclosure to be added as per applicable Consolidated checklist of standard
observations.
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Master Circular for Mutual Funds as on March 31, 2024
D. LOAD STRUCTURE
Exit Load is an amount which is paid by the investor to redeem the units from the scheme. Load
amounts are variable and are subject to change from time to time. For the current
applicable structure, please refer to the website of the AMC (www.-----) or may
call at (toll free no.) or your distributor.
Type of Load Load chargeable (as %age of NAV)
Exit To be prescribed by respective AMC
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Master Circular for Mutual Funds as on March 31, 2024
Section II
I. Introduction
A. Definitions/interpretation
Functional website link that contains detailed description
B. Risk factors
- Scheme specific risk factors
Include risk factors associated with investment in various instruments in which the
scheme intends to invest as indicated in asset allocation section.
C. Risk mitigation strategies
II. Information about the scheme:
A. Where will the scheme invest – Detailed description of the instruments (including
overview of debt markets in India, if applicable) mentioned in Section I
B. What are the investment restrictions?
All the investment restrictions as contained in the Seventh Schedule to
SEBI (Mutual Funds) Regulations, 1996 and circulars issued
thereunder, applicable to the scheme should be incorporated. Further in
case the fund follows any internal norms vis-à-vis limiting exposure to a
particular scrip or sector, etc. apart from the aforementioned investment
restrictions the same needs to be disclosed.
C. Fundamental Attributes
Following are the Fundamental Attributes of the scheme, in terms of
Clause 1.14 of SEBI Master Circular for Mutual Funds:
(i) Type of a scheme
o Open ended/Close ended/Interval scheme
o Sectoral Fund/Equity Fund/Balance Fund/Income Fund/Index
Fund/Any other type of Fund
(ii) Investment Objective
o Main Objective - Growth/Income/Both.
o Investment pattern - The Tentative Equity/Debt/Money Market
portfolio break-up with minimum and maximum asset allocation, while
retaining the option to alter the asset allocation for a short term period
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Master Circular for Mutual Funds as on March 31, 2024
on defensive considerations.
(iii) Terms of Issue
o Liquidity provisions such as listing, repurchase, redemption.
o Aggregate fees and expenses charged to the scheme.
o Any safety net or guarantee provided.
In accordance with Regulation 18(15A) of the SEBI (MF) Regulations and
Clause 1.14.1.4 of SEBI Master Circular for Mutual Funds, the Trustees
shall ensure that no change in the fundamental attributes of the
Scheme(s) and the Plan(s) / Option(s) thereunder or the trust or fee and
expenses payable or any other change which would modify the Scheme(s)
and the Plan(s) / Option(s) thereunder and affect the interests of
Unitholders is carried out unless:
• SEBI has reviewed and provided its comments on the proposal
• A written communication about the proposed change is sent to each
Unitholder and an advertisement is given in one English daily newspaper
having nationwide circulation as well as in a newspaper published in the
language of the region where the Head Office of the Mutual Fund is
situated; and
• The Unitholders are given an option for a period of atleast 30
calendar days to exit at the prevailing Net Asset Value without any exit
load.
D. Index methodology (for index funds, ETFs and FOFs having one underlying
domestic ETF)- Disclosures regarding the index, index eligibility criteria,
methodology, index service provider, index constituents, impact cost of the
constituents
E. Principles of incentive structure for market makers (for ETFs)
F. Floors and ceiling within a range of 5% of the intended allocation against
each sub class of asset, as per clause 13.6.2 of SEBI master circular for
mutual funds dated May 19, 2023 (only for close ended debt schemes)
G. Other Scheme Specific Disclosures:
Listing and transfer of units
Dematerialization of units
Minimum Target amount
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Master Circular for Mutual Funds as on March 31, 2024
(This is the minimum amount
required to operate the scheme
and if this is not collected
during the NFO period, then all
the investors would be
refunded the amount invested
without any return.)
Maximum Amount to be
raised (if any)
Dividend Policy (IDCW)
Allotment (Detailed procedure) Mention, the procedure for allotment and dispatch
of account statements/unit certificates. Indicate
the time period. Mention the number of days
within which the statement shall be dispatched to
the unitholders who subscribe to the units when
the scheme is open for continuous subscription
after NFO as per the applicable guidelines.
Refund If application is rejected, full amount will be
refunded within 5 working days of closure of NFO. If
refunded later than 5 working days @ 15% p.a. for
delay period will be paid and charged to the AMC.
Who can invest
This is an indicative list and
investors shall consult their
financial advisor to ascertain
whether the scheme is suitable
to their risk profile.
Who cannot invest
How to Apply (details) Details regarding availability of application form
from either the Investor Service Centers
(ISCs)/Official Points of Acceptance(OPAs) of AMC
or may be downloaded from the website of AMC
should be specified
Please refer to the SAI and Application form for the
instructions.
Provide name, address and contact no. of Registrar
Where can you submit the filled and Transfer Agent (R&T), email id of R&T, website
address of R&T, official points of acceptance,
up applications.
collecting banker details etc. on back cover page.
The policy regarding reissue of
repurchased units, including
the maximum extent, the
manner of reissue, the entity
(the scheme or the AMC)
involved in the same.
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Master Circular for Mutual Funds as on March 31, 2024
Restrictions, if any, on the
right to freely retain or dispose
of units being offered.
Cut off timing for
subscriptions/ redemptions/
switches
This is the time before which
your application (complete in
all respects) should reach the
official points of acceptance.
Where can the applications for Please refer the AMC website (Provide website link)
purchase/redemption switches at the following link for the list of official points of
be submitted? acceptance, collecting banker details etc.
To inform investors that it is mandatory to mention
their bank account numbers in their
applications/requests for redemption.
Minimum amount for
purchase/redemption/switches
(mention the provisions for
ETFs, as may be applicable, for
direct subscription/redemption
with AMC.
Minimum balance to be
maintained and consequences
of non-maintenance
Accounts Statements The AMC shall send an allotment confirmation
specifying the units allotted by way of email and/or
SMS within 5 working days of receipt of valid
application/transaction to the Unit holders
registered e-mail address and/ or mobile number
(whether units are held in demat mode or in account
statement form).
A Consolidated Account Statement (CAS) detailing
all the transactions across all mutual funds
(including transaction charges paid to the
distributor) and holding at the end of the month
shall be sent to the Unit holders in whose folio(s)
transaction(s) have taken place during the month by
mail or email on or before 15th of the succeeding
month.
Half-yearly CAS shall be issued at the end of every
six months (i.e. September/ March) on or before 21st
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Master Circular for Mutual Funds as on March 31, 2024
day of succeeding month, to all investors providing
the prescribed details across all schemes of mutual
funds and securities held in dematerialized form
across demat accounts, if applicable
For further details, refer SAI.
Dividend/ IDCW The payment of dividend/IDCW to the unitholders
shall be made within seven working days from the
record date.
Redemption The redemption or repurchase proceeds shall be
dispatched to the unitholders within three working
days from the date of redemption or repurchase.
For list of exceptional circumstances refer para
14.1.3 of SEBI Master Circular for Mutual Funds
dated May 19, 2023
For schemes investing atleast 80% of total assets in
permissible overseas investments (as per Clause
12.19 of SEBI Master Circular for Mutual Funds),
the transfer of redemption or repurchase proceeds to
the unitholders shall be made within five working
days from the date of redemption or repurchase.
Bank Mandate
Delay in payment of redemption The Asset Management Company shall be liable to
/ repurchase proceeds/dividend pay interest to the unitholders at rate as specified
vide clause 14.2 of SEBI Master Circular for Mutual
Funds dated May 19, 2023 by SEBI for the period
of such delay
Unclaimed Redemption and
Income Distribution cum
Capital Withdrawal Amount
Disclosure w.r.t investment by
minors
Any other disclosure in terms of
Consolidated Checklist on
Standard Observations
III. Other Details
A. In case of Fund of Funds Scheme, Details of Benchmark, Investment
Objective, Investment Strategy, TER, AUM, Year wise performance,
Top 10 Holding/ link to Top 10 holding of the underlying fund should
be provided
B. Periodic Disclosures such as Half yearly disclosures, half yearly results,
719
Master Circular for Mutual Funds as on March 31, 2024
annual report
 Specify timelines of these disclosures and details of where they are
disclosed. (such as “Refer to AMC website, SAI, AMFI website for
further details etc. Provide a functional link for each respective field”)
 Any disclosure in terms of Consolidated Checklist on Standard
Observations
C. Transparency/NAV Disclosure (Details with reference to information
given in Section I)
D. Transaction charges and stamp duty- Indicate only the amount of
transaction charges and stamp duty applicable. Details to be provided in
SAI.
E. Associate Transactions- Please refer to Statement of Additional
Information (SAI)
F. Taxation- For details on taxation please refer to the clause on Taxation in
the SAI apart from the following:
Resident Investors Mutual Fund
Tax on dividend
Capital gain
Long Term:
Short Term:
G. Rights of Unitholders- Please refer to SAI for details.
H. List of official points of acceptance: Details to be uploaded and updated
on a functional website link
I. Penalties, Pending Litigation or Proceedings, Findings of Inspections
or Investigations For Which Action May Have Been Taken Or Is In The
Process Of Being Taken By Any Regulatory Authority
- AMCs to ensure real time updation of data on the said link.
- Any disclosure in terms of Consolidated Checklist on Standard
Observations
*****
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Master Circular for Mutual Funds as on March 31, 2024
B. STATEMENT OF ADDITIONAL INFORMATION (SAI)
This Statement of Additional Information (SAI) contains details of -------Mutual
Fund, its constitution, and certain tax, legal and general information. It is
incorporated by reference (is legally a part of the Scheme Information Document).
This SAI is dated ________.
I. INFORMATION ABOUT SPONSOR, AMC AND TRUSTEE COMPANIES
A. Constitution of the Mutual Fund
ABC (the “Mutual Fund”) has been constituted as a trust on _______ in accordance
with the provisions of the Indian Trusts Act, 1882 (2 of 1882) with XYZ, as the
Sponsor and DEF as the Trustee. The Trust Deed has been registered under the
Indian Registration Act, 1908. The Mutual Fund was registered with SEBI on
____________under Registration Code MF-
B. Sponsor
ABC Mutual Fund is sponsored by XYZ. The Sponsor is the Settler of the Mutual
Fund Trust. The Sponsor has entrusted a sum of Rs._______ to the Trustee as the
initial contribution towards the corpus of the Mutual Fund.
Financial Performance of the Sponsor (past three years):
Particulars Year 1 Year 2 Year 3
Net Worth
Total Income
Profit after tax
Assets Under
Management (if
applicable)
C. The Trustee
DEF (the “Trustee”), through its Board of Directors, shall discharge its obligations
as trustee of the ABC Mutual Fund. The Trustee ensures that the transactions
entered into by the AMC are in accordance with the SEBI Regulations and will
also review the activities carried on by the AMC.
Details of Trustee Directors:
Name Age/Qualification Brief Experience
PQR 45/CA PQR is a fellow member of the Institute of
Chartered Accountant and is in practice from
1978. He is a Senior Partner with a firm of
Chartered Accountants in India. He is also a
director on the Board of various companies and
trustee of charitable institutions
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Master Circular for Mutual Funds as on March 31, 2024
State the responsibilities and duties of the Trustee as well as the specific and general
due diligence.
D. Asset Management Company
STP Ltd. is a private limited company incorporated under the Companies Act,
1956 on ________, having its Registered Office at _____________________. STP Ltd.
has been appointed as the Asset Management Company of the -----------Mutual
Fund by the Trustee vide Investment Management Agreement (IMA) dated
___________, and executed between DEF and STP.
Details of AMC Directors:
Name Age/Qualification Brief Experience
UVT 45/CA UVT is a fellow member of the Institute of
Chartered Accountant and is in practice from
1978. He is a Senior Partner with a firm of
Chartered Accountants in India. He is also a
director on the Board of various companies and
trustee of charitable institutions
State the Duties and obligation of the AMC as specified in the SEBI Mutual Fund
Regulations on www.sebi.gov.in.
Information on Key Personnel:
Name/Designation Age/Qualification Brief Experience
CEO
CIO
Operations Head
Compliance Officer
Sales Head
Risk Manager
Investor Relations
Officer
(The AMC may decide on the key personnel it wants to mention in the SAI in
addition to the persons mentioned above.)
E. Service providers
Custodian
Name, Address and SEBI Registration Number of the Custodian for the scheme
722
Master Circular for Mutual Funds as on March 31, 2024
Transfer agent
Name and principal business address of the Registrars, Transfer Agents and the
dividend paying agent. A statement to the effect that the Board of the Trustees
and the AMC have ensured that the Registrar has adequate capacity to discharge
responsibilities with regard to processing of applications and dispatching unit
certificates to unitholders within the time limit prescribed in the Regulations and
also has sufficient capacity to handle investor complaints. Also state the SEBI
Registration Number of Registrars, Transfer Agents.
Statutory auditor
Name and Address of the statutory auditor for Mutual Fund.
Legal counsel
Name and Address of the Legal Counsel
Fund Accountant
Name and Address of the fund accountant
Collecting Bankers
Name, Address and SEBI Registration Number
F. Condensed financial information (CFI) for all the schemes launched by MF
during the last three fiscal years (excluding redeemed schemes) in the format
given below
HISTORICAL PER UNIT SCHEME NAME
STATISTICS
YR. 1 YR. 2 YR. 3
NAV at the beginning of the year (as
on April 1)
Dividends*
NAV at the end of the year (as on
March 31)
Annualised return**
Net Assets end of period (Rs. Crs.)
Ratio of Recurring Expenses to net
assets
* Excluding dividend details of liquid scheme.
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Master Circular for Mutual Funds as on March 31, 2024
** Only for growth option. Explanation to be given for not providing annualised
return for options other than growth option. Absolute returns to be provided for
schemes less than one year.
III. HOW TO APPLY?
Describe briefly the manner in which the units of the scheme being offered under
the scheme information document may be purchased by the prospective investor.
The descriptions should emphasise the procedures to be followed. Also provide the
details of KYC requirement for unit holders.
IV. RIGHTS OF UNITHOLDERS OF THE SCHEME
1. Unit holders of the Scheme have a proportionate right in the beneficial
ownership of the assets of the Scheme.
2. When the Mutual Fund declares a dividend under the Scheme, the
dividend warrants shall be despatched within 30 days of the declaration
of the dividend. Account Statement reflecting the new or additional
subscription as well as Redemption / Switch of Units shall be despatched
to the Unit holder within 10 business days of the Specified Redemption
Date. Provided if a Unit holder so desires the Mutual Fund shall issue a
Unit certificate (non- transferable) within 30 days of the receipt of request
for the certificate.
3. The Mutual Fund shall dispatch Redemption proceeds within 10 Business
Days of receiving the Redemption request.
4. The Trustee is bound to make such disclosures to the Unit holders as are
essential in order to keep the unitholders informed about any information
known to the Trustee which may have a material adverse bearing on their
investments.
5. The appointment of the AMC for the Mutual Fund can be terminated by
majority of the Directors of the Trustee Board or by 75% of the Unit holders
of the Scheme.
6. 75% of the Unit holders of a Scheme can pass a resolution to wind- up a
Scheme.
7. The Trustee shall obtain the consent of the Unit holders:
- whenever required to do so by SEBI, in the interest of the Unit holders.
- whenever required to do so if a requisition is made by three- fourths of
the Unit holders of the Scheme.
- when the Trustee decides to wind up the Scheme or prematurely
redeem the Units.
- The Trustee shall ensure that no change in the fundamental attributes
of any Scheme or the trust or fees and expenses payable or any other
change which would modify the Scheme and affects the interest of Unit
holders, shall be carried out unless:
(i) a written communication about the proposed change is sent to each
Unit holder and an advertisement is given in one English daily
newspaper having nationwide circulation as well as in a newspaper
724
Master Circular for Mutual Funds as on March 31, 2024
published in the language of the region where the Head Office of the
Mutual Fund is situated; and
(ii) the Unit holders are given an option to exit at the prevailing Net
Asset Value without any Exit Load.
9. In specific circumstances, where the approval of unitholders is sought on any
matter, the same shall be obtained by way of a postal ballot or such other means
as may be approved by SEBI.
V. INVESTMENT VALUATION NORMS FOR SECURITIES AND OTHER
ASSETS
This section shall disclose the Valuation of Assets and properties of the scheme in
accordance with Eighth Schedule of Regulation 47 of SEBI (Mutual Funds)
Regulations, 1996 and applicable guidelines.
Real Estate Mutual Fund Schemes shall disclose Valuation of Assets and properties
of the scheme in accordance with Schedule IXB of Regulation 49 (F) (1) of SEBI
(Mutual Funds) Regulations, 1996 and applicable guidelines.
V. TAX & LEGAL & GENERAL INFORMATION
A. Taxation on investing in Mutual Funds
This section shall disclose the applicable tax provisions for Mutual Fund and for
investments in Mutual Fund scheme.
B. Legal Information
This section may include information on Nomination Facility, KYC Requirements,
Requirements of Prevention of Money Laundering Act, Transfer and transmission
of units, Duration of the scheme/Winding up, Procedure and manner of winding up
etc.
C. General Information
In addition to the following,, this section may include information on Underwriting,
Securities Lending and Borrowing by the Mutual Funds etc.:
Inter-Scheme Transfer of Investments:
Transfers of investments from one scheme to another scheme in the same mutual
fund shall be allowed only if -
(a) such transfers are done at the prevailing market price for quoted instruments
on spot basis.
Explanation : “spot basis” shall have same meaning as specified by stock
exchange for spot transactions.
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Master Circular for Mutual Funds as on March 31, 2024
(b) the securities so transferred shall be in conformity with the investment
objective of the scheme to which such transfer has been made.
