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In December 2021, the Committee formed by SEBI submitted their recommendation to SEBI regarding the amendment needed for Mutual Fund Houses. After Such a recommendation, Sebi has taken a positive move to protect the interest of mutual Fund investors.
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Under the new norms, mutual fund trustees will be required to obtain the consent of the unitholders when the majority of the trustees decide to wind up a scheme or prematurely redeem the units of a close-ended scheme.
First of all, let's understand,
What is a Close Ended Scheme?
A closed-ended mutual fund scheme is where investment is locked in for a specified period of time. One Can Subscribe to close-ended schemes only during the new fund offer period (NFO) and redeem the units only after the lock-in period or the tenure of the scheme is over.
Why did it need to amend the Provision?
Previously Consent of Unitholders was not required for winding up of schemes. So Supreme court made a judgment in July 2021 that trustees are mandatorily required to take consent of unitholders before winding up the scheme. The Supreme Court's decision came in the case pertaining to winding-up of Franklin Templeton Mutual Fund's six debt schemes.
The fund house shut its six debt mutual fund schemes on April 23, 2020, citing redemption pressures and lack of liquidity in the bond market.
How Voting Will Take Place?
Sebi on its Notification clarified that the basis of voting will be one vote per unit held by unitholders and the results of the voting will be published within 45 days of the publication of notice of circumstances leading to winding up.
In case the trustees fail to obtain consent, Sebi said the scheme would be open for business activities from the second business day after the publication of the results of the voting.
SEBI said the trustees will give notice within one day, disclosing the circumstances leading to the winding up of the scheme to the regulator and in two daily newspapers having circulation all over India as well as a vernacular newspaper circulating at the place where the mutual fund is formed.
SEBI asks Fund houses to follow some mandatory requirements to be followed while preparing Accounts
- Financial statements and accounts of the mutual fund scheme shall be prepared in accordance with IND AS.
- Mutual will mark all investments to the market and carry investments in the balance sheet at market value.
- The realized gains or losses on sale or redemption of investment, as well as unrealized appreciation or depreciation shall be recognized in all financial statements through Revenue Accounts.
- The aggregate market value of investments in securities will be stated separately in respect of each type of investment, such as equity shares, preference shares, convertible debentures listed on the stock exchange, non-convertible debentures or bonds further differentiating between those listed on the stock exchange and those privately placed.
So, Now SEBI is taking progressive steps for the Investor, It will help and attract more Investors to Invest in Mutual Funds.
by Abhishek Kumar.
News article brought in association with jobaaj.com
