SEBI mandates MFs to increase transparency and enhance distribution
The Securities and Exchange Board of India had recently come out with a Long-term Policy for Mutual Funds. In continuation of that, it has released a circular which addresses a lot of these issues in greater detail. This circular will be applicable with effect from April 1, 2014.
Transparency:
In order to enhance transparency and increase the quality of the disclosures for investors, Mutual Funds will need to disclose the following on a monthly basis on their website and also share the same with Association of Mutual Funds in India (AMFI):
- AUM from different categories of schemes such as equity schemes, debt schemes, etc.
- Contribution to AUM from B-15 cities (i.e. other than top 15 cities as identified by AMFI) and T-15 cities (Top 15 cities).
- Contribution to AUM from sponsor and its associates and entities other than sponsor and its associates.
- Contribution to AUM from investors type (retail, corporate, etc.) in different scheme type (equity, debt, ETF, etc.).
- AUM garnered through sponsor group/ non-sponsor group distributors.
- State-wise/Union Territory-wise contribution to AUM.
MF-wise and consolidated data on the above parameters will also be disclosed on AMFI website as per the format prescribed by the regulator. AMCs are required to provide this data in a spreadsheet and provide to AMFI within 7 working days from the end of the month.
Distribution channels:
In order to achieve participation from all parts of the country in MFs, SEBI has suggested the following:
Distribution through PSU banks: In order to leverage the wide-spread infrastructure of PSU banks, MFs need to develop a system for active support to PSU banks to distribute MF products through them.
Online distribution: The phenomenal growth in online transactions, especially by the younger generation, and distributor economics has led SEBI to ask all MFs to enhance the online investment facility and tap the internet savvy users to invest in MFs by providing an online investment facility on their websites. The regulator added that MFs should also tap the burgeoning mobile-only internet users for direct distribution of MFs.
Financial inclusion:
In order to promote financial inclusion, Mutual Funds are required to:
- Make available printed literature on mutual funds in regional languages for investor awareness and education.
- Introduce Investor awareness campaign in regional languages both in print and electronic media.
Disclosures of Votes Cast by Mutual Funds:
SEBI has mandated AMCs to take the following measures in order to improve transparency as well as encourage AMCs to diligently exercise their voting rights in best interest of the unitholders:
- AMCs need to record and disclose specific rationale supporting their voting decision (for, against or abstain) with respect to each vote proposal.
- AMCs need 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 favour, against or abstained from.
- AMCs need to make disclosure of votes cast on their website (in spreadsheet format) on a quarterly basis, within 10 working days from the end of the quarter. They will continue disclosing voting details in their annual report.
Prudential limits and disclosures on portfolio concentration risk in debt-oriented mutual funds scheme:
SEBI said that the guidelines issued on prudential limits for sectoral exposure in debt oriented mutual funds schemes excludes investment in Bank CDs, CBLO, G-Secs, T-Bills and AAA rated securities issued by Public Financial Institutions and Public Sector Banks while calculating total exposure of debt schemes of mutual funds in a particular sector. Since the investments in short term deposits of scheduled commercial banks is allowed pending deployment of funds of a scheme the same will also be excluded while calculating sector exposure.
Changes in benchmark and additional offering
SBI Mutual Fund will change the benchmark of the following schemes from April 1, 2014. SBI Tax Advantage Fund Series I: from S&P BSE 500 to CNX Midcap; SBI Tax Advantage Fund Series II: from S&P BSE 500 to S&P BSE 100; SBI Magnum Global Fund and SBI Magnum Midcap Fund: from S&P BSE Midcap to CNX Midcap.
BNP Paribas Mutual Fund will change the benchmark of BNP Paribas Dividend Yield Fund and BNP Paribas Tax Advantage Plan (ELSS) to CNX 200 from April 1, 2014. Earlier the benchmark of BNP Paribas Dividend Yield Fund was S&P BSE Sensex and benchmark of BNP Paribas Tax Advantage Plan (ELSS) was S&P BSE 200.
Reliance Mutual Fund introduced yearly frequency under the systematic investment plan. The minimum investment amount is Rs 5,000 per year, in multiples of Rs 500, for a minimum of 2 years. Reliance STEP-UP feature will also be available for the yearly SIP facility at yearly intervals only and the minimum application amount for STEP-UP would be Rs 500. Thes changes will be in effect from April 1, 2014.
Axis Mutual Fund introduced bonus option under the regular and direct plans of the following schemes from March 24, 2014: Axis Liquid Fund, Axis Treasury Advantage Fund, Axis Short Term Fund, Axis Banking Debt Fund, Axis Income Fund, Axis Dynamic Bond Fund and Axis Constant Maturity 10 Year Fund.
BOI AXA Mutual Fund introduced monthly and quarterly frequency in addition to annual frequency under Systematic Withdrawal Plan (SWP) under BOI AXA Treasury Advantage Fund and BOI AXA Liquid Fund from April 1, 2014. The minimum SWP value is Rs 1,000 for quarterly and monthly frequency and the minimum additional amount is in multiples of Rs 100. Date of SWP installment will be any of the 1st, 7th, 10th, 15th, 20th or 25th of the month for monthly and quarterly frequency. The minimum number of installments in monthly and quarterly frequency will be 6.
ICICI Prudential MF has made changes to the source and target schemes under its Liquity facility. The change is available under the growth option of the schemes from April 1, 2014. Under source schemes, it has replaced ICICI Prudential Ultra Short Term Plan with ICICI Prudential Regular Savings Fund. Further, it has added ICICI Prudential Top 100 Fund and ICICI Prudential Export and Other Services Fund to target schemes.
ICICI Prudential MF has removed the maximum investment amount per investor under ICICI Prudential Equity Arbitrage Fund and ICICI Prudential Blended Plan- Plan A from March 25, 2014.
Change in exit load and dividends declared
Franklin Templeton Mutual Fund will begin charging an exit load of 0.50% under Franklin India Savings Plus Fund from April 1, 2014, if units are redeemed within 90 days.
Franklin Templeton Mutual Fund declared dividend under the dividend option of Franklin India Flexi Cap Fund. The quantum of dividend is Re 1 per unit with the record date set as March 28, 2014.
SBI Mutual Fund has declared dividend under SBI Magnum Taxgain Fund. The quantum of dividend is Rs 3.5 per unit with the record date set as March 28, 2014.
Religare Invesco Mutual Fund declared bonus under Religare Invesco Arbitrage-Bonus and Religare Invesco Arbitrage Direct-Bonus. Investors will receive 1 unit for every 2 units held, subject to availability of distributable surplus. The record date has been fixed as March 28, 2014.
Deutsche Mutual Fund has declared bonus under DWS Short Maturity Fund. Investors will receive 0.05 units for every unit held. The record date has been fixed as March 28, 2014.