Associate Transactions
The following disclosures, summarising historical information pertaining to the last
three fiscal years of the schemes of the Mutual Fund under the management of the
Asset Management Company reflecting associate transactions and the manner in
which such transactions affected the performance of schemes of the Mutual Fund
should be made. The disclosures shall include any underwriting obligations
undertaken by the schemes of the Mutual Fund with respect to issues of associate
companies, devolvement if any, of such commitments, subscription by the schemes
in issues lead managed by associate companies, total business given to associate
brokers and the percentage of brokerage commission paid to them and any
distribution of units performed by associate companies.
This section shall also disclose:
(a) the policy for investing in group companies of the sponsor of a Mutual Fund that
is followed/to be followed by the Mutual Fund, including the aggregate market
value of investments in group companies of the Sponsor and asset Management
Company by all the schemes of the Mutual Fund and its percentage of the
aggregate net asset value of the Mutual Fund,
(b) in case any scheme of the Mutual Fund has invested more than 25% of its net
assets in group companies, this shall be disclosed.
(c) names of associates of the Sponsor or the Asset Management Company with
which the Mutual Fund proposes to have dealings, transactions and those whose
services may be used for marketing and distributing the scheme and the
commissions that may be paid to them.
Documents Available for Inspection
The following documents will be available for inspection at the office of the Mutual
Fund at ________________________________ during business hours on any day
(excluding Saturdays, Sundays and public holidays):
 Memorandum and Articles of Association of the AMC
 Investment Management Agreement
 Trust Deed and amendments thereto, if any
 Mutual Fund Registration Certificate
 Agreement between the Mutual Fund and the Custodian
 Agreement with Registrar and Share Transfer Agents
 Consent of Auditors to act in the said capacity
 Consent of Legal Advisors to act in the said capacity
 Securities and Exchange Board of India (Mutual Funds) Regulations, 1996
and amendments from time to time thereto.
 Indian Trusts Act, 1882.
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Master Circular for Mutual Funds as on March 31, 2024
Investor Grievances Redressal Mechanism
Describe briefly the investors' complaints history for the last three fiscal years of
existing schemes and the redressal mechanism thereof. The SAI should include
data updated every two months on the number of complaints received, redressed
and pending with the Mutual Fund.
Notwithstanding anything contained in this Statement of Additional
Information, the provisions of the SEBI (Mutual Funds) Regulations, 1996
and the guidelines thereunder shall be applicable.
*****
Instruction:
A Mutual Fund is free to add any other disclosure, which in the opinion of the Trustees of
the Mutual Fund (Trustees) or the Asset Management Company (AMC) is material, provided
that such information is not presented in an incomplete, inaccurate or misleading manner.
Care should be taken to ensure that inclusion of such information does not, by virtue of its
nature, or manner of presentation, obscure or impede understanding of any information
that is required to be included under the Scheme Information Document and Statement of
Additional Information.
Note:
The wording in italics is explanatory commentary/instructions.
The words in Arial font are the text to be used in the Statement of Additional Information,
as applicable.
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Master Circular for Mutual Funds as on March 31, 2024
C. KEY INFORMATION MEMORANDUM (KIM)706
Name of AMC &
MF
(Type of scheme)
KEY INFORMATION MEMORANDUM
--------- Scheme
(________________________)
The Mutual Fund shall specify the scheme’s suitability to investors:
Mutual Funds shall disclose the product labeling of the scheme
depending upon the level of risk in the mutual fund scheme
Offer for Units of Rs. -- Per Unit for cash during the
New fund Offer Period and at NAV based prices upon re-opening
New Fund Offer Opens on:
New Fund Offer Closes on:
Scheme Re-opens for continuous sale and
repurchase on:
This Key Information Memorandum (KIM) sets forth the information, which a
prospective investor ought to know before investing. For further details of the
scheme/Mutual Fund, due diligence certificate by the AMC, Key Personnel,
investors’ rights & services, risk factors, penalties & pending litigations etc.
investors should, before investment, refer to the Scheme Information
Document and Statement of Additional Information available free of cost at
any of the Investor Service Centres or distributors or from the website www.
-----.
The Scheme particulars have been prepared in accordance with
Securities and Exchange Board of India (Mutual Funds) Regulations
1996, as amended till date, and filed with Securities and Exchange
Board of India (SEBI). The units being offered for public subscription
have not been approved or disapproved by SEBI, nor has SEBI
certified the accuracy or adequacy of this KIM.
706 SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008
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Master Circular for Mutual Funds as on March 31, 2024
Investment Objective
Asset Allocation Pattern Types of Instruments Normal Allocation (% of Net
of the scheme Assets)
Risk Profile of the Mutual Fund Units involve investment risks including the possible
Scheme loss of principal. Please read the SID carefully for details on risk
factors before investment. Scheme specific Risk Factors are
summarized below:
Plans and Options
Applicable NAV (after
the scheme opens for
repurchase and sale)
Minimum Application Purchase Additional
Amount/ Number of Purchase Repurchase
Units
Despatch of Repurchase Within 10 working days of the receipt of the redemption request at
(Redemption) Request the authorised centre of the ------- Fund.
Benchmark Index
Dividend Policy
Name of the Fund
Manager
Name of the Trustee
Company
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Master Circular for Mutual Funds as on March 31, 2024
Expenses of the Scheme New Fund Offer Period Continuous Offer
Entry load : Entry load :
i) Load Structure Exit load : Exit load :
CDSC (if any): CDSC (if any):
First Rs. 100 crores of the average Actual expenses for the
ii) Recurring expenses weekly net assets : previous financial year: ----
Next Rs. 300 crores of the average (Not Applicable in case of a
weekly net assets : new scheme)
Next Rs. 300 crores of the average
weekly net assets :
Balance :
Waiver of Load for The applicable procedure should be given in brief.
Direct Applications
Tax treatment for the Investor will be advised to refer to the details in the Statement of
Investors (Unitholders) Additional Information and also independently refer to his tax
advisor.
The NAV will be declared on all ------- days and will be published in
Daily Net Asset Value 2 newspapers. NAV can also be viewed on www.___ and
www.amfiindia.com [You can also telephone us at ------ (optional)].
(NAV) Publication
For Investor Grievances Name and Address of Registrar Name, address, telephone
please contact number, fax number, e-mail i.d.
------
Unitholders’ Give the frequency and the policy of the fund house for the providing
Information the Accounts Statement, Annual Financial results and Half yearly
portfolio to the investors.
Date:
N.B. Data and information shall be up-to-date but in no case older than 30 days
from the date of KIM
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Master Circular for Mutual Funds as on March 31, 2024
D. PLACEMENT MEMORANDUM707
NAME OF THE SCHEME
(Type of Scheme- Closed Ended / Interval)
Private placement of Units of Rs. 10 lakh each during the Placement period
Placement Period Opens on: :
Placement Period Closes on:
Scheme re-opens on:
Name of Mutual Fund:
Name of Asset Management Company:
Name of Trustee Company:
Addresses, Website of the entity:
The particulars of the Scheme have been prepared in accordance with the
Securities and Exchange Board of India (Mutual Funds) Regulations 1996,
(herein after referred to as SEBI (MF) Regulations) as amended till date.
These units being privately placed have not been approved or recommended
by SEBI nor has SEBI certified the accuracy or adequacy of the Placement
Memorandum. It is to be distinctly understood that this Placement
Memorandum should not, in anyway, be deemed or construed that the same
has been cleared or vetted by SEBI.
The investors are advised to refer to the Statement of Additional
Information (SAI) for details of Mutual Fund, Tax and Legal issues and
general information on www._______. (website address).
This Placement Memorandum is dated __________.
Instructions:
 A Mutual Fund is free to add any other disclosure, which in the opinion
of the Trustees of the Mutual Fund (Trustees) or the Asset Management
Company (AMC) is material for the investor, provided that such
information is not presented in an incomplete, inaccurate or misleading
manner. Care should be taken to ensure that inclusion of such information
does not, by virtue of its nature, or manner of presentation, obscure or
impede understanding of any information that is required to be included
in the Placement Memorandum.
 Care should therefore be taken to present the information in the
Placement Memorandum in simple language and in a clear, concise and
easily understandable manner.
707 SEBI Circular No. CIR/IMD/DF/7/2013 dated April 23, 2013
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Master Circular for Mutual Funds as on March 31, 2024
 The scheme shall not have a name or title which may be deceptive or
misleading. The Scheme’s name should be consistent with its statement
of investment policy.
TABLE OF CONTENTS
HIGHLIGHTS/SUMMARY OF THE SCHEME – This section shall include the
following:
Investment objective
Liquidity
Benchmark
Transparency/NAV Disclosure
Minimum Application Amount
I. INTRODUCTION
A. RISK FACTORS
Standard Risk Factors as per Scheme Information Document Format:
Scheme Specific Risk Factors:
 Risk associated with investment in the Infrastructure Sector
• Risk associated with investment in Infrastructure Debt
Instruments
• Risk associated with investment in Infrastructure Projects
• Risk associated with investing in Equities
• Risk associated with investing in Bonds
• Risks associated with Investing in Bank Deposits
• Risks associated with Investing in Convertibles including
mezzanine financing instruments
• Risks associated with investing in Securitized Debt
• Risks associated with investing in unrated/below investment
grade securities
• Any other risk factors
B. REQUIREMENT OF MINIMUM INVESTORS IN THE SCHEME
(Applicability for a Close ended scheme / Interval scheme)
The Scheme(s) and Individual Plan (s) under the Scheme(s) shall have a
minimum of 5 investors and no single investor shall account for more than
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Master Circular for Mutual Funds as on March 31, 2024
50% of the corpus of the Scheme(s)/Plan(s). These conditions will be
complied with immediately after the close of the Placement Period itself
i.e. at the time of allotment. In case of non-fulfilment with the condition
of minimum 5 investors, the Scheme(s)/Plan(s) shall be wound up in
accordance with Regulation 39 (2) (c) of SEBI (MF) Regulations
automatically without any reference from SEBI. In case of non-fulfilment
with the condition of 50% holding by a single investor on the date of
allotment, the application to the extent of exposure in excess of the
stipulated 50% limit would be liable to be rejected and the allotment
would be effective only to the extent of 50% of the corpus collected.
Consequently, such exposure over 50% limits will lead to refund within 5
days of the date of closure of the Placement Period.
For interval scheme the aforesaid provision will be applicable at the end
of initial placement period and further specified transaction period(s).
C. SPECIAL CONSIDERATIONS, if any
D. DEFINITIONS - All terms used in the Placement Memorandum shall be
defined in this Section.
Instructions:
i. Language and terminology used in the Placement
Memorandum shall be as provided in the Regulations. Any new
term if used shall be clearly defined.
ii. The term ‘scheme’ shall be used uniformly to indicate the different schemes
of a Mutual Fund.
E. DUE DILIGENCE BY THE ASSET MANAGEMENT COMPANY AND
THE TRUSTEE
The Asset Management Company shall submit a Due Diligence
Certificate duly signed by the Compliance Officer/Chief Executive
Officer/Managing Director/Whole time Director/Executive Director of
the Asset Management Company and countersigned by a director
of the trustee company/trustee from the board of trustees to SEBI, which
reads as follows:
It is confirmed that:
(i) The final Placement Memorandum forwarded to SEBI is in accordance
with the SEBI (Mutual Funds) Regulations, 1996 and the guidelines and
directives issued by SEBI from time to time.
(ii) All legal requirements connected with the launching of the scheme
as also the guidelines, instructions, etc., issued by the Government and
any other competent authority in this behalf, have been duly complied
with.
(iii) The disclosures made in the Placement Memorandum are true, fair
and adequate to enable the investors to make a well informed decision
regarding investment in the proposed scheme.
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Master Circular for Mutual Funds as on March 31, 2024
(iv) The intermediaries named in the Placement Memorandum and
Statement of Additional Information are registered with SEBI and their
registration is valid, as on date.
II. INFORMATION ABOUT THE SCHEME
A. TYPE OF THE SCHEME – (close ended /interval)
B. WHAT IS THE INVESTMENT OBJECTIVE OF THE SCHEME?
C. HOW WILL THE SCHEME ALLOCATE ITS ASSETS?
The asset allocation will be as follows:
Instrument Indicative Allocation Risk
Minimum Maximum Profile
Debt securities or securitized debt instruments
of infrastructure companies or projects or special
purpose vehicles which are created for the
90% 100% -
purpose of facilitating or promoting investment
in infrastructure or bank loans in respect of
completed and revenue generating projects of
infrastructure companies or special purpose
vehicle.
Equity shares, convertibles including mezzanine 0% 10%
financing instruments of companies engaged in
infrastructure, infrastructure development projects;
or money market instruments and bank
deposits
D.WHERE WILL THE SCHEME INVEST?
This includes a brief narration on the types of instruments in which the
scheme will invest and the concerned regulations and limits applicable
shall also be mentioned.
Portfolio Rebalancing – Briefly describe about the conditions which may
lead to portfolio rebalancing and also in the event of asset allocation falling
outside the limits, in what time period does the Mutual Fund will review
and rebalance the same.
E.WHAT ARE THE INVESTMENT STRATEGIES?
Information about investment approach and risk control should be included
in simple terms.
F.FUNDAMENTAL ATTRIBUTES
Following are the Fundamental Attributes of the scheme, in terms of
Regulation 18 (15A) of the SEBI (MF) Regulations:
i. Type of the scheme
 Close ended/Interval scheme
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Master Circular for Mutual Funds as on March 31, 2024
ii. Investment Objective
 Main Objective
 Investment Pattern - The tentative portfolio break-up with
minimum and maximum asset allocation, while retaining the option
to alter the asset allocation for a short term period on defensive
considerations.
iii. Terms of Issue
 Liquidity provisions such as listing, repurchase, redemption.
 Aggregate fees and expenses charged to the scheme.
 Any safety net or guarantee provided.
In accordance with Regulation 18(15A) of the SEBI (MF) Regulations, the
Trustees shall ensure that no change in the fundamental attributes of the
Scheme(s) and the Plan(s) / Option(s) thereunder or the trust or fee and
expenses payable or any other change which would modify the Scheme(s)
and the Plan(s) / Option(s) thereunder and affect the interests of Unitholders
is carried out unless:
 A written communication about the proposed change is sent to
each Unitholder and an advertisement is given in one English daily
newspaper having nationwide circulation as well as in a newspaper
published in the language of the region where the Head Office of the
Mutual Fund is situated; and
 The Unitholders are given an option for a period of 30 days to exit at
the prevailing Net Asset
 Value without any exit load.
G. BENCHMARK AND ITS JUSTIFICATION
H. WHO MANAGES THE SCHEME?
Name, age, qualification and experience in the infrastructure sector of the
fund manager to the scheme to be disclosed. The experience of the fund
manager should include last 10 years experience and also the name of other
schemes under his /her management.
I. WHAT ARE THE INVESTMENT RESTRICTIONS?
All the investment restrictions as contained in Chapter VI-B (Infrastructure
Debt Fund Schemes) to SEBI (Mutual Funds) Regulations, 1996 and
applicable restrictions of the Seventh Schedule should be incorporated.
Further in case the fund follows any internal norms vis-à-vis limiting
exposure to a particular security or sector, etc. apart from the
aforementioned investment restrictions the same needs to be disclosed.
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Master Circular for Mutual Funds as on March 31, 2024
J. HOW HAS THE SCHEME PERFORMED?
K. Indicative Portfolio based on type of assets
Indicative % of investment to be made in various securities to be mentioned
below with the ratings mentioned against each type of instrument.
All investments shall be based on the rating prevalent at the time of investment.
However, in case of an instrument having dual ratings, the most conservative
publicly available rating would be considered.
L. Valuation Policy for the assets of the scheme
A detailed valuation policy for the assets of the scheme based on the overarching
principle of fair valuation and valuation done 'in good faith' shall be given.
M. Extension in the tenure of the scheme: As stipulated in Regulations
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Master Circular for Mutual Funds as on March 31, 2024
I II. PLACEMENT DETAILS
A. Placement Period
Offer Price: Rs. 10 lakh per unit
This is the price per unit that the investors have
to pay to invest during the Placement Period.
Minimum Amount for Application Rs. 1 crore and in multiples
of Rs.10 lakh thereafter.
Minimum Target amount Rs.
This is the minimum amount required to operate
the scheme and if this is not collected during the
Placement Offer Period, then all the investors
would be refunded the amount invested without
any return. However, if AMC fails to refund
the amount within five business days, interest
as specified by SEBI (currently 15% p.a.) will be
paid to the investors from the expiry of five
working days from the date of closure of the
subscription period.
Details of strategic investors and amounts
committed by them
Plans / Options offered
Specified transaction period (for interval schemes)
Dividend Policy
Allotment*
Refund
Dividend
Redemption
Who can invest
Listing of fully paid up units
Mandatory quoting of bank mandate and PAN
number by investors
Pledge/Lien
Capital Commitments
Subsequent Drawdowns
Default on Capital Calls and the interest or
penalty thereon, with the interest or penalty being
retained in the scheme.
Restrictions, if any, on the right to freely retain or
dispose of units being offered.
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Master Circular for Mutual Funds as on March 31, 2024
Accounts Statements During subscription, and
subsequent capital calls
Consolidated Account Statement
Annual Account Statement
Transaction Charges
*Allotment shall be made within five working days of the closure of the Placement
Period
B. PERIODIC DISCLOSURES
Net Asset Value
This is the value per unit of the scheme
on a particular day. You can ascertain the
value of your investments by multiplying
the NAV with your unit balance.
Portfolio disclosures
Half Yearly Results
Annual Report
Taxation Resident Non Mutual
Resident Fund
Investor
The information is provided for general
Tax on
information only. However, in view of the
Dividend
individual nature of the implications, each
investor is advised to consult his or her
own tax advisors/authorised dealers with Capital
respect to the specific amount of tax Gains:
and other implications arising out of his
or her participation in the schemes. Long
(mention the tax rates as per the applicable Term
tax laws)
Short
Term
Jurisdiction
Investor Services
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Master Circular for Mutual Funds as on March 31, 2024
C. COMPUTATION OF NAV
Describe briefly the policies of the Mutual Fund with regard to computation
of NAV of the scheme in accordance with SEBI (Mutual Funds) Regulations,
1996.
Rounding off policy for NAV as per the applicable guidelines shall be
disclosed.
D. FEES AND EXPENSES
This section outlines the expenses that will be charged to the scheme.
a. PLACEMENT EXPENSES
These expenses are incurred for the purpose of various activities related
to the Placement process. The same may be borne by the AMC/ Trustee/
Sponsor.
b. ANNUAL SCHEME RECURRING EXPENSES
These are the fees and expenses for operating the scheme. These
expenses include Investment Management and Advisory Fee charged by the
AMC, Registrar and Transfer Agents’ fee, marketing and selling costs etc. as
given in the table below:
The AMC has estimated that upto % of the daily net assets of the
scheme will be charged to the scheme as expenses (Give slab wise break up
depending on the assets under management.) For the actual current
expenses being charged, the investor should refer to the website of the
mutual fund.
Particulars % of daily Net Assets
Regular Plan (the Direct Plan (the
name of the plan as name of the plan
applicable) as applicable)
Investment Management & Advisory Fee
Marketing and selling expenses including
agent's commission if any
Brokerage and transaction cost
Registrar services for transfer of units sold
or redeemed
Fees and expenses of trustees
Audit fees
Custodian fees
Costs related to investor communication
Costs of fund transfer from location to location
Costs of providing account statements
and dividend/redemption cheques and
warrants
Insurance premium paid by the fund
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Master Circular for Mutual Funds as on March 31, 2024
Winding up costs for terminating a fund or
a scheme
Cost of statutory advertisements
Listing fees
Investor Awareness and Education Initiatives#
Such other costs as may be approved by the Board*
Total Recurring Expenses
(* To be specified as permitted under the Regulation 52 of SEBI (MF) Regulations) (#
At least 2 bps)
Commission/ Distribution expenses will not be charged In case of Direct
Plan.
The AMC may charge additional expenses not exceeding 0.20% of daily
net assets of the Scheme incurred towards different heads of fees and
expenses.
Additional expenses may be charged up to 30 basis points on daily net
assets of the Scheme as per Regulation 52 of SEBI Regulations, if the new
inflows from beyond top 15 cities are at least (a) 30% of gross new inflows
in the Scheme or (b) 15% of the average assets under management (year
to date) of the Scheme, whichever is higher.
Provided that if inflows from such cities is less than the higher of (a) or
(b) above, such additional expenses on daily net assets of the Scheme shall
be charged on proportionate basis.
Provided further that expenses charged under this clause shall be
utilized for distribution expenses incurred for bringing inflows from such
cities.
Provided further that amount incurred as expense on account of inflows
from such cities shall be credited back to the Scheme in case the said inflows
are redeemed within a period of one year from the date of investment
Brokerage and Transaction Cost:
Brokerage and transaction cost incurred for the purpose of execution of trade
may be capitalized to the extent of 12bps for cash market transactions. Any
payment towards brokerage and transaction cost, over and above the said
12 bps for cash market transactions may be charged to the scheme
within the maximum limit of Total Expense Ratio (TER) as prescribed
under regulation 52 of the SEBI (Mutual Funds) Regulations, 1996. Any
expenditure in excess of the said prescribed limit (including brokerage and
transaction cost, if any) shall be borne by the AMC or by the trustee or
sponsors.
Any expenditure in excess of the limits specified in Regulation 52(6)
and 52(6A) (a) shall be borne by the asset management company or
trustees or sponsors.
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Master Circular for Mutual Funds as on March 31, 2024
Goods & Service Tax:
1. Mutual funds /AMCs may charge Goods & Service Tax on investment and
advisory fees to the scheme in addition to the maximum limit of TER as
prescribed in regulation 52 of the Regulations.
2. Goods & Service Tax on other than investment and advisory fees, if any,
shall be borne by the scheme within the maximum limit of TER as per
regulation 52 of the Regulations.
3. Goods & Service Tax on brokerage and transaction cost paid for asset
purchases, if any, shall be within the limit prescribed under regulation 52
of the Regulations.
The mutual fund would update the current expense ratios on the website
within two working days mentioning the effective date of the change.
c. TRANSACTION CHARGES as per SEBI Circulars
IV. RIGHTS OF UNITHOLDERS
Please refer to SAI for details.
V. PENALTIES, PENDING LITIGATION OR PROCEEDINGS, FINDINGS OF
INSPECTIONS OR INVESTIGATIONS FOR WHICH ACTION MAY HAVE
BEEN TAKEN OR IS IN THE PROCESS OF BEING TAKEN BY ANY
REGULATORY AUTHORITY
Disclosure of such penalties, pending litigations, etc shall be given as per
the requirements in the Scheme Information Document.
Notwithstanding anything contained in this Placement Memorandum,
the provisions of the SEBI (Mutual Funds) Regulations, 1996 and the
Circulars and guidelines there under shall be applicable.
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Master Circular for Mutual Funds as on March 31, 2024
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Master Circular for Mutual Funds as on March 31, 2024
6. STANDARD OBSERVATIONS708
A. STANDARD OBSERVATION FOR SCHEME INFORMATION
DOCUMENT (SID)
While filing the Statement of Additional Information (SAI) and the Scheme
Information Document (SID) for launching a new scheme / revising and
filing existing SAI and SID with SEBI, the mutual funds should highlight and
clearly mention the page number of the SAI and SID on which each of the
following observation has been incorporated. In case of any amendment to
Regulations, the new provisions should be incorporated in the SAI / SID.
STANDARD OBSERVATIONS FOR SID:
Standard Observation Remarks
1. The AMC shall not invest in any of the schemes unless full disclosure of its intention
to invest has been made in the Scheme Information Document and that the AMC
shall not be entitled to charge any fees on such investments may be disclosed.
2. All Risk Factors including general and scheme specific risk factors should appear at
a single place in the Scheme Information Document instead of giving at different
places.
3. In case the mutual fund intends to invest in ADRs/GDRs and foreign securities, the
risk factors associated with such investments including currency risk should be
disclosed.
4. If the scheme proposes to invest in securitised debt, the table on investment pattern
should disclose the maximum limit up to which such investment in securitised debt
would be made.
5. In case the mutual fund intends to trade in derivatives, the strategies and risks
associated with such activities should be disclosed at relevant places in the Scheme
Information Document. The Scheme Information Document shall contain disclosures
as communicated vide our circular no. DNPD/Cir-29/2005 dated September 14,
2005
Following risk factor pertaining to investments in derivatives may also be given
(except in case where the scheme is investing in derivatives for only for the purpose of
hedging and portfolio rebalancing):
“Derivative products are leveraged instruments and can provide disproportionate
gains as well as disproportionate losses to the investor. Execution of such strategies
depends upon the ability of the fund manager to identify such opportunities.
708 SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008
743
Master Circular for Mutual Funds as on March 31, 2024
Standard Observation Remarks
Identification and execution of the strategies to be pursued by the fund manager
involve uncertainty and decision of fund manager may not always be profitable. No
assurance can be given that the fund manager will be able to identify or execute such
strategies”.
“The risks associated with the use of derivatives are different from or possibly greater
than, the risks associated with investing directly in securities and other traditional
investments”.
Mention clearly specific risk factors pertaining to derivative strategies.
6. In case the mutual fund intends to engage in stock lending/short selling, concepts
and risks associated with stock lending/short selling shall be provided as per the
applicable guidelines.
7. A note of the investment strategy followed for the scheme shall be given in the Scheme
Information Document.
8. The fundamental attributes of the scheme shall be disclosed in the Scheme
Information Document. The note shall also include the steps to be followed by the
Trustee for change in fundamental attributes, as required by the SEBI regulations.
The trustees shall ensure that no change in the fundamental attributes of any scheme
or the trust or fees and expenses payable or any other change which would modify
the scheme and affects the interest of the unitholders, shall be carried out unless, (i)
a written communication about the proposed change is sent to each unitholder and
an advertisement is given in one English daily newspaper having nationwide
circulation as well as in a newspaper published in the language of the region where
the Head Office of the mutual fund is situated; and (ii) the unitholders are given an
option to exit at the prevailing Net Asset Value without any exit load.
9. The name(s) of index/indices with which the AMC and trustees would compare the
performance of the scheme should be disclosed. The benchmark index/indices may
be chosen on the basis of the investment pattern/objective of the scheme and the
composition of the index, as approved by the Boards of AMC and trustees
10. The details pertaining to the fund manager of the scheme shall inter-alia include the
age of the person, educational qualification, total number of years' experience, type
and nature of past experience including assignments held during the last 10 years,
etc.
11. All the investment restrictions under SEBI (Mutual Funds) Regulations, 1996 and
applicable to the scheme should be incorporated.
12. In case the scheme intends to invest substantially in debt and/or money market
instruments, one paragraph highlighting the features of Debt Market and
Instruments available may also be included alongside the asset allocation.
13. Clarify whether, apart from the investment restrictions prescribed under SEBI (MF)
Regulations, does the fund follow any internal norms vis-à-vis limiting exposure to a
particular scrip or sector, etc.
14. Indicate the asset allocation pattern under normal circumstances and to what extent
that would be allowed to rise or fall before a review and rebalancing would be called
for. From the disclosures, prospective investors should be able to gather an idea on
the investment strategy of a scheme at any point of time.
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Master Circular for Mutual Funds as on March 31, 2024
Standard Observation Remarks
15. The Scheme Information Document shall Indicate the types of securities /
instruments in which the scheme would invest and a brief narration on the same.
16. Any imposition or enhancement in the load shall be applicable on prospective
investments only. However, AMC shall not charge any load on issue of bonus units
and units allotted on reinvestment of dividend for existing as well as prospective
investors. At the time of changing the load structure, the mutual funds may consider
the following measures to avoid complaints from investors about investment in the
schemes without knowing the loads:
(i) The addendum detailing the changes may be attached to Scheme Information
Documents and key information memorandum. The addendum may be circulated to
all the distributors/brokers so that the same can be attached to all Scheme
Information Documents and key information memoranda already in stock.
(ii) Arrangements may be made to display the addendum in the Scheme Information
Document in the form of a notice in all the investor service centres and
distributors/brokers office.
(iii) The introduction of the exit load/ CDSC alongwith the details may be stamped
in the acknowledgement slip issued to the investors on submission of the application
form and may also be disclosed in the statement of accounts issued after the
introduction of such load/CDSC.
(iv) A public notice shall be given in respect of such changes in one English daily
newspaper having nationwide circulation as well as in a newspaper published in the
language of region where the Head Office of the Mutual Fund is situated.
(v) Any other measures which the mutual funds may feel necessary.
17. NAV Information/ Sale and Repurchase price:
a) Disclosure to the effect that NAV shall be published at least in two daily
newspapers at intervals of not exceeding one week in case of close ended schemes
and on daily basis in case of open ended schemes (alongwith sale and repurchase
prices).
b) Disclosure to the effect that the repurchase price shall not be lower than 93% of
the NAV and the sale price shall not be higher than 107% of the NAV and the
difference between the repurchase price and sale price shall not exceed 7% on the
sale price. In the case of close-ended scheme the repurchase price shall not be
lower than 95% of the NAV.
18. SID shall disclose the number of days within which the statement shall be dispatched
to the unitholders who subscribe to the units when the scheme is open for continuous
subscription after NFO as per the applicable guidelines.
19. Disclosure to the effect that it shall be mandatory for the investors of mutual fund
schemes to mention their bank account numbers in their applications/requests for
redemption.
20. Disclosure on Pending Penalties and Pending Litigations shall be provided as per the
relevant clause as prescribed in the SID format.
21. The Scheme Information Document shall have no clause, which in effect limits the
jurisdiction for settlement of claims of the investors to a specific place/region.
22. A statement should be incorporated on the last page of the Scheme Information
Document as follows "Notwithstanding anything contained in the Scheme
745
Master Circular for Mutual Funds as on March 31, 2024
Standard Observation Remarks
Information Document the provisions of the SEBI (Mutual Funds) Regulations, 1996
and the Guidelines thereunder shall be applicable."
23. All information in the Scheme Information Document and KIM shall be updated,
considering the above observations, 30 days before the launch of the scheme.
24. You are required to give a due diligence certificate stating that the draft Scheme
Information Document is in accordance with the SEBI (Mutual Funds) Regulations.
You are again advised to specifically confirm whether there are any deviations from
the regulations or whether subjective interpretations have been applied to the
provisions of the regulations or where the AMC feels that any matter is required to be
brought to the notice of SEBI.
Further you are also advised to confirm that the contents of the SID including figures,
data, yields, etc. have been checked and are factually correct.
25. Trustees shall provide certification as required under Paragraph 1.4 of the Master
Circular for Mutual Funds
26. The schemes are required to be approved by the trustees. While approving the
scheme, the trustees may also review the systems, adequacy of key personnel,
compliance mechanism, etc. as required under Regulation 18 (4). A letter from the
Trustees should be submitted while filing a new Scheme Information Document,
confirming that the trustees have ensured that the asset management company
complies with the requirements of Regulation 18(4).
746
Master Circular for Mutual Funds as on March 31, 2024
B. STANDARD OBSERVATIONS FOR STATEMENT OF ADDITIONAL
INFORMATION (SAI)
STANDARD OBSERVATIONS FOR SAI:
Standard Observation Remarks
1. If the AMC is undertaking other business activities as provided in Regulation 24(2)
brief details of the same giving SEBI registration particulars, if applicable, and
certification that there is no conflict of interest.
2. The details of sponsor shall also include a brief note on their activities.
3. The details pertaining to the key personnel of the AMC shall inter-alia include the
age of the person, educational qualification, total number of years' experience, type
and nature of past experience including assignments held during the last 10 years,
etc. The number of persons involved in equity research and fund management and
their past experience must be mentioned. If any of the key personnel is based
elsewhere and not in the registered/corporate office of the AMC, must be disclosed.
4. The detailed procedures followed for investment decisions, whether an individual
or committee takes decisions, role of chief executive of AMC in investment
decisions, recording of each investment decision, how these decisions and
performance of schemes are monitored by the AMC Board and the trustees, should
be explained by way of a separate paragraph in the Statement of Additional
Information.
5. A brief note on the supervisory role performed by the Trustees, the number of
meetings held during the last year, systems set up by the trustees for monitoring
the activities of the AMC.
6. Disclosure that no amendments to the trust deed shall be carried out without the
prior approval of SEBI and unitholders approval would be obtained where it affects
the interests of unitholder.
7. Share holding pattern of the AMC specifying the percentage holding of various
groups/companies.
8. The appointment of the AMC can be terminated by majority of the trustees or by
seventy five percent of the unitholders of the scheme.
9. The despatch of dividend warrants shall be made within 30 days of the declaration
of the dividend and despatch of redemption or repurchase proceeds shall be made
within 10 working days from the date of redemption or repurchase.
10. S uspension or restriction of repurchase / redemption facility under any scheme of
the mutual fund shall be made applicable only after the approval from the Board
of Directors of the Asset Management Company and the Trustees. The approval
from the AMC Board and the Trustees giving details of circumstances and
justification for the proposed action shall also be informed to SEBI in advance.
747
Master Circular for Mutual Funds as on March 31, 2024
Standard Observation Remarks
11. If the work relating to transfer of units is processed in-house, disclosure that the
charges are at competitive rates and if the rates are higher, reasons for charging
higher rates should be disclosed.
12. D isclosure as to the procedure for seeking approval of the unitholders in specified
circumstances.
13. T he SAI shall fully disclose the fund’s policy for dealing with unclaimed redemption
amounts in line with Paragraph 14.3 of Master Circular for Mutual Funds
14. T he disclosure in respect of tax benefits to the mutual fund and the unit holders
shall be in accordance with prevailing tax laws.
15. T he SAI shall have no clause, which in effect limits the jurisdiction for settlement
of claims of the investors to a specific place/region.
16. T he application inviting subscription to the scheme should mention about the
availability of the facility of Multiple nominations and how the same can be availed.
Necessary details in this regard may also be disclosed in the SAI.
17. T he table on Condensed Financial Information shall be provided as per the relevant
clause as prescribed in the SAI format.
18. A statement should be incorporated on the last page of the Statement of Additional
Information as follows "Notwithstanding anything contained in the Statement of
Additional Information the provisions of the SEBI (Mutual Funds) Regulations,
1996 and the Guidelines thereunder shall be applicable."
748
Master Circular for Mutual Funds as on March 31, 2024
7. DISCLOSURES
A. INDICATIVE FORMAT OF DISCLOSURE ON PERFORMANCE OF
OTHER SCHEMES MANAGED BY THE FUND MANAGER709
Name of Fund Manager:
Period 1 year 3 year 5 year
Scheme Benchmark Scheme Benchmark Scheme Benchmark
return % return (%) return % return (%) return % return (%)
Scheme 1
Scheme 2
Scheme 3
Scheme 4
Scheme 5
Scheme 6
Note:
a. The concerned fund manager manages X number of schemes of the concerned Mutual Fund.
b. In case the number of schemes managed by a fund manager is more than six, performance
data of other scheme the top 3 and bottom 3 schemes managed by fund manager has been
provided herein.
c. Period for which scheme’s performance has been provided is computed basis last day of the
month-end preceding the date of advertisement
d. Different plans shall have a different expense structure. The performance details provided
herein are of (regular / direct) plan.
709 SEBI Cir no SEBI/CIR/IMD/DF/23/2017 dated March 15, 2017
749
Master Circular for Mutual Funds as on March 31, 2024
B. BROKERAGE AND COMMISSION PAID TO ASSOCIATES
Brokerage paid to associates/related parties/group companies of
Sponsor/AMC710
Name of Nature of Period covered* Value of Brokerage
associate Association/ transaction ( in (Rs Cr & % of
/related Nature of Rs. Cr. & % of total
parties/ relation total value brokerage paid
group of transaction of by
companies the fund ) the fund)
of
Sponsor/
AMC
Commission paid to associates/related parties/group companies of
sponsor/AMC
Name of Nature of Period covered * Business given Commission paid
associate Association/ (Rs. Cr. & ( Rs & % of total
/related Nature of % of total commission paid
parties/ relation business by
group received by the the fund)
companies fund)
of
Sponsor/
AMC
* The period covered shall be as following:
• SAI - Past three financial years including the current year
• Half Yearly Unaudited Financial Results – Current half year and previous half
year
• Abridged Scheme wise Annual Report – Current year and previous year
The disclosures for the aforementioned period shall be furnished for each period
in separate tables.
710 SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15 ,2010
750
Master Circular for Mutual Funds as on March 31, 2024
C. ROLE OF MUTUAL FUNDS IN CORPORATE GOVERNANCE OF
PUBLIC LISTED COMPANIES711
(i) Revised format for disclosure of vote cast by Mutual Funds - during an individual quarter:
Details of Votes cast during the quarter ended __, of the Financial year __-__
Meeti Compa Type of Proposal Proposal's Investee Vote Reason supporting
ng ny meetings by descriptio company’s (For/ the vote decision
Date Name (AGM/EG Managem n Management Against/
M) ent or Recommendat Abstain)
Sharehold ion
er
(ii) Revised format for disclosure of voting by Mutual Funds/AMCs during a financial year
Details of Votes cast during the Financial year __-__
Quart Meetin Company Type of Proposal Proposal's Investee Vote (For/ Against/ Reason
er g Date Name meetings by descriptio company’s Abstain) supporti
(AGM/EG Managem n Management ng the
M) ent or Recommenda vote
Sharehold tion decision
er
(iii) Format of providing the summary of proxy votes cast by Mutual Funds/AMCs across all the
investee companies
Summary of Votes cast during the F.Y. ___-___
F.Y. Quarter Total Break-up of Vote decision
no. of
resolut
For Against Abstained
ions
711 SEBI/IMD/DF/05/2014 dated March 24, 2014, SEBI/IMD/CIR No 18 / 198647 /2010
dated March 15 ,2010, SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021
751
Master Circular for Mutual Funds as on March 31, 2024
D. DISCLOSURE OF INVESTOR COMPLAINTS WITH RESPECT TO
MUTUAL FUNDS712
Redressal of Complaints received during the period: DD/MM/YYYY to DD/MM/YYYY
Name of the Mutual Fund:
Total Number of Folios:
Data for every month ending
Part A: Total complaints report (including complaints received through SCORES)
Action on (a) and (b)
(a) No. of
complaints (b) No of Resolved Pending
Complaint Type of pending at complaints
Non
code complaint# the received Average
Actionable
beginning during the Within 30- 60- Beyond time Beyond
*
of the period 30 60 180 180 taken ^ 0-3 3-6 6-12 12
period days days days days (in months months months months
days)
Non receipt of
amount declared
under Income
I A Distribution cum
Capital Withdrawal
option
Interest on delayed
payment of
I B amount declared
under Income
Distribution cum
Capital Withdrawal
option
Non receipt of
I C Redemption
Proceeds
Interest on delayed
I D payment of
Redemption
Non receipt of
Statement of
712 SEBI Circular No. SEBI/HO/IMD-II/IMD-II_DOF10/P/CIR/2021/00677 dated
December 10,2021
752
Master Circular for Mutual Funds as on March 31, 2024
Account/Unit
II A
Certificate
Discrepancy in
II B Statement of
Account
Data corrections in
II C
Investor details
Non receipt of
Annual
II D
Report/Abridged
Summary
Wrong switch
III A
between Schemes
Unauthorized
III B switch between
Schemes
Deviation from
III C
Scheme attributes
Wrong or excess
III D
charges/load
Non updation of
changes viz.
III E address, PAN,
bank details,
nomination, etc
Delay in allotment
III F
of Units
Unauthorized
III G
Redemption
IV Others
# including against its authorized persons/ distributors/ employees. etc.
*Non actionable means the complaint that are incomplete / outside the scope of the mutual fund
^ Average Resolution time is the sum total of time taken to resolve each complaint in days, in the current month divided
by total number of complaints resolved in the current month.
Part B: Report on complaints received through SCORES
Action on (a) and (b)
(a) No. of
complaint (b) No of Resolved Pending
Compla s pending complaints
Non
int Type of complaint# at the received Avera
Action
code beginning during the Within 30- 60- Bey ge Beyond
able 0-3 3-6 6-12
of the period 30 60 180 ond time 12
* mo months months
period days days days 180 taken months
nth
days ^ (in
s
days)
Non receipt of amount
declared under Income
I A
753
Master Circular for Mutual Funds as on March 31, 2024
Distribution cum Capital
Withdrawal option
Interest on delayed
payment of amount
I B
declared under Income
Distribution cum Capital
Withdrawal option
Non receipt of
I C
Redemption Proceeds
Interest on delayed
I D
payment of Redemption
Non receipt of Statement
II A
of Account/Unit
Certificate
Discrepancy in Statement
II B
of Account
Data corrections in
II C
Investor details
II D Non receipt of Annual
Report/Abridged
Summary
Wrong switch between
III A
Schemes
Unauthorized switch
III B
between Schemes
Deviation from Scheme
III C
attributes
Wrong or excess
III D
charges/load
Non updation of changes
III E viz. address, PAN, bank
details, nomination, etc
III F Delay in allotment of
Units
III G Unauthorized Redemption
IV Others
# including against its authorized persons/ distributors/ employees. etc.
*Non actionable means the complaint that are incomplete / outside the scope of the mutual fund
^ Average Resolution time is the sum total of time taken to resolve each complaint in days, in the current month divided
by total number of complaints resolved in the current month.
Part C: Trend of monthly disposal of complaints (including complaints received through
SCORES)
SN Month Carried Received Resolved* Pending**
forward from
previous
month
754
Master Circular for Mutual Funds as on March 31, 2024
1 2 3 4 5 6
1 April- YYYY
2 May- YYYY
3 June- YYYY
4 July- YYYY
5 ……….
6 ……….
March- YYYY
Grand Total
*Should include complaints of previous months resolved in the current month. If any.
** Should include total complaints pending as on the last day of the month, if any.
Part D: Trend of annual disposal of complaints (including complaints received through SCORES)
SN Year Carried Received Resolved Pending at the
forward during the during the end of the
from year year year
previous
1 2017-18 year
2 2018-19
3 2019-20
4 2020-21
5 2021-22
Grand Total
755
Master Circular for Mutual Funds as on March 31, 2024
756
Master Circular for Mutual Funds as on March 31, 2024
E. FORMAT FOR DISCLOSURE OF TOTAL EXPENSE RATIO (TER) OF
MUTUAL FUND SCHEMES713
Name of Scheme: XYZ
Date Regular Plan Direct Plan
(DD/MM Base Additional Additional GST Tota Base Additional Additional GST Total
/YYYY) TER expense expense (%)4 l TER expense as expense (%)4 TER
(%)1 as per as per TER (%)1 per as per (%)
Regulatio Regulatio (%) Regulation Regulatio
n n 52(6A)(b) n
52(6A)(b) 52(6A)(c) (%)2 52(6A)(c)
(%)2 (%)3 (%)3
1. Base TER excludes additional expenses provided in Regulation 52(6A)(b) and 52(6A)(c) of SEBI (Mutual Funds)
Regulations, 1996 and Goods and Services Tax (GST) on investment and advisory fees as per applicable rate.
2. Additional Expenses not exceeding 0.30% in terms of Regulation 52(6A)(b) of SEBI (Mutual Funds) Regulations,
1996.
3. Additional Expenses not exceeding 0.05% in terms of Regulation 52(6A)(c) of SEBI (Mutual Funds) Regulations,
1996.
4. Present GST rate is XX %.
5. Percentages mentioned above are annualized.
6. Base TER of direct plan shall have a lower expense ratio excluding distribution expenses, commission, etc., and
no commission shall be paid from such plans.
713 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/18 dated February 5, 2018 and
SEBI Cir no SEBI/HO/IMD/DF2/CIR/P/2018/91 dated June 05, 2018
757
Master Circular for Mutual Funds as on March 31, 2024
F. FORMAT FOR DISCLOSURE OF CALL OPTIONS WRITTEN714
In terms of paragraph 12.25.8 of Master Circular for Mutual Funds, call options
written shall be disclosed in the following format:
Underlying No. of % of Option Current Margin
contracts underlying price option maintained
shares when price in Rs. Lakhs
sold
Call options written as percentage of total market value of equity shares held
in the scheme
For the period ended … specify the following for call options written which
have already been exercised/expired
· Total Number of contracts entered into
· Gross Notional Value of contracts
· Net Profit/Loss on all contracts
714 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/17 dated January 16, 2019
758
Master Circular for Mutual Funds as on March 31, 2024
G. REPORTING FORMATS FOR CREDIT DEFAULT SWAPS (CDS)715
A. Format for disclosure to be made in the monthly portfolio
statements and half-yearly trustee report
Counter Party Details of the Details of Protection Credit
Details underlying event
payments
received
Name Rating Sector Name of Amount Residual Amount Tenor Price/ Premium
the (FV) Maturity Spread Paid
reference (bps)
entity
(Amount in Rs. crore, Residual Maturity/ Tenor in years)
715 SEBI Circular No. CIR/IMD/DF/23/2012 dated November 15, 2012
759
Master Circular for Mutual Funds as on March 31, 2024
B. Format for disclosure to be made in the notes to account of annual
report of the mutual funds
1. No. of transactions during the year
2. Amount of protection bought during the year
3. No. of transactions where credit event payment was received during
the year
a. Pertaining to current years transactions.
b. Pertaining to previous year (s) transactions.
4. Outstanding transactions as on year end:
a. No. of transactions
b. Amount of protection
5. Net income/expenses in respect of CDS transactions during year-to-
date:
a. Premium paid
b. Credit event payments received (net of value of derivable
obligations)
760
Master Circular for Mutual Funds as on March 31, 2024
8. FORMAT FOR REPORTING OF ALL TRANSACTION IN
DEBT AND MONEY MARKET SECURITIES716
# Nomenclature of "Type of security" shall be strictly mentioned as Commercial Paper, Certificate
of Deposit, Corporate Bond, Debentures, Securitised Debt, Zero Coupon Bonds, AT1 Bond,
Government Bonds (Include State Development Loans, special purpose bonds such as Uday Bonds,
Fertilizer Bonds, etc), Tresury Bills, Cash Management Bills, Bill Rediscounting Scheme, Corporate
Bond Repo, Reverse Repo, TREPS, Others (please specify)
## Nomenclature of "Listed status of security" shall be strictly mentioned as Listed, Unlisted,
Awaiting Listing, Not Applicable
$ Nomenclature of "Type of scheme" shall be strictly mentioned as Close ended, Open ended,
Interval
$$ All date formats should be in DD-MM-YYYY
@ Deemed Maturity date may be "put or/and call date" or "coupon reset date" etc. whichever is
used for pricing
@@ Please mention Clean price per 100 Rupee atleast upto 6 decimal places (In case of Zero Coupon
Bonds please mention dirty price per 100 Rupee)
* Please mention traded yield in percentage term atleast upto 4 decimal
** Yield at which said security valued on previous day in NAV in case of security already held by
any scheme of the Mutual Fund and yield at which said security valued at the end of day in NAV
in case of first time buy. Please mention traded yield in percentage term atleast upto 4
Decimal
*** Inter Scheme Transfer/Primary/Secondary through market/ Secondary through off-
market/Buyback/Other (Specify)
716 SEBI circular no. Cir/IMD/DF/6/2012 dated February 28, 2012,
SEBI/HO/IMD/DF2/CIR/P/2017/109 dated September 27, 2017 and
SEBI/HO/IMD/DF4/CIR/P/2020/163 dated September 01, 2020
761
Master Circular for Mutual Funds as on March 31, 2024
9. FORM TO REPORT ON AI AND ML TECHNOLOGIES – TO BE SUBMITTED QUARTERLY
INTIMATION TO AMFI FOR THE USE OF THE AI AND ML APPLICATIONS AND SYSTEMS717
S/N Head Value
1 Entity SEBI registration number
2 Registered entity category
3 Entity name
4 PAN of Entity
5 Application / System Name
6 Date from which the Application / System
was used
7 Type of area where AI or ML is used <order execution /
Advisory services / KYC /
AML / Surveillance /
Compliance/ Others
(please specify in 256
characters)>
7.a Does the system involve order initiation, <Yes / NO>
routing and execution?
7.b Does the system disseminate investment or <Yes / NO>
trading advice or strategies?
7.c Is the application / system used in area of <Yes / NO>
Cyber security to detect attacks
7.d What claims have been made regarding AI <free text field>
and ML application / system– if any?
8 What is the name of the Tool / Technology <free text field>
that is categorized as AI and ML system /
717 SEBI circular no. SEBI/HO/IMD/DF5/CIR/P/2019/63 dated May 09, 2019
762
Master Circular for Mutual Funds as on March 31, 2024
Application and submissions are declared
vide this response
9 How was the AI or ML project implemented <Internally / through
solution provider /
Jointly with a solution
provider or third party>
10 Are the key controls and control points in <free text field>
your AI or ML application or systems in
accordance to circular of SEBI that mandate
cyber security control requirements
11 Describe the application / system and how it <free text field>
uses AI / ML as portrayed in the product
offering
12 What safeguards are in place to prevent <free text field>
abnormal behavior of the AI or ML
application / System?
13 Is the AI / ML system included in the scope <Yes / NO>
of system audit, if applicable?
14 Is there any adverse comment in the system <free text field>
audit regarding the AI / ML system? If yes,
details of the adverse comments may be
provided.
763
Master Circular for Mutual Funds as on March 31, 2024
10. EXCEPTION (OBSERVATION) REPORTING FORMAT718
Note: Mutual Funds are expected to submit following information with regards to exceptions observed
in the System Audit, including open observations from previous audit report.
Name of the Mutual Fund: ___________________
Systems Audit Report Date: _________________
Table 1:
High/ Medium risk exceptions observed in the System Audit, including open observations from previous
audit report
Audit
Objectiv Whether
e similar issue
Audit Auditor’s Management
S Checklis Departm Description of Risk Audited was observed
Objective Recommendatio Comment with Trustee
No. t ent Name Observation Rating By in any of the
Heading n target date Comment
Questio previous 2
n audits
Number
Description of relevant Table heads
1. S No. – This indicates the serial number of the observation.
718 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/57 dated April 11, 2019
764
Master Circular for Mutual Funds as on March 31, 2024
2. Audit Objective Checklist Question Number – This indicates question number in the guideline audit
checklist
3. Audit Objective Heading – This indicates heading in the guideline audit checklist
4. Department Name – name of auditee department to which the observation pertains to e.g. PMS, R&TA, IT,
Admin etc.
5. Description of Observation – Description of the observation in sufficient detail
6. Risk Rating – Observation’s rating based on its impact and severity to reflect risk exposure.
Rating Description
High rating represents weakness in control with respect to threat(s) that is/are sufficiently
HIGH capable and impacts asset(s) leading to regulatory noncompliance, significant financial,
operational and reputational loss. These observations need to be addressed with utmost priority.
Medium rating represents weakness in control with respect to threat(s) that is/are capable and
MEDIUM impacts asset(s) leading to exposure in terms of financial, operational and reputational loss.
These should be addressed reasonably promptly.
Low rating represents a weaknesses in control, which in combination with other weakness can
LOW develop into an exposure. Suggested improvements for situations not immediately/directly
affecting controls.
7. Audit By – Name of the firm/ company performing the system audit
8. Auditor’s Recommendation – A detailed recommendation by auditor for correction of the observation and/
or implementation of the corrective actions.
9. Whether similar issue was observed in any of the previous 2 audits – Yes/ No if similar issue was
observed in previous two audit reports.
10. Management Comment with target date – Management action plan/taken to address the observation
and/ or implementation of auditor’s recommendation with target date to address/implement.
11. Trustee Comment– Trustee comments with respect to management action plan/taken to address the
observation and/ or implementation of auditor’s recommendation with target date to address/implement
765
Master Circular for Mutual Funds as on March 31, 2024
Table 2:
Low risk observations in current audit which were observed in previous two System audit reports:
Audit Management Comment Trustee Comment
Objective Audit with target date
S Description of
Checklist Objective Risk Rating
No. Observation
Question Heading
Number
Low
Description of relevant Table heads
1. S No. – This indicates the serial number of the observation.
2. Audit Objective Checklist Question Number – This indicates question number in the guideline audit
checklist
3. Audit Objective Heading – This indicates heading in the guideline audit checklist
4. Description of Observation – Description of the observation in sufficient detail
5. Risk Rating – Observation’s rating based on its impact and severity to reflect risk exposure.
6. Management Comment with target date – Management action plan/taken to address the observation
and/ or implementation of auditor’s recommendation with target date to address/implement.
7. Trustee Comment– Trustee comments with respect to management action plan/taken to address the
observation and/ or implementation of auditor’s recommendation with target date to address/implement
766
Master Circular for Mutual Funds as on March 31, 2024
Table 3:
Follow on Audit for Open Items reported in Table 1 and Table 2 of Previous System Audit Report
Reason for Management Trustee
Observation
S Departm Recommendation as delay in Comment Comment
Audite Description of Risk Status as per
No ent per previous audit implementat with revised
d By Observation Rating current
. Name report ion/ [Target]
auditor
compliance Closure Date
Description of relevant Table heads
2. S No. – Serial number
3. Audited By – Name of the firm that performed audit
4. Department Name – name of auditee department to which the observation pertains to e.g. PMS, R&TA, IT,
Admin etc.
5. Description of Observation –Description as per previous System Audit report
6. Risk Rating of Observation – Risk rating as per previous System Audit report
7. Previous Auditor’s Recommendation –Recommendation as per previous System Audit report
8. Reason for delay in implementation / compliance – Details of reason for delay in addressing the
observation/ implementation of corrective action.
9. Observation Status per current auditor – Status of observation in reference to recommendation and
management action plan mentioned in the previous system audit report.
10. Revised [Target] Closure date with Management Comment – Revised closure date or target closure date
for the observation. Management comment is necessary if observation status is not closed as per current
auditor.
767
Master Circular for Mutual Funds as on March 31, 2024
11. Trustee Comment– Trustee comments with respect to revised closure date or target closure date for the
observation.
768
Master Circular for Mutual Funds as on March 31, 2024
11. FORMAT FOR TEMPLATE TO BE MAINTAINED WITH
RESPECT TO INTER SCHEME TRANSFERS719
a. For meeting liquidity requirement due to redemption pressure
Template for ISTs due to Liquidity Management
ISIN of security to be transferred
Name of security to be transferred
Date and time of ISTs
Transferor Transferee
Particular
Scheme Scheme
Category of scheme
As per LRM minimum cash & cash equivalent required
for the scheme
Net cash position after projected inflow and outflow
Line available and borrowing utilized (record, in case
Not
borrowing was not utilized) #
Applicable
Sale proceeds of the securities utilized (record with
evidence including screenshot of Request For Quote Not
(RFQ), the attempt to sell liquid assets in market) Applicable
If all above is not sufficient then
ISTs of optimal mix of low duration paper with highest Not
quality paper and so on Applicable
Declaration:
1. IST is in the interest of unit holders.
2. Quality of security under ISTs is not suspect i.e. no adverse news or rumors in
the mainstream media about the said security, nor any credit alert for last four
months.
3. Fund Manager of transferee scheme confirms that he/she has done full credit
risk assessment of security before buying the same through ISTs, and the same
is documented.
Name and Signature of Fund Managers
Name and Signature of Chief Investment officer
Name and Signature of Compliance officer
719 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2020/202 dated October 08, 2020
769
Master Circular for Mutual Funds as on March 31, 2024
# The use of market borrowing before ISTs will be optional and at the discretion
of Fund Managers.
b. For Duration rebalancing
Template for ISTs to rebalance Duration
ISIN of security to be transferred
Name of security to be transferred
Date and time of ISTs
Transferor Transferee
Particular
Scheme Scheme
Category of scheme
Pre trade duration of scheme
Post trade duration of scheme
Interest rate view of Fund Manager
Request for Quote (RFQ) screen shot
Declaration:
1. IST is in the interest of unit holders.
2. Quality of security under ISTs is not suspect i.e. no adverse news or rumors in
the mainstream media about the said security, nor any credit alert for last four
months.
3. Fund Manager of transferee scheme confirms that he/she has done full credit
risk assessment of security before buying the same through ISTs, and the same
is documented.
Name and Signature of Fund Managers
Name and Signature of Chief Investment officer
Name and Signature of Compliance officer
c. For Issuer/Sector/Group rebalancing
Template for ISTs to rebalance Issuer/Sector/Group concentration
ISIN of security to be transferred
Name of security to be transferred
Date and time of ISTs
Transferor Transferee
Particular
Scheme Scheme
Category of scheme
770
Master Circular for Mutual Funds as on March 31, 2024
Pre trade concentration of Issuer/Sector/Group
Limit specified in SEBI Regulations/circular/
guidelines for Issuer/Sector/Group
Post trade concentration of Issuer/Sector/Group
Outlook of Fund Manager of transferee scheme about
security at the time ISTs
Request for Quote screen shot
Declaration:
1. IST is in the interest of unit holders.
2. Quality of security under ISTs is not suspect i.e. no adverse news or rumors in
the mainstream media about the said security, nor any credit alert for last four
months.
3. Fund Manager of transferee scheme confirms that he/she has done full credit
risk assessment of security before buying the same through ISTs, and the same
is documented.
Name and Signature of Fund Managers
Name and Signature of Chief Investment officer
Name and Signature of Compliance officer
771
Master Circular for Mutual Funds as on March 31, 2024
12. INVESTOR CHARTER FOR MUTUAL FUNDS720
VISION
 To develop the Indian Mutual Fund Industry and bring a high degree of
professionalism transparency and ethics by enacting regulations to govern
the functioning of mutual funds in order to enhance and maintain
standards to protect and promote the interests of unit holders of mutual
funds.
MISSION
 To support the development of a vibrant, transparent, ethical and globally
competitive asset management industry.
 To enact and enforce rules and regulations that promote the maintenance
of high professional and ethical standards in all areas of operation of the
mutual fund industry.
 To work closely with the mutual fund industry in order to recommend and
promote good business practices and a code of conduct to be followed by
all asset management companies engaged in the activities of investment
management in the best interests of unitholders / investors.
 To recommend standardized operational processes to be followed by the
Mutual Fund industry for the convenience and benefit of the investors..
 To undertake nationwide investor awareness programmes, so as to inform
and educate existing and prospective investors about mutual funds as an
asset class and to educate the public about the concept and working of
mutual funds.
 To protect the interest of investors/unit holders.
720 SEBI/HO/IMD-II/IMD-II_DOF10/P/CIR/2021/00677 dated December 10, 2021
772
Master Circular for Mutual Funds as on March 31, 2024
DESCRIPTION OF ACTIVITIES / BUSINESS OF THE ENTITY
 To offer investment opportunities to the investors through various schemes.
 To pool money by issuing units to the investors at the applicable Net Asset
Value (NAV).
 Deploy the monies pooled from investors in various securities and manage
the portfolio in accordance with objectives as disclosed in offer document
and in compliance with all applicable regulations.
 Disclose various information including NAV on daily basis, Risk-o-meter of
schemes, portfolio of the schemes, performance of the schemes, annual
report or abridged annual report etc.
 Pay redemption proceeds, dividends etc. to the investors.
 Process investor’s financial and non – financial transactions / service
requests.
773
Master Circular for Mutual Funds as on March 31, 2024
SERVICES PROVIDED FOR INVESTORS
Non-Financial Transaction
Sr. Description of Service / Activity Time taken for providing
no service
1 Providing Consolidated Account th
by 15 of succeeding month
Statement (CAS) for each calendar
month
2 Providing Consolidated Account st
By 21 of succeeding month
Statement (CAS) for the half year
3 Request for Dematerialisation of units 2 Days *
Financial Transactions (Commercial Transactions)
Sr. Description of Service / Activity Time taken for providing
no. service
1 Pay-out of redemption proceeds 10 Days
2 Pay-out of dividend from the record date 15 Calendar days
3 Pay-out of proceeds on maturity of a 10 Days
close- ended scheme
Issue of statement of accounts specifying 5 days from the date of closure of
4 the number of units allotted or issue the initial subscription list or
units in the dematerialized form from the date of receipt of the
application
Refund of subscription Money in case of 5 days from the date of closure of
5 New Fund Offer the initial subscription list
Complaints/Requests
Sr. Description of Service / Activity Time taken for providing
no. service*
Submission of ATR to SEBI in respect of
1 complaint received from investor through 30 days
SCORES
Disclosure / Reports
Sr. Description of Service / Activity Time taken for providing service
no.
Intimation regarding change in TER of
1 schemes 3 days in advance of TER effective
date
Intimation regarding change in 30 days prior to the effective date of
2 Fundamental Attributes of schemes (Exit Fundamental Attribute change
Window)
3 Intimation regarding Merger of schemes 30 days prior to the effective date of
Merger
4 Intimation regarding Conversion of 30 days prior to the effective date of
Close Ended Scheme to Open Ended conversion
Scheme
5 Disclosure of Daily NAV other than FOF Daily by 11 pm
Schemes
774
Master Circular for Mutual Funds as on March 31, 2024
6 Disclosure of Daily NAV of FOF Schemes T+1 by 10 am
7 Disclosure of Fortnightly Portfolio of within 5 calendar days.
Schemes (Debt Schemes)
8 Disclosure of Monthly Portfolio of within 10 calendar days
Schemes
9 Disclosure of half Yearly Portfolio of within 10 calendar days
Schemes
10 Disclosure of Risk-o-meter by 10th of calendar day
11 Disclosure of TER of scheme Every day
12 Disclosure of Annual report of Schemes / Every year before July 31
abridged scheme wise Annual Report
13 Disclosure of Annual report of AMC Within 4 months from the end of
the financial year
14 Disclosure of half Yearly Unaudited within 1 month
Financials
15 Disclosure of notice in respect of 5 calendar days prior to declaration
Dividend declaration of dividend
16 Disclosure of Complaints redressal 2 months of the close of the
report financial year
17 Disclosure of Asset Under Management 7 days from the end of the month
18 Disclosure of transactions in debt and 15 days from each transaction day
money market securities
19 Disclosure of half yearly updated scheme 1 month from the end of the half-
information document year
20 Disclosure of half yearly updated Key 1 month from the end of the half-
Information Memorandum year
21 Disclosure of statement of additional 3 months from end of financial year
information
22 Disclosure of Executive Remuneration 1 month from the end of financial
year.
Notes:
1. * All the above mentioned time taken for providing service (Financial & Non-
Financial) will be subject to receipt of complete documentation/information
from the investor.
2. Day refers to working day unless otherwise specified.
3. The Asset Management Companies which fail to meet the stipulated
timelines maybe liable for suitable action as deemed fir in terms of SEBI
Act, 1992 or regulations framed thereunder.
GRIEVANCE REDRESSAL MECHANISM FOR INVESTORS
1. In case of any grievance / complaint, an investor should approach the
concerned Mutual Fund / Investor Service Centre of the Mutual Fund. If
775
Master Circular for Mutual Funds as on March 31, 2024
the complaint remains unresolved, the investor may write to the
designated Investor Relations Officer of the mutual fund. The name of the
Investor Relations Officer / contact person is generally mentioned in the
Scheme Information Document (SID) of the mutual fund scheme, and also
on the website of the concerned mutual fund, whom one may approach /
write to in case of any query, complaints or grievance.
2. If the investor’s complaint is not redressed satisfactorily, one may lodge a
complaint with SEBI on SEBI’s portal, named , 'SCORES', which is a
centralized web based complaints redress system. SEBI takes up the
complaints registered via SCORES
(https://scores.gov.in/scores/Welcome.html) with the concerned mutual
fund / intermediary for timely redressal. SCORES facilitates tracking the
status of the complaint.
3. Investors may send their physical complaints to: Office of Investor
Assistance and Education, Securities and Exchange Board of India, SEBI
Bhavan. Plot No. C4-A, ‘G’ Block, Bandra-Kurla Complex, Bandra (E),
Mumbai - 400 051
DO’s and DON’Ts FOR INVESTORS
Do’s
1. Check registration status of the Mutual Fund on SEBI website before
transacting with them.
2. Read all Scheme related documents and understand the scheme features
and the risks involved and suitability of the scheme to the investor’s risk
profile.
3. Provide and keep updated KYC details including address, tax status,
residency, and other key information such as PAN & bank account details.
4. Provide own email address and mobile number and to promptly notify
changes to this information, if any.
5. Check Account Statement & Common Account Statements for
discrepancy, if any and promptly bring any such discrepancies to the
notice of the Asset Management Company
6. Read communications / notices / addendums / press releases, etc. sent /
or published by the mutual fund via newspapers, email, etc.
7. Consider availing nomination facility in respect of investments made in
Mutual Funds.
8. Choose the plan for investments i.e. Direct Plan or Regular Plan.
776
Master Circular for Mutual Funds as on March 31, 2024
9. Invest through registered and regulated entities
10. Keep confidential critical information such as user ID, password, etc.
11. Invest by issuing payments in the name of the Mutual fund / scheme only
and not in the name of any other entity.
Don’ts
1. Do not invest based on speculation, rumor or informal advice.
2. Do not fall for the promise of indicative or exorbitant or assured returns.
3. Do not issue blank cheques or blank signed transaction instructions.
4. Do not use third-party bank accounts for fund flows for subscription or
redemption of units.
RIGHTS OF INVESTORS
1. Right to receive information and details about the scheme including about
its investment philosophy, risk profile, portfolio holdings, fees, charges and
expenses and such other information as may be required under SEBI
regulations to enable investors to make an informed decision about
investing in a scheme, prior to making any such investment.
2. Right to timely receipt of account statement evidencing a transaction as
specified in the SEBI Mutual Funds Regulations, or to receive such
statements on request.
3. Right to receive Consolidated Account Statement (CAS) at a periodic
frequency as specified by SEBI.
4. Right to timely disclosure of daily Net Asset Values (NAV), Portfolio and
Performance of each scheme including scheme’s AUM, investment
objective, expense ratios on mutual fund website.
5. Right to receive Annual report / abridged annual report of the scheme(s)
invested in,
6. Right to timely receipt of redemption proceeds / dividend payments /
refunds, as applicable.
7. Right to be notified about any change in the fundamental attributes
(features) of a mutual fund scheme in which the investor has investments
and to be provided a right to exit the scheme without cost, if so desired, as
a result of the fundamental attribute change.
777
Master Circular for Mutual Funds as on March 31, 2024
8. Right to be informed about such disclosures which may have a material
bearing on their investments in mutual fund schemes.
9. Right to privacy of information in accordance with the applicable laws of
the land.
10. Right to security of, and access to, information provided to Asset
Management Companies and their service providers in relation to
investments in mutual funds. Right to have such information corrected
and receive confirmation of such correction.
11. Right to information about how complaints are handled and can be
escalated in the event investors are not satisfied with the resolution
provided.
12. Right to timely redressal of grievances and complaints within the timelines
specified by regulations and the right to escalate complaint not resolved
satisfactorily to the Investor Grievance Officer of the respective Asset
Management Company.
13. Right to escalate unresolved complaints to SEBI via the SCORES portal.
RESPONSIBILITIES OF INVESTORS
1. To check registration status of the Mutual Fund on SEBI website before
transacting with them.
2. To read all Scheme related documents and understand the scheme
features and the risks involved and suitability of the scheme to the
investor’s risk profile.
3. To provide and keep updated KYC details including address, tax status,
residency, and other key information such as PAN & bank account details.
4. To provide own email address and mobile number and to promptly notify
changes to this information, if any.
5. To check Account Statement & Consolidated Account Statements for
discrepancy, if any and promptly bring any such discrepancies to the
notice of the Asset Management Company
6. To read communications / notices / addendums / press releases, etc. sent
/ or published by the mutual fund via newspapers, email, etc.
7. To consider availing facility to nominate in respect of investments made in
Mutual Funds.
8. To choose the plan for investments i.e. Direct Plan or Regular Plan.
778
Master Circular for Mutual Funds as on March 31, 2024
9. To invest through registered and regulated entities and not to invest
based on speculation, rumor or informal advice
10. To keep confidential critical information such as user ID, password, etc.
11. To invest by issuing payments in the name of the Mutual fund / scheme
only and not in the name of any other entity.
12. To protect oneself by not falling for the promise of indicative or exorbitant
or assured returns.
13. To protect oneself by not issuing blank cheques or blank signed
transaction instructions.
14. To avoid using third-party bank accounts for fund flows for subscription
or redemption of units.
*******
779
Master Circular for Mutual Funds as on March 31, 2024
13. REPORTING FORMATS FOR OFFSITE INSPECTION
A. FORMATS PERTAINING TO MFS AND RTAS
1.1. Tables pertaining to MFs
S. No. Table Name
1 Monthly Investment Report
2 Monthly AUM Report
3 Monthly Investment Transaction Report
4 Monthly Potential Outflow Factor Report
5 Monthly Risk-O-Meter Report
6 Monthly Potential Risk Class Report
1.2. Tables pertaining to RTAs
S.
Table Name
No.
1 Investor Master
2 Investor Bank account details
3 Distributor Details
4 Scheme Master
5 Plan Master
6 NAV Details
7 MF Investor Transaction Details
8 MF Investor Holding Details
9 AMC Master
10 Scheme level RTA AUM
11 Plan level RTA AUM
B. DATA FROM MUTUAL FUNDS
780
Master Circular for Mutual Funds as on March 31, 2024
• AMCs have to submit data for all days including the date of
holidays. In case there are no changes in the data on holiday date,
the data of previous business day may be given for such days.
• Also, AMCs have to submit Asset under Management (AuM) data
for all corresponding days for which investment data is being
submitted.
Table B1: Monthly Investment Report
Field Data Type Comments
Sr
Mandatory Allowed Character
No
1. DATE Y
EXPOSURE DATE DD/MM/YYYY Exposure
format date
2. SCHEME CODE STRING Y Maximum 20 length FA Scheme
String Code
3. ASSET TYPE STRING Y
Please Refer Asset Type for
Annexure ‘I’ given e.g.
below Equity
Shares
4. INSTRUMENT STRING Y
TYPE Please Refer Instrument
Annexure ‘II’ given type. For e.g.
below Equity
5. ISSUER CODE STRING(50) N been entered
into. Issuer
of the
security
which is
being hedged
must not
appear as
50
Issuer Name
long
in case of
IRS.
However, if
Maximum AMC has
characters transacted in
String IRS through
781
Master Circular for Mutual Funds as on March 31, 2024
an electronic
trading
platform
offered by the
Clearing
Corporation
of India Ltd.
(CCIL)
and
CCIL is the
central
counterparty
for such
transactions
guaranteeing
settlement,
issuer name
in such
instances
would be
CCIL.
6. ISSUER NAME STRING(50) N Maximum 50 Issuer Name
character long
For IRS,
String
Issuer name
would be the
name of the
counterparty
with which
the IRS has
782
Master Circular for Mutual Funds as on March 31, 2024
been entered
into. Issuer
of the
security
which is
being hedged
must not
appear as
Issuer Name
in case of
IRS.
However, if
AMC has
transacted in
IRS through
an electronic
trading
platform
offered by the
Clearing
Corporation
of India Ltd.
(CCIL)
and
CCIL is the
central
counterparty
for such
transactions
guaranteeing
settlement,
issuer name
in such
instances
would be
CCIL.
7. SECURITY NAME STRING(100) N
Maximum 100 Security
character long Name
String
783
Master Circular for Mutual Funds as on March 31, 2024
8. ISIN STRING N Maximum 12 Alpha
numeric Character ISIN
long String Number
For equity
derivatives,
kindly
provide ISIN
of underlying
securities
(wherever
applicable)
9. MATURITY DATE DATE N DD/MM/YYYY Maturity
format date of the
security
(wherever
applicable)
For
Derivatives
such as
Futures,
Options,
ETCD,
Expiry date of
the
contract
10. QUANTITY DECIMAL N 20 Digits number Quantity/No
with 6 decimal of units of
security held
as per Fund
Accountant
(FA) books
(wherever
applicable)
In case part
redemption
has
happened by
784
Master Circular for Mutual Funds as on March 31, 2024
reducing the
units, provide
residual
quantity
In case of
derivatives
specify total
quantity of
underlying
securities on
which
exposure is
taken.
Cannot be
negative if Asset
Type is ‘Cash’.
For Asset Type
is ‘Cash’ report
quantity same as
market
value/total
exposure.
11. MARKET VALUE DECIMAL Y 20 Digits number Current
with 6 decimal Market Value
(For Swaps:
Difference of
payable and
receivable
shall be
considered
For Futures:
Notional
market value
of the
security
shall be
considered)
Cannot be
negative if Asset
Type is ‘Cash’.
For Asset Type
is ‘Cash’ report
market value
same as
quantity/total
exposure.
785
Master Circular for Mutual Funds as on March 31, 2024
12. ACCRUED DECIMAL N 20 Digits number Accrued
INTEREST with 6 decimal interest
for
coupon
bearing
bonds.
For all other
non-coupon
bearing debt
securities
(i.e. zero
coupon bonds,
CPs, CDs,
Deep
Discount
Bonds etc.)
kindly provide
‘0’
Total value of
the exposure
I,e, summation
of Market value
and accrued
interest.
Cannot be
13. DECIMAL Y negative if
Asset Type is
‘Cash’. For
Asset Type is
‘Cash’ report
total exposure
TOTAL 20 Digits number same as market
EXPOSURE with 6 decimal value/quantity.
14. FACE VALUE DECIMAL N 20 Digits number Face Value of
with 6 decimal the Security as
per FA.
In case part
redemption
has happened
by reducing
the Face
Value, provide
residual FV
786
Master Circular for Mutual Funds as on March 31, 2024
15. COST OF DECIMAL N 20 Digits number Total cost of
ACQUISITION with 6 decimal acquisition of
the security
including
amortized cost
wherever
applicable.
In futures the
cost of
acquisition is a
notional
derived value
as the
gain/loss is
crystallized
when futures
are closed.
For Options,
the cost can
be the
premium
cost
Cash, margin
and Cash
Equivalents
cost and
market
value would
be same
16. MARKET PRICE DECIMAL N 20 Digits number Market price of
PER UNIT with 6 decimal an unit
Per Unit
Market Price
of security
as per FA
books
(wherever
applicable)
787
Master Circular for Mutual Funds as on March 31, 2024
17. RATING STRING N Please Refer Ratings. For
Annexure ‘III’ given e.g. AAA
below
Prevailing
rating of the
security used
for valuation
For unrated
security, this
field will be
“UNRATED”
Name of
rating agency
should not be
part rating.
In case
security is
rated by
multiple
CRAs then
the lowest
rating should
be provided
(wherever
applicable)
18. RATING AGENCY STRING N Please Refer
Annexure ‘IV’ given Rating
below agency which
provided the
rating. For
e.g. CARE
19. LISTED STATUS STRING N This indicates 1 if listed or
whether the going to be
security is listed or listed
(Securities
not
awaiting
1 – Listed/Going to listing post
be listed IPO
allotment,
Rights shares
0 – Unlisted which are to
be listed,
(wherever listing is etc.), 0 if not
not applicable listed
please leave the
field blank)
788
Master Circular for Mutual Funds as on March 31, 2024
20. PFI PSB FLAG STRING N This indicates PFI PSB Flag
whether the
security is issued by
an PFI/PSB or not
0– No
1- Yes
This indicates
21. PSU FLAG STRING N whether the 1 if PSU, 0 if
not PSU
security is issued by
an PSU or not
0– No
1– Yes
22. BASIC INDUSTRY STRING(60) N String with length Basic
CLASSIFICATION 60 Industry
Classificatio
n as per
AMFI
classification
(wherever
applicable)
23. SECTOR STRING(60) N String with length Sector to
60 which the
issuer
belongs
to
(Nomenclatu
re of sector
should
be
same as used
by AMFI)
(wherever
applicable)
24. GROUPCODE STRING(30) N String with length
30 Internal
Code used
by AMC to
identify
group
companies
789
Master Circular for Mutual Funds as on March 31, 2024
25. SECURITY CODE STRING(30) N String with length
30 Internal code
used by
AMC to
identify
securities
without ISIN
(to be given
only for
those
securities
which does
not have
ISIN)
26. CALL PUT DATE DATE N DD/MM/YYYY Only to be
format provided
when Call
and Put for
debt
instrument
fall on the
same
day and
have
same
put and
call
option price,
otherwise
please leave
blank
27. OPTION TYPE STRING N CALL/PUT
To be filled
only in case
of derivative
options
contracts –
CALL, PUT
28. ISSUER FLAG STRING N Choose the
appropriate flag
790
Master Circular for Mutual Funds as on March 31, 2024
(integer) as per the Issuer flag
list below or leave it
blank if
not applicable:
1 – Issuer is
Sponsor of MF
2- Issuer is
Associate Company
of sponsor
3 - Issuer is Group
Company of
sponsor
4- Issuer is the group
company of the AMC
5-Issuer is associate of
AMC
29. COUPON RESET DATE N DD/MM/YYYY Next Coupon
DATE format reset date for
floating rate
papers,
otherwise
please leave it
blank
Whenever
the reset is
automatic
due to
benchmark
being reset
automaticall
y, give the
next coupon
date
30. PRINCIPAL STRING N Name of Stock
EXCHANGE Exchange (kindly
mention the
791
Master Circular for Mutual Funds as on March 31, 2024
numeric code as per the Principal
mapping given below): 1 - exchange on
NSE which
2 - BSE security is
3 - MSEI traded
4- Foreign
Exchange
5 – MCX
6 – NCDEX
7 - ICEX
31. YIELD OF DECIMAL N 20 Digits number with Day end yield
SECURITY 6 decimal of the
security.
E.g. 7.132
32. UNSUPPORTED STRING(10) N Cannot be
RATING blank if
Prevailing
‘Rating’ has
unsupported rating of
(CE) as suffix
the security used for
valuation.
Name of
rating agency
should not be part
rating.
In case security is
rated by multiple
CRAs then the lowest
unsupported rating
should be
provided (wherever
applicable)
792
Master Circular for Mutual Funds as on March 31, 2024
33. OUTSTANDING NUMERIC(20, N In case of
ISSUANCE 5) ReITs and
InVITs
provide
outstanding
units of the
issuer, in
Outstanding
other cases
Issuance for ISIN
eg AT1/TIER
where Asset Type is
2 provide
either
outstanding
1. ReITs
quantity of
2. InVITs
that ISIN of
3. Additional that issuer.
Tier 1 Bonds
and Tier II Cannot be
blank for
Bonds under
Asset Type: -
Basel III
ReITs ,
Framework
InVITs, AT1
4. Any other Bond, T2
such debt Bond
instrument
which have
features of
subordination
n to equity
(loss absorption
before equity
capital) and/or
convertible to
equity upon trigger
of pre specified
event for loss
absorption
793
Master Circular for Mutual Funds as on March 31, 2024
34. BESPOKE FLAG SMALLINT N
This indicates
whether the
security is bespoke
or not
1 – For Bespoke
Securities
0 – For other than
Bespoke securities -
35. MACAULAY NUMERIC N For certain
DURATION (10,6) asset types
like TREPS
etc. Maculay
duration
should be in
terms of
residual
maturity or
as followed
by AMCs for
calculation of
macaulay
duration in
determining
overall
portfolio
duration for
duration
based funds.
Cannot be
blank for
Instrument
Type ‘Debt -
Money
Macaulay Duration Market’ and
of the security in ‘Debt - Non
years (wherever Money
applicable) Market’
36. PUT DATE DATE N Next Date on which
Put option can be
exercised in case of
debt securities
having embedded
options (wherever
not applicable leave
Blank) -
794
Master Circular for Mutual Funds as on March 31, 2024
37. CALL DATE DATE N
Next Date on which
Call option can be
exercised by the
issuer in case of debt
securities having
embedded options
(wherever not
applicable leave
Blank) -
Table B2: Monthly AUM Report
SN Field Name Type Remarks
1. AUM Date DATE AUM Date
2. MF Code VARCHAR(30) SEBI Registration No of MF
3. Scheme Code VARCHAR(20) AMC Scheme Code as per FA data
NUMERIC(20,4 Closing Asset Under Management in Fund
4. Total AUM ) Accountant (FA) book
NUMERIC(20,4
Closing Asset Under Management in FA book
5. AUM – Regular )
under Regular Plan
NUMERIC(20,4
Closing Asset Under Management in FA book
6. AUM – Direct )
under Direct Plan
Investment &
Advisory Fees NUMERIC(20,4 To be given in amount for a day, after
7.
(IAF) – Regular ) excluding GST for Regular Plan
GST on
Investment &
NUMERIC(20,4 GST charged on Investment & Advisory Fees
8. Advisory Fees
) in Regular Plan for a day
(IAF) – Regular
To be given in amount for Regular Plan for a
Other Expenses NUMERIC(20,4 day (all expenses other than IAF and
9.
– Regular ) Distribution)
Investment &
Advisory Fees NUMERIC(20,4 To be given in amount, after excluding GST for
10.
(IAF) – Direct ) Direct Plan for a day
795
Master Circular for Mutual Funds as on March 31, 2024
GST on
Investment &
NUMERIC(20,4 GST charged on Investment & Advisory Fees
11. Advisory Fees –
) in Direct Plan for a day
Direct
Other Expenses NUMERIC(20,4 To be given in amount for Direct Plan for a day
12. – Direct ) (all expenses other than IAF)
Distribution
Commission - NUMERIC(20,4 To be given in amount after excluding B-30
13.
Regular ) commission for a day
B-30 NUMERIC(20,4
14. Commission ) To be given in amount for a day
Maximum permissible base TER percentage
at the given total AUM as per Regulation 52(6)
Base TER - for a day (in percentage) (after applying the
15. NUMERIC(7,4)
Regular regulatory slabs and arriving at weighted
average rate)
Maximum permissible base TER percentage
at the given total AUM as per Regulation 52(6)
Base TER - for a day (in percentage) (after applying the
16. NUMERIC(7,4)
Direct regulatory slabs and arriving at weighted
average rate)
Actual TER
charged
NUMERIC(20,4 Actual TER in INR terms (value) charged by
17. excluding GST –
) scheme – Regular plan
Regular
Actual
TER
NUMERIC(20,4 Actual TER in INR terms charged by scheme –
18. charged
) Direct plan
excluding GST –
Direct
Additional
Expense under
19. Reg 52(6A)(c) – NUMERIC(7,4) In percentage Terms
Regular
Additional
Expense under
20. Reg 52(6A)(c) – NUMERIC(7,4) In percentage Terms
Direct
NUMERIC(20,4 Total GST charged on Direct Plan for a day in
21. GST – Direct ) INR terms
796
Master Circular for Mutual Funds as on March 31, 2024
NUMERIC(20,4 Total GST charged on Regular Plan for a day
22. GST - Regular ) in INR terms
797
Master Circular for Mutual Funds as on March 31, 2024
Table B3: Monthly Investment Transaction Report
Sr Allowed
No. Tag Data Type Mandatory Character Comments
1
DATE Y DD/MM/YYY Trade date of the
TRADE DATE Y format security
2 The date when
securities are credited
DATE Y
SETTLEMENT DD/MM/YYY to the account is to be
DATE Y format specified.
3 STRING Y
UNIQUE REF Maximum
NO length allowed: Unique identifier for
40 particular transaction
4 STRING Y
Maximum AMC Scheme Code as
SCHEME CODE
length allowed: per Fund
20 Accountant (FA) data
5 ISIN STRING N
ISIN of the security
Maximum 12 (wherever applicable.
Alpha numeric Otherwise leave
Character blank)
long String
6 SECURITY STRING N
CODE Maximum Internal code used by
length allowed: AMC to identify
30 securities without
ISIN
7 STRING Y Name of the security
SECURITY Maximum
NAME length allowed:
100
8 ISSUER CODE STRING Y
Maximum Internal code to
length allowed: identify issuer of
50 security
9 ISSUER NAME STRING Y
Maximum Name of the issuer of
length allowed: security
50
798
Master Circular for Mutual Funds as on March 31, 2024
10 INSTRUMENT STRING Y Please Refer
TYPE Annexure ‘II’ Type of instrument
as given based on Annexure II
below. (Same as that of
investment holding
data structure
communicated from
time to time)
Nomenclature
should be based only
on the list provided
in Annexure II.
11 ASSET TYPE STRING Y Please Refer
Annexure ‘I’ as Asset Type of
given below security based on
Annexure I (Same as
that of investment
holding data
structure
communicated from
time to time)
Nomenclature
should be based only
on the list provided
in Annexure I.
12 TRANSACTION NUMERIC Y 1 –
NATURE Primary
2 –
Secondary
3 – Inter
scheme
Transfer
4 – Others
13 TRANSACTION STRING N Maximum
NATURE DESC length allowed: If
40 <TRANSACTION_NA
TURE> has value 4
provide narration for
the transaction
nature such as Call,
Put, Interest Reset,
Part Redemption,
Maturity, Right
Issuance, Bonus,
Buy Back, Split etc.
14
TRANSACTION NUMERIC Y 1 – Buy
TYPE 2 – Sell
799
Master Circular for Mutual Funds as on March 31, 2024
15 QUANTITY DECIMAL(2 Y 20 digits with
1. For Equity
0,4) 4 decimal
quantity traded
2. For Equity
Futures and Options
the units traded i.e.
Lot size * No. of Lots
3. For Debt,
actual Quantity
considering the FV
as per the
Information
Memorandum (IM). In
case partial
redemption has
happened by
reducing the
Quantity, then
provide reduced
Quantity.
16 FACE VALUE DECIMAL(2 N 20 digits with
0,4) 4 decimal
1. For Debt, actual
Face Value of the
Security as per IM
(not as per FA books).
In case partial
redemption has
happened by
reducing the Face
Value, then provide
reduced Face Value.
(wherever applicable)
2. Kindly leave
blank wherever not
applicable
17
TRANSACTION DECIMAL(2 Y 20 digits with 1. For Debt securities,
PRICE 0,6) 6 decimal per unit
800
Master Circular for Mutual Funds as on March 31, 2024
price at which
security is traded in
terms of Rs. 100 till 6
decimal places
(In case of Debt
securities, provide
clean price i.e.
excluding accrued
interest component.
Further, for
debt securities
mention the
clean price in terms of
INR)
2. For Equity
shares, the actual
transaction Price.
3. For Equity
Options, the
premium
paid/received
(Premium in
absolute terms viz
without negative or
positive sign shall be
given)
4. For Equity
Futures, the price of
one unit
18 TRANSACTION DECIMAL(2 Y 20 digits with
VALUE 0,4) 4 decimal 1. For Debt
securities,
Transaction_Value =
Quantity/unit * Face
Value *
Transaction_Price /
100
2. For Equity
Shares,
Transaction_Value =
801
Master Circular for Mutual Funds as on March 31, 2024
Quantity/unit *
Transaction_Price
3. For Equity Options,
Transaction_Value =
Quantity/unit *
Premium
4.For Equity Futures,
Transaction_Value =
Quantity/unit *
Transaction_Price
19
ACCRUED DECIMAL(2 N 20 digits with Accrued Interest
INTEREST 0,4) 4 decimal
20 STATUTORY DECIMAL(2 N 20 digits with
LEVIES 0,4) 4 decimal Shall include STT,
GST, Stamp Duty or
any other statutory
levy
21
BROKERAGE DECIMAL(1 N 12 digits with Amount charged
2,2) 2 decimal towards brokerage
22 GROSS VALUE DECIMAL(2 Y 20 digits with
0,4) 4 decimal Gross_Value =
Transaction_Value +
Accrued_Interest +
Statutory Levies +
Brokerage
23 YIELD OF DECIMAL(1 N 10 digits with
SECURITY 0,6) 6 decimal Traded Yield to
Maturity till 4
decimal (In
percentage). Only to
be given for debt
securities.
24 DATE N
MATURITY DD/MM/YYY Final maturity date of
DATE Y format the security
(wherever applicable)
802
Master Circular for Mutual Funds as on March 31, 2024
25 RATING STRING N Please Refer
Annexure ‘III’ Prevailing rating of
as given below the security used for
valuation
For unrated security,
this field will be
“UNRATED”
Name of
rating agency
should not be part of
rating.
In case security is
rated by multiple
CRAs then the lowest
rating should be
provided
(Wherever applicable).
In case the security
has structured
obligation or credit
enhancement, rating
should invariably
mention (SO) and
(CE).
26 STRING N
RATING Please Refer Rating agency which
AGENCY Annexure ‘IV’ provided the rating
as given below as in <RATING>
27 BROKER NAME STRING N
Maximum Name of the Broker
length allowed: (wherever applicable)
100
28 BROKER FLAG NUMERIC N
0 – No If broker is
1 – Yes associated with the
sponsor
29 STRING N
COUNTERPAR Maximum i. In case of ISTs,
TY NAME length allowed: mention scheme
100 name.
803
Master Circular for Mutual Funds as on March 31, 2024
Ii. In case
counterparty is a
Mutual Fund,
complete name of that
Mutual Fund, if
known
iii. For remaining
counterparties,
mention complete
name of counter
party, if available on
best effort basis
30 COUNTERPAR STRING N Maximum
TY PAN length allowed: Provide PAN of
20 counterparty on best
effort basis.
If not available, then
leave blank. However
in such cases,
Counterparty ID may
be provided.
31 COUNTERPAR STRING N Maximum
TY ID length allowed: Provide ID of
20 counterparty on best
effort basis.
In case of ISTs,
mention scheme
code.
In case of others,
mention the
Counterparty ID
used to report the
trade at trade
reporting platforms.
For trades with
unregistered entities
on CBRICS/ICDM,
provide the PAN No.
of the Counterparty.
For Eg- For a CP
settled at NSE and
804
Master Circular for Mutual Funds as on March 31, 2024
reported at F-TRAC,
the counterparty ID
should be the ID
used to report the
counterparty at
FTRAC. Similarly, for
a trade reported at
ICDM/CBRICS, the
counterparty should
be the id used to
report counterparty
at ICDM/CBRICS, if
available.
For instance, if ID is
not available when
securities purchased
on exchange/ CCIL
where counterparty
is not known, then it
can be left blank.
32 EXCHANGE NUMERIC N 1 – NSE Stock Exchange
2 – BSE where the trade is
3 – MSEI executed and/or
4 – settled
Foreign
Exchange (In case of other
5 – MCX ( securities (including
Multi unlisted securities),
Commodity leave it blank))
Exchange of
India Ltd)
6 –
NCDEX
(National
Commodity &
Derivatives
Exchange Ltd)
7 –
ICEX
(Indian
Commodity
Exchange
Limited)
33 OPTION TYPE STRING N
To be filled only in
CALL PUT
case of equity
derivative options
contracts
mentioning CALL or
PUT
805
Master Circular for Mutual Funds as on March 31, 2024
34 TRADE EXEC STRING N HH:mm (24
TIME hour format)
Trade execution time
as per SEBI circular
CIR/IMD/DF/6/201
0 dated July 30,
2010 and circular
CIR/MRD/DP/10
/2014 dated March
21, 2014.
Provide the time for
below mentioned
cases
1. Equity:
Trade execution time
in system (Only for
IST trades)
2.Debt:
Trade execution time
for all trades
including ISTs
This tag may be
excluded in
remaining scenarios
Trade execution time
for debt redemptions
may be mentioned as
23:59
Table B4: Monthly Potential Outflow Factor Report
Data pertaining to all Open Ended Debt Schemes may be provided.
Sr Tag Data Type Mandatory Allowed Comments
No. Character
806
Master Circular for Mutual Funds as on March 31, 2024
i) Effective date
1 Effective Date
of initial
POFF values
for applicable
new schemes
ii) Effective date
of updated
POFF values
if there is a
change in the
same for any
scheme due to
back test
failure
iii) Last day of
DD/MM/YYYY
DATE Y
format month for
applicable
schemes
i.e., There will be
minimum 1 record for
each applicable
scheme (last day of
the month). Multiple
records to be
provided for
scheme(s) wherein
there is a change in
POFF details of an
existing scheme or
when a new scheme is
launched.
2 Scheme Code Maximum AMC Scheme Code
STRING Y length allowed: as per Fund
20 Accountant (FA) data
3 RAR_OUTFLOW_1 Total Digits Potential outflow
DECIMAL Y Allowed: 5 factor (RaR) in 1st
Decimal Digits category – (0 to 1 Cr)
Allowed: 4
4 RAR_OUTFLOW_2 Total Digits Potential outflow
DECIMAL Y Allowed: 5 factor (RaR) in 2nd
Decimal Digits category – (1 Cr to 5
Allowed: 4 Cr)
807
Master Circular for Mutual Funds as on March 31, 2024
5 RAR_OUTFLOW_3 Total Digits Potential outflow
DECIMAL Y Allowed: 5 factor (RaR) in 3rd
Decimal Digits category – (5 Cr to
Allowed: 4 100 Cr)
6 RAR_OUTFLOW_4 Total Digits Potential outflow
DECIMAL Y Allowed: 5 factor (RaR) in 4th
Decimal Digits category – (> 100 Cr)
Allowed: 4
7 CRAR_OUTFLOW_1 Total Digits Potential outflow
DECIMAL Y Allowed: 5 factor (CRaR) in 1st
Decimal Digits category – (0 to 1 Cr)
Allowed: 4
8 CRAR_OUTFLOW_2 Total Digits Potential outflow
DECIMAL Y Allowed: 5 factor (CRaR) in 2nd
Decimal Digits category – (1 Cr to 5
Allowed: 4 Cr)
9 CRAR_OUTFLOW_3 Total Digits Potential outflow
DECIMAL Y Allowed: 5 factor (CRaR) in 3rd
Decimal Digits category – (5 Cr to
Allowed: 4 100 Cr)
10 CRAR_OUTFLOW_4 Total Digits Potential outflow
DECIMAL Y Allowed: 5 factor (CRaR) in 4th
Decimal Digits category – (> 100 Cr)
Allowed: 4
Table B5: Monthly Risk-O-Meter Report
Sr Tag Data Type Mandatory Allowed Comments
No. Character
Effective DATE i) Effective date of initial
1 Date Y DD/MM/YYYY
Risk-O-Meter value for
format
new scheme
ii) Effective date of updated
Risk-O-Meter value if
there is a change in the
same for any scheme
iii) Last day of month for all
schemes
There will be minimum 1 record for
each scheme (last day of the month).
Multiple records to be provided for
scheme(s) wherein there is a change in
808
Master Circular for Mutual Funds as on March 31, 2024
ROM details of an existing scheme or
when a new scheme is launched.
Scheme STRING
2 Code Y Maximum AMC Scheme Code as per Fund
length allowed: Accountant (FA) data
20
ROM
3 Level Please refer SEBI Circular on
Product Labelling in Mutual Fund
schemes – Risk-o-meter
1 SEBI/HO/IMD/DF3/CIR/P/2020/197
2 dated October 05, 2020.
STRING Y 3
4 1-Low Risk
5 2-Low to Moderate Risk
6 3-Moderate Risk
4-Moderately High Risk
5-High Risk
6-Very High Risk
ROM
4 Value Please refer SEBI Circular on
Total Digits
Product Labelling in Mutual Fund
Allowed: 4
DECIMAL Y schemes – Risk-o-meter
Decimal Digits
SEBI/HO/IMD/DF3/CIR/P/2020/197
Allowed: 2
dated October 05, 2020.
CRV
5 Please refer SEBI Circular on
Product Labelling in Mutual Fund
schemes – Risk-o-meter
SEBI/HO/IMD/DF3/CIR/P/2020/197
dated October 05, 2020.
Total Digits
Credit Risk Value (CRV) of a debt
Allowed: 4
DECIMAL N scheme shall be the weighted
Decimal Digits
average of credit risk value of
Allowed: 2
each instrument in the portfolio of
the scheme; the weights based on
their proportion in scheme’s AUM.
For other schemes, this tag may not
be provided.
LRV
6 Please refer SEBI Circular on
Product Labelling in Mutual Fund
schemes – Risk-o-meter
Total Digits
SEBI/HO/IMD/DF3/CIR/P/2020/197
Allowed: 4
DECIMAL N dated October 05, 2020.
Decimal Digits
Allowed: 2
Liquidity Risk Value (LRV) of a
debt scheme shall be the weighted
average of liquidity risk value of
809
Master Circular for Mutual Funds as on March 31, 2024
each instrument in the portfolio of
the scheme; the weights based on
their proportion in scheme’s AUM.
For other schemes, this tag may not
be provided.
Macaulay
7 Duration In terms of para 3(i)(b) of Annexure
Total Digits A of SEBI Circular on Product
Allowed: 4 Labelling in Mutual Fund schemes –
DECIMAL N
Decimal Digits Risk-o-meter
Allowed: 2 SEBI/HO/IMD/DF3/CIR/P/2020/197
dated October 05, 2020.
Table B6: Monthly Potential Risk Class Report
Sr Tag Data Mandatory Allowed Comments
No. Type Character
Effective DATE iv) Effective date of initial
1 Date Y DD/MM/YYYY
PRC values for new
format
scheme
v) Effective date of
updated PRC values if
there is a change in the
same for any scheme
vi) Last day of month for
all schemes
i.e., There will be minimum 1
record for each scheme (last day
of the month). Multiple records to
be provided for scheme(s)
wherein there is a change in PRC
details of an existing scheme or
when a new scheme is launched.
Scheme STRING
2 Code Y Maximum AMC Scheme Code as per Fund
length allowed: Accountant (FA) data
20
3 CRV Class Please refer SEBI Circular on
Potential Risk Class Matrix for
debt schemes based on Interest
1
Rate Risk and Credit Risk
STRING Y 2
SEBI/HO/IMD/IMD-II
3
DOF3/P/CIR/2021/573 dated June
07, 2021.
810
Master Circular for Mutual Funds as on March 31, 2024
Class to be Allowed
specified Value
A 1
B 2
C 3
4 IRRV Please refer SEBI Circular on
Class Potential Risk Class Matrix for
debt schemes based on Interest
Rate Risk and Credit Risk
SEBI/HO/IMD/IMD-II
DOF3/P/CIR/2021/573 dated June
1
07, 2021.
STRING Y 2
3
Class to be Allowed
specified Value
I 1
II 2
III 3
Annexure I - Allowed values for Asset Type
Equity Preference Warrants Corporate Debentures
Shares Shares Bonds
Securitise Government Treasury Commercial Certificate
d Debt Bonds Bills Paper Of Deposit
FRB/FRN
STD With Mutual CBLO/TREP Bill
Banks Fund S Rediscounting
Units Scheme
Reverse STD - I ndex Index
Repo Margin Futures Stock Futures O ptions
ADR GDR IDR
Stock Interest
Options Rate
Futures
Cash Borrowing Swaps
Net Current Overseas
Assets other Mutual
than cash Funds
and Units
borrowing
811
Master Circular for Mutual Funds as on March 31, 2024
Foreign Gold Gold ETF
Securities Differential Zero Coupon
Voting Bonds/
Rights Deep
Shares Discount
Bond
ReITs InVITs AIF Corporate
Forward Bond Repo
Rate
Agreement
s
ETF
Commodity Cash Gold Deposit Gold
Future Management Scheme Monetisation
Bills Scheme
AT1 Bond Currency
Stock Futures
Rights Physical
Lending
Entitlement Commodities
&amp;
Borrowing
Securitise Sovereign Commodity STRIPS G-Sec Repo
d Debt - Gold Bond Options
Retail
Housing
and/or
Affordable
Housing
Unlisted T2 Bond Municipal
Credit Non- NCD Bonds
Default convertible
Swap Preference
share
Silver
Reverse Reverse Index Index
Repo in Repo in Options - Options -
GSec Corporate Put Call
Bond
Stock Stock
Options - Options -
Put Call
812
Master Circular for Mutual Funds as on March 31, 2024
Annexure II - Allowed values for Instrument Type
- Equity Others
Debt Debt - Non Equity Related
Money Money Market Instruments
Market
Annexure III - Allowed values for Ratings
AAA AA+ AA AA- A+ A
A- BBB+ BBB BBB- BB+ BB
BB- B+ B B- C+ C
C- A1+ A1 A2+ A2 A3+
A3 A4+ A4 Privately SOVEREIGN UNRATED
Rated
AAA(SO) AA+(SO) AA(SO) AA-(SO) A+(SO) A(SO)
A-(SO) BBB+(SO) BBB(SO) BBB-(SO) BB+(SO) BB(SO)
BB-(SO) B+(SO) B(SO) B-(SO) C+(SO) C(SO)
C-(SO) D(SO) AAA(CE) A1+(SO) A1(SO) A2+(SO)
A2(SO) A3+(SO) A3(SO) A4+(SO) A4(SO) AA+(CE)
AA(CE) AA-(CE) A+(CE) A(CE) A-(CE) BBB+(CE)
BBB(CE) BBB-(CE) BB+(CE) BB(CE) BB-(CE) B+(CE)
B(CE) B-(CE) C+(CE) C(CE) C-(CE) D(CE)
A1+(CE) A1(CE) A2+(CE) A2(CE) A3+(CE) A3(CE)
A4+(CE) A4(CE) D
Annexure IV- Allowed values for Rating Agency
CARE CRISIL ICRA
FITCH BWR IVR
813
Master Circular for Mutual Funds as on March 31, 2024
ACUITE IND SMERA
C. DATA FROM RTAs – TABLE C1-C11
Table C1: Investor Master
SN Field Name Type Remarks
1 PAN VARCHAR2(45) PAN Number
2 FOLIO_NO VARCHAR2(15) Folio Number
3 MF_SEBI_REG_NO VARCHAR2(30) SEBI registration of the Mutual Fund
4 INVESTOR_FIRST_NAME VARCHAR2(150) Investor First Name
5 INVESTOR_MIDDLE_NAME VARCHAR2(35) Investor Middle Name
6 INVESTOR_LAST_NAME VARCHAR2(35) Investor Last Name
7 GUARDIAN_NAME VARCHAR2(150) Guardian Name
8 ADDRESS1 VARCHAR2(120) Address 1
9 ADDRESS2 VARCHAR2(120) Address 2
10 ADDRESS3 VARCHAR2(120) Address 3
11 ADDRESS4 VARCHAR2(120) Address 4
12 CITY VARCHAR2(100) City
13 STATE VARCHAR2(35) State Name
14 PINCODE VARCHAR2(20) PIN Code
15 COUNTRY VARCHAR2(35) Country Name
16 MOBILE_NO VARCHAR2(40) Primary Mobile No
17 EMAIL VARCHAR2(500) Email Id
18 JH1 VARCHAR2(150) Second Holder name (Joint holder 1)
19 JH2 VARCHAR2(150) Third Holder name (Joint Holder 2)
20 JH1_PAN_NO VARCHAR2(45) Joint Holder 1 PAN Number
21 JH2_PAN_NO VARCHAR2(45) Joint Holder 2 PAN Number
22 GUARDIAN_PAN_NO VARCHAR2(45) Guardian PAN Number
814
Master Circular for Mutual Funds as on March 31, 2024
Holding Nature
SINGLE
ANYONE OR SURVIOR
JOINT
23 HOLDING_NATURE VARCHAR2(35)
EITHER OR SURVIOR
FIRST OR SURVIOR
NOT APPLICABLE
KYC Status of First Holder as PER
SCAS logic. Values can be -
KYC OK
24 KYC_STATUS VARCHAR2(35)
KYC NOT OK
KYC NOT DONE
KYC PENDING
KYC Status of Joint Holder 1 as PER
SCAS logic.
Values can be -
KYC OK
KYC NOT OK
25 JOINT1_KYC VARCHAR2(35)
KYC NOT DONE
KYC PENDING
KYC Status of Joint Holder 2 as PER
SCAS logic.
Values can be -
KYC OK
26 JOINT2_KYC VARCHAR2(35)
KYC NOT OK
KYC NOT DONE
KYC PENDING
KYC Status of Guardian as PER SCAS
logic.
Values can be -
KYC OK
27 GUARDIAN_KYC VARCHAR2(35)
KYC NOT OK
KYC NOT DONE
KYC PENDING
28 Tax Status VARCHAR2(100) Tax Status Description
29 RTA_CODE VARCHAR2(20) CAMS/ KARVY / FT/DB/SUN
PAN Exempted KRA Reference Number
30 PEKRN_FH VARCHAR2(15)
of 1st holder
PAN Exempted KRA Reference Number
31 PEKRN_JH1 VARCHAR2(50)
of 2nd holder
815
Master Circular for Mutual Funds as on March 31, 2024
PAN Exempted KRA Reference Number
32 PEKRN_JH2 VARCHAR2(50)
of 3rd holder
PAN Exempted KRA Reference Number
33 PEKRN_G VARCHAR2(15)
of Guardian
34 Income Slab varchar2(40) Income Slab
Gender
MALE
FEMALE
35 Gender VARCHAR2(10)
NA
OTHERS
36 DOB DATE Date of Birth in YYYY-MM-DD format.
For non-individuals, date of
incorporation will be returned
wherever available
37 Nationality VARCHAR2(40) Nationality
38 Occupation VARCHAR2(100) Occupation
PEP flag
PEP
39 PEP flag VARCHAR(25)
RPEP
NPEP
40 DP_CLIENT_ID VARCHAR2(20) DP + Client ID
Classification is in line with the Annual
unit holding pattern information (ASR-
Annual Statistical Report) which is
submitted at the end of closing day of
Financial year.
41 INVESTOR CATEGORY VARCHAR2(40)
Retail
HNI
NRI
FPI
Corporate/Institution/Others
Table C2: Investor Bank account details
SN Field Name Type Remarks
SEBI registration of the Mutual
MF_SEBI_REG_NO VARCHAR2(30 BYTE)
1 Fund
RTA_CODE VARCHAR2(20 BYTE) CAMS/ KARVY/DB/SUN
2
REF_ID VARCHAR2(40 BYTE) RTA Unique Identifier for Bank
3
FOLIO_NO VARCHAR2(15 BYTE) Folio Number
4
BANK_ACCOUNT_NO VARCHAR2(40 BYTE) Investor Bank Account Number
5
IFSC_CODE VARCHAR2(40 BYTE) Bank IFSC Code
6
PURPOSE VARCHAR2(50 BYTE) Pay-In/Payout status
7
816
Master Circular for Mutual Funds as on March 31, 2024
ACTIVE CHAR(1) Allowed Values : Y/N
8
RECORD DATE DATE Date on which either the bank
9 account was added or modified
Table C3: Distributor Details
SN Field Name Type Remarks
1 RTA_CODE VARCHAR2(20) CAMS/ KARVY / FT/DB/SUN
2 BROKCODE VARCHAR2(20) Distributor Code
3 MF_SEBI_REG_NO VARCHAR2(30) SEBI registration of the Mutual Fund
4 BROKNAME VARCHAR2(70) Distributor Name
5 ADDRESS1 VARCHAR2(120) Address 1
6 ADDRESS2 VARCHAR2(120) Address 2
7 ADDRESS3 VARCHAR2(120) Address 3
8 ADDRESS4 VARCHAR2(120) Address 4
9 CITY VARCHAR2(100) City
10 STATE VARCHAR2(35) This will contain State Name
11 PINCODE VARCHAR2(20) PIN Code
12 PHONE VARCHAR2(40) Phone Number
13 MOBILE_NO VARCHAR2(40) Primary Mobile No
14 CONTACTPER VARCHAR2(45) Contact Person Name
15 EMAIL VARCHAR2(500) Email Id
16 FAX VARCHAR2(40) Fax Number
17 AMFIREGNO VARCHAR2(40) AMFI Registration Number
18 PAN VARCHAR2(45) PAN Number
Self Certification Flag Y if the self-certification
19 SELFCERTIFLAG VARCHAR(1)
provided is currently active; else N
Table C4: Scheme Master
SN Field Name Type Remarks
1 RTA Code VARCHAR2(20) CAMS/KARVY/ FT/DB/SUN
2 MF SEBI Reg No VARCHAR2(30) SEBI registration of the Mutual Fund
3 Scheme Code VARCHAR2(20) Scheme Code unique for a scheme
4 Scheme Name VARCHAR2(200) Scheme Name
817
Master Circular for Mutual Funds as on March 31, 2024
Open or Close / Interval ended fund
OPEN
5 Nature VARCHAR2(40) CLOSE
INTERVAL
SEGREGATED
Scheme Category. Kindly refer the sheet
6 Scheme Category VARCHAR2(40) "Scheme Category" below.
Scheme Sub Category. Kindly refer the
7 Scheme Sub Category VARCHAR2(40) sheet "Scheme Sub Category" below.
Keep it blank. It is reserved for future
8 MCRID VARCHAR2(40)
use.
RTA needs to submit the Scheme Code
9 AMC Scheme Code VARCHAR2(20) which is also available at AMC
Scheme Category
Type
Equity Schemes
Debt Schemes
Hybrid Schemes
Solution Oriented
Schemes
Other Schemes
Scheme Sub Category
Sub category type
Aggressive Hybrid Fund
Arbitrage Fund
Balanced Advantage
Balanced Hybrid Fund
Banking and PSU Fund
Capital Protection Oriented Schemes
Children’s Fund
Conservative Hybrid Fund
Contra Fund
Corporate Bond Fund
Credit Risk Fund
Hybrid Debt ETF
Silver ETF
Corporate Debt ETF
Equity ETF
818
Master Circular for Mutual Funds as on March 31, 2024
Other ETF
G-sec ETF
Dividend Yield Fund
Dynamic Asset Allocation
Dynamic Bond
ELSS
Equity Savings
Fixed Term Plan
Floater Fund
Focused Fund
Fund of Funds Investing Overseas
Fund of Funds Scheme (Domestic)
Gilt Fund
Gilt Fund with 10 year constant
duration
Gold ETF
G-sec Index Fund
Corporate Debt Index Fund
Hybrid Debt Index Fund
Equity Index Fund
Large & Mid Cap Fund
Large Cap Fund
Liquid Fund
Long Duration Fund
Low Duration Fund
Medium Duration Fund
Medium to Long Duration Fund
Mid Cap Fund
Money Market Fund
Multi Asset Allocation
Multi Cap Fund
Overnight Fund
Retirement Fund
Sectoral/ Thematic
Short Duration Fund
Small cap Fund
Ultra Short Duration Fund
Value Fund
Infrastructure Debt Fund
Flexi Cap Fund
819
Master Circular for Mutual Funds as on March 31, 2024
Table C5: Plan Master
SN Field Name Type Remarks
1 RTA Code VARCHAR2(20) CAMS/KARVY/ FT/DB/SUN
MF SEBI Reg
2 VARCHAR2(30) SEBI registration of the Mutual Fund
No
3 Scheme Code VARCHAR2(20) Scheme Code from Scheme Master
Scheme Plan Code unique to each
4 Plan Code VARCHAR2(20)
Plan
Option Code -
Z - Growth
5 Option Code VARCHAR2(5)
N - Dividend Reinvestment
Y - Dividend Payout
NFO Open Date in YYYY-MM-DD
6 Open Date DATE
format
NFO Close Date in YYYY-MM-DD
7 Close Date DATE
format
8 ISIN VARCHAR2(15) ISIN
Plan Type
9 Plan Type VARCHAR2(20) DIRECT
REGULAR
For close ended schemes, the date of
10 Maturity Date DATE maturity in YYYY-MM-DD format
Should include remaining description
Plan
11 VARCHAR(50) of the scheme plan including the plan
Description
level and option level information
Allotment date in YYYY-
12 DATE
Allotment Date MM-DD format
Winding up date in YYYY-MM-DD
Winding up
format
13 Date DATE
VARCHAR(3) Y - Yes
Winding up
N- No
14 flag
65/60 (only applicable for retirement
NUMERIC(2,0) funds i.e. scheme subcategory
15 Retirement age 'Retirement Fund')
Table C6: NAV Details
SN
Field Name Type Remarks
1 RTA_CODE VARCHAR2(20) CAMS/ KARVY / FT/DB/SUN
MF_SEBI_REG_N
2 VARCHAR2(30) SEBI registration of the Mutual Fund
O
3 SCHEME_CODE VARCHAR2(20) Scheme Code
820
Master Circular for Mutual Funds as on March 31, 2024
4 Plan Code VARCHAR2(20) Plan Code
Applicable NAV Date in YYYY-MM-DD
5 NAV_DATE DATE
format
NAV that is used for valuation will be
6 NAV NUMERIC(24,8)
provided
Table C7: MF Investor Transaction Details
SN Field Name Type Remarks
1 REF_NO VARCHAR2(100) Reference number (Unique Field)
2 RTA_CODE VARCHAR2(20) CAMS/ KARVY / FT/DB/SUN
3 MF_SEBI_REG_NO VARCHAR2(30) SEBI registration of the Mutual Fund
4 SCHEME_CODE VARCHAR2(20) Scheme Code
Plan Type
5 PLAN_TYPE VARCHAR2(20) DIRECT
REGULAR
6 FOLIO_NO VARCHAR2(15) Folio Number
Time stamp Machine serial no
7 TSMSLNO VARCHAR2(40)
including machine identifier
Applicable NAV Date in YYYY-MM-DD
8 NAV_DATE DATE
format
Credit realization date
Flag for NAV decision such as before
9 CREDITDT VARCHAR2(100) cut-off or after cut-off. If date and time
is maintained, then it will be provided
in the format YYYYMMDDHH24MI
10 PROCESSDT DATE Process Date
The net amount against which units
has been alloted or extinguished after
11 AMT FLOAT
adjusting "LOADAMT" and "Statutory
Levies".
12 UNITS NUMERIC(24,8) Units
13 NAV NUMERIC(24,8) NAV
14 POP NUMERIC(24,8) Applicable Price (Inclusive Load)
15 TRXN_TYPE VARCHAR2(100) Transaction Type description
16 BROKCODE VARCHAR2(20) Distributor Code
17 SUB_BRK_CODE VARCHAR2(20) Sub Broker Code
18 SUB_BRK_ARN_CODE VARCHAR2(20) Sub Broker arn Code
19 LOADAMT FLOAT Load Amount
20 TRXN_SIGN VARCHAR2(1) Transaction symbol + or -
Transaction Charge deducted, for this
21 TRANCHARGE NUMERIC(22,2)
particular transactions
821
Master Circular for Mutual Funds as on March 31, 2024
Employee Unique Identification No.
22 EUIN VARCHAR2(10) Employee is the employee of
distributor
City Category.
23 TER_FLAG VARCHAR2(10) T - Top
B - Below
Transaction Source -
ONLINE
OFFLINE
OTHERS
24 VARCHAR2(10)
Others will include transactions such
as corporate actions (dividend,
scheme merger etc), reversals,
TRXNSOURCE triggers (SIP, Event based etc)
FT Account Number
Only FT will provide their sub account
25 FT_ACCOUNT_NO VARCHAR2(13)
number, other RTAs will provide blank
value
26 VARCHAR(20)
Plan Code Plan Code
Standard Transaction Standard Transaction Type presrcibed
27 VARCHAR2(40)
Type by SEBI
Any statutory levy such as Stamp
Duty, etc. deducted from Gross
transaction amount (viz subscription,
redemption, switch etc) excluding load
28 Statutory Levies NUMERIC(24,8)
amount. (Gross Transaction amount=
Amount as per Sr. No. 11+ Statutary
Levies as Sr. No. 29+ LoadAMT as per
Sr. No. 19)
29 Original Txn NO VARCHAR (100) Original Transaction reference for
rejection/reversal transaction. To be
kept blank in other instances
30 Bank Account No NUMERIC(20) Bank Account from which credit
happened in case of Purchase/ SIP
Purchase or to which redemption
proceeds were credited ; whichever is
the case
IFSC Code VARCHAR (10) IFSC Code of Bank Account
31
Table C8: MF Investor Holding Details
SN
Field Name Type Remarks
Holding Date DATE
1 Holding date in YYYY-MM-DD format
2 Reserved VARCHAR(10) Blank
Folio No VARCHAR2(15
3 Folio Number
)
MF Reg No VARCHAR2(30
4 SEBI registration of the Mutual Fund
)
822
Master Circular for Mutual Funds as on March 31, 2024
Scheme VARCHAR2(20
5 Scheme Code
Code )
Plan Type VARCHAR2(20
Plan Type
)
6 DIRECT
REGULAR
Unit NUMBER(25,8 Closing Balance as on report generation date
7 Balance ) and time for the folio and scheme
RTA Code VARCHAR2(20
8 CAMS/ KARVY / FT/DB/SUN
)
ISIN VARCHAR2(15
9 ISIN
)
Reinvest VARCHAR(1)
Flag
Scheme Reinvest Code -
Z - Not Applicable
10
N - Dividend Reinvestment
Y - Dividend Payout
DEMAT Flag VARCHAR(3)
DEMAT Flag
11 Y - Yes
N - No
12 Plan Code VARCHAR(20)
Plan Code
Holding NUMBER(25,2
13 Closing Balance in Rs.
Value )
Table C9: AMC Master
SN Field Name Type Remarks
SEBI registration of the
1 MF_SEBI_REG_NO VARCHAR2(30)
Mutual Fund
2 AMC_NAME VARCHAR2(100) Name of Mutual Fund
CAMS/ KARVY /
3 RTA_CODE VARCHAR2(20)
FT/DB/SUN
PAN of AMC
4 AMC_PAN CHAR(10)
Table C10: Scheme level RTA AUM
S.No Field Name Type Remarks
Scheme AUM
1 DATE Scheme AUM Date
date
2 RTA Code VARCHAR2(20) CAMS/KARVY
SEBI registration of the Mutual
3 MF SEBI Reg No VARCHAR2(30)
Fund
4 Scheme Code VARCHAR2(20) Scheme Code unique for a scheme
823
Master Circular for Mutual Funds as on March 31, 2024
Scheme RTA Summation of RTA AUM of the
5 AUM Details - NUMBER(25,2) Scheme for Direct Plans i.e
Direct Plan without distributor
Scheme RTA Summation of RTA AUM of the
6 AUM Details - NUMBER(25,2) Scheme for Regular Plans i.e with
Regular Plan distributor
RTA AUM of the Scheme for Other
Scheme RTA
Plan, if any. Please fill this as 0 if
7 AUM Details - NUMBER(25,2)
the same is not applicable for a
Other Plan
particular scheme
Scheme RTA
Scheme level RTA AUM of the
8 AUM Details - NUMBER(25,2)
Scheme
Total
Table C11: Plan level RTA AUM
Sr. No Field Name Type Remarks
1 Plan NAV Date DATE Plan NAV date
2 RTA Code VARCHAR2(20) CAMS/KARVY
3 SEBI registration of the
MF SEBI Reg No VARCHAR2(30)
Mutual Fund
4 Scheme Code unique for a
Scheme Code VARCHAR2(20)
scheme
5 Plan Code unique to each
Plan Code VARCHAR2(20)
Plan
6 Plan ISIN VARCHAR2(16) ISIN
Scheme Reinvest Code -
Z - Not Applicable
7 REINVEST TAG VARCHAR(1)
N - Dividend Reinvestment
Y - Dividend Payout
8 Plan Units NUMBER(25,8) Day end Units
9 Plan NAV NUMERIC(25,8) Day end Plan Level NAV
10 Plan AUM NUMBER(25,2) Day end Plan Level AUM
824
Master Circular for Mutual Funds as on March 31, 2024
D. DETAILS OF REPORTING REQUIREMENTS AS PER THE
PROVISIONS OF THE MASTER CIRCULAR
Details of the requirements prescribed under various clauses of the
Master Circular that are covered through the offsite inspection
reporting formats, are as under:
Paragraph Requirement Table Reference
Reference
number
of the
Master
Circular
2.6 Categories of Schemes, Monthly Investment Report, Scheme
Scheme Characteristics and Master, Monthly Investment
Type of Scheme (Uniform Transaction Report.
Description of Schemes)
2.9 Timelines for Rebalancing of Monthly Investment Report, Scheme
Portfolios of Mutual Fund Master, Monthly Investment
Schemes Transaction Report.
3.2 Gold Exchange Traded Fund Monthly Investment Report, Scheme
Scheme Master, Monthly Investment
Transaction Report.
3.3 Norms for Silver Exchange Monthly Investment Report, Scheme
Traded Funds (Silver ETFs) Master, Monthly Investment
Transaction Report.
3.4 Portfolio Concentration Norms Monthly Investment Report, Scheme
for Equity Exchange Traded Master, Monthly Investment
Funds (ETFs) and Index Funds Transaction Report.
3.5 Norms for Debt Exchange Monthly Investment Report, Scheme
Traded Funds (ETFs)/Index Master, Monthly Investment
Funds Transaction Report.
3.7 Capital Protection Oriented Monthly Investment Report, Scheme
Scheme Master, Monthly Investment
Transaction Report.
825
Master Circular for Mutual Funds as on March 31, 2024
4.1 With the overall objective of Monthly Investment Report, Scheme
management of key risks Master, Monthly Investment
involved in mutual fund Transaction Report.
operation, the Risk
Management Framework
(RMF) shall provide a set of
principles or standards, which
inter alia comprise the policies,
procedures, risk management
functions and roles &
responsibilities of the
management, the Board of
AMC and the Board of
Trustees.
4.4 Creation of segregated portfolio Monthly Investment Report, Scheme
in mutual fund schemes Master.
4.5 Risk management framework Monthly Investment Report, Scheme
for liquid and overnight funds Master.
4.6 Prudential Norms for Liquidity MF investment details, Scheme
Risk Management of Open Master, Monthly Potential Outflow
Ended Debt Schemes Factor Report
7.2.6 The AMC, its sponsor, MF Investor Transaction Details,
employees of AMC and Trustee Plan Master, Scheme Master.
shall not be permitted to
transact (buy or sell) in the
units of such schemes that are
under the process of being
wound up. The compliance of
the same shall be monitored
both by the Board of AMC and
Trustee.
9.7.1 Aggregate value of “illiquid Monthly Investment Report
securities” under a scheme,
which are defined as
nontraded, thinly traded and
unlisted equity shares, shall
not exceed 15 per cent of the
total assets of the scheme and
any illiquid securities held
above 15 per cent of the total
assets shall be assigned zero
value.
9.17.1 All AMC’s shall ensure that Monthly Investment Report
similar securities held under its
various schemes shall be
valued consistently.
10.5 Transaction Charge MF Investor Transaction Details
12.1 Investment in Listed and Monthly Investment Report, Scheme
Unrated Debt Instruments Master
826
Master Circular for Mutual Funds as on March 31, 2024
12.2 Investment in Instruments Monthly Investment Report, Scheme
having Special Features Master
12.3 Restrictions on Investment in Monthly Investment Report, Scheme
debt instruments having Master
Structured Obligations / Credit
Enhancements:
12.5 Investments by Index Funds Monthly Investment Report, Scheme
Master.
12.6 Investments by Liquid Schemes Monthly Investment Report, Scheme
and plans Master, Plan Master
12.7 Investment by close ended debt Monthly Investment Report, Scheme
schemes Master
12.9 Prudential limits and Monthly Investment Report, Scheme
disclosures on portfolio Master
concentration risk in debt
oriented mutual fund schemes
12.10 Investment in Non-convertible Monthly Investment Report, Scheme
Preference Shares Master
12.13 Investments in Units of Venture Monthly Investment Report, Scheme
Capital Funds Master
12.14 Investment limit for Monthly Investment Report, Scheme
government guaranteed debt Master
securities
12.15 Investment Restrictions for Monthly Investment Report, Scheme
Securitised Debt Master
12.16 Investments in Short Term Monthly Investment Report, Scheme
Deposits (STDs) of Scheduled Master
Commercial Banks - pending
deployment
12.18 Participation of Mutual Funds Monthly Investment Report, Scheme
in repo corporate debt Master, Monthly Investment
securities Transaction Report
12.19 Overseas Investment limits for Monthly Investment Report, Scheme
Mutual Funds Master
12.20 Investments in Indian Monthly Investment Report, Scheme
Depository Receipts (IDRs) Master
12.21 Investments in units of REITs Monthly Investment Report, Scheme
/ InvITs Master
12.25 Norms for investment and Monthly Investment Report, Scheme
disclosure by Mutual Funds in Master
derivatives
827
Master Circular for Mutual Funds as on March 31, 2024
12.25.8 Writing of Covered Call Monthly Investment Report, Scheme
Options by Mutual Fund Master
Schemes : Mutual funds have
been permitted to write call
options under a covered call
strategy
12.26 Participation of mutual funds Monthly Investment Report, Scheme
in Exchange Traded Commodity Master
Derivatives
12.27 Interval Schemes/Plans Monthly Investment Report, Scheme
Master
12.28 CDS – mutual funds as users Monthly Investment Report, Scheme
(protection buyers) Master
12.30 Inter Scheme Transfer of Monthly Investment Transaction
Securities Report
16.7 Cash Investments in mutual MF Investor Transaction Details
funds
17.4 Product Labelling in Mutual Monthly Investment Transaction
Funds Report, Monthly Risk-O-Meter Report,
Scheme Master
17.5 Potential Risk Class Matrix Monthly Investment Transaction
Report, Monthly Potential Risk Class
Report, Scheme Master
*******
828
Master Circular for Mutual Funds as on March 31, 2024