SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/90

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 anything done or any action taken or purported to have been done or taken under the rescinded circulars, including registrations or approvals granted, fees collected, registration suspended or cancelled, any inspection or investigation or enquiry or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 any application made to SEBI under the rescinded circulars, prior to such rescission, and pending before it shall be deemed to have been made under the corresponding provisions of this Master Circular;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 the previous operation of the rescinded circulars or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the rescinded circulars, any penalty, incurred in respect of any violation committed against the

6 · Pursuant to issuance of this Master Circular, the entities which are required to ensure compliance with various provisions shall submit

8 · This Master Circular is available on the SEBI website at https://www.sebi.gov.in/ under the category “Legal -> Master Circulars”.

1 · 1 Filing of Offer Document with the Board 1

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 Regulations 4 .

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 Februa ry 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

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 · 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

1 · 1.3. All offer documents (ODs) of Mutual Fund schemes shall be filed with SEBI in terms of the Regulations 7 .

1 · 1.3.1. Filing of Draft SID:

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

10 · SEBI Circular No. IIMARP/MF/CIR/01/428/97 dated February 28, 1997.

1 · 1.3.2. Filing of SAI

1 · 1.3.3. Filing of Final SID

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

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 .

1 · 2 Updation of SID & KIM1 M17

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:

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.

16 · 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/IMDRAC -2/P/OW/2023/45312/1 dated November 10, 2023

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 same 19 .

1 · 2.2 20The procedure to be followed in case of changes to the open ended and interval scheme shall be as under:

18 · SEBI 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

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

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:

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

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 Document2 t27

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 Benchmarks 28

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

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.

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:

31 · SEBI 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

1 · 9.3 AMFI has been advised to publish:

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 · 10.2 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.

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:

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 -

35 · SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/603 dated July 23, 2021

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

22 · 36 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/57 dated May 31, 2016

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

1 · 13.1 The nomenclature "Liquid Plus Scheme(s)" has been discontinued from January 2009 since it gives a wrong impression of added

1 · 14 Fundament al Attributes38

1 · 14.1 The words "fundamental attributes"39 are elaborated below:

1 · 14.1.1 Type of a scheme

1 · 14.1.2 Investment Objective(s)

1 · 14.1.3 Terms of Issue

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

1 · 14.1.4 42Comments from SEBI for change in Fundamental Attributes:

25 · 42 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021

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)

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

1A · 1.3.B Acquisition of an AMC

1A · 1.3.C Pooled Investment Vehicle as sponsor of Mutual Funds

1A · 1.3.D Reduction of stake and disassociation of sponsor

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.

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)

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 selfsponsored AMC, in case the AMC fails to meet the conditions specified at paragraph 1A.1.3.D (iii) above.

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:

44 · SEBI Circular No. MFD/CIR No.22/2311/03 dated January 30, 2003.

45 · Regulation 33(3) of the SEBI (Mutual Funds), Regulations, 1996.

46 · 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.

48 · 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'

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.

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):

2 · 2.2.2 Disclosures:

50 · SEBI Circular No. SEBI/MFD/CIR No.5/12031/03 dated June 23, 2003.

51 · Regulation 18(15A) of the Mutual Funds Regulations.

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:

52 · Refer format no. 3.C. on half yearly portfolio disclosure under section on Formats

53 · 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

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:

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

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

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

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:

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 .

42 · 64 Refer SEBI letter No. SEBI/HO/OW/IMD-II/DOF3/P/25096/2022 dated June 17, 2022

65 · SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/172 dated September 11, 2020

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/IMDPOD-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

69 · SEBI/HO/IMD/DF2/CIR/P/2021/683 dated December 10, 2021

70 · SEBI circular no. SEBI/HO/IMD/DF3/CIR/P/2017/126 dated December 04, 2017

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.

2 · 6.3 In case of Solution oriented schemes, there will be specified period of lock in as stated in the above tables.

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:

71 · SEBI Circular no. SEBI/HO/IMD/DF3/CIR/P/2020/228 dated November 06, 2020

72 · Refer SEBI email dated January 28, 2022

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:

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:

73 · SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/126 dated December 04, 2017

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:

2 · 9 Timelines for Rebalancing of Portfolios of Mutual Fund Schemes75

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:

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

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:

2 · 9.4 Reporting and Disclosure Requirements:

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

3 · 1 Fund of Funds Scheme7 e77

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.

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:

83 · Regulations 2(mc) of the Mutual Funds Regulations introduced vide Gazette Notification No.

84 · SEBI Circular 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

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:

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.

3 · 2.4 Recurring Expenses 91

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

97 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/668 dated November 24, 2021.

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:

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

3 · 3.4.1 The NAV of units of Silver ETF Scheme shall be calculated up to four decimal points as shown below:

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

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

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.

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.

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/tbills/SDLs (Hybrid debt indices).

3 · 5.2 Debt ETFs/ Index Funds: Index Constitution

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

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 halffyearly 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:

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

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:

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

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:

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:

3 · 5.4 G -sec ETF/Index Fund: Debt ETFs/ Index Funds based on G-sec, tbills 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:

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

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:

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.

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

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 .

3 · 6.1.5 Market Making Settlement Process for domestic Equity ETFs

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

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:

3 · 6.3 Tracking Error and Tracking Difference

3 · 6.3.1 Tracking Error (TE)

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

3 · 6.3.2 Tracking Difference (TD)

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

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:

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:

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.

104 · SEBI 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.

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.

110 · SEBI Circular No -SEBI/IMD/CIR No.4/124477/08 dated May 2,2008

111 · Regulation 49 A(a)(i) of SEBI (Mutual Fund) Regulations, 1996

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

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:

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

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

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

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-SEC2/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

3 · 11.4.3.2 ESG scores of securities

3 · 11.4.3.3 Voting disclosures by ESG schemes

3 · 11.4.3.4 Annual Fund Manager commentary and disclosure of case studies

3 · 11.4.3.5 Assurance on ESG Schemes

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 .

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:

117 · SEBI Circular No. CIR/IMD/DF/03/2015 dated April 30, 2015. Refer SEBI email dated February 27, 2024 .

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:

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.

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.

118 · SEBI Circular No.SEBI/HO/IMD/DF3/CIR/P/2020/229 dated November 06, 2020.

119 · SEBI Circular 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 Circular 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 Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/127 dated November 07, 2019.

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:

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

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:

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:

123 · SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2021/032 dated March 10, 2021.

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.

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

4 · 4.5.2 Once trustee approval is received by the AMC,

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:

4 · 4.7 Disclosure Requirements

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

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

4 · 4.9.1 In order to ensure timely recovery of investments of the segregated portfolio, trustees shall ensure that:

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

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

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.

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.

4 · 5.4 Mutual Fund shall levy exit load on investors who exit the Liquid Fund within 7 days of their investment.

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

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 .

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

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

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.

4 · 9.3 Any set of applications / software / programs / executable / systems (computer systems) – cumulatively called application and systems,

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 · .

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

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:

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:

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:

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.

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

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.

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:

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 halfyearly 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

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 Regulations 141 , 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

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

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/05031/2022dated 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

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.

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 holdings 147

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:

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.

148 · For further details, refer Part II – Scheme Governance in the Chapter 6 on 'Governance Norms'

149 · 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

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

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 noninstitutional 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.

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.

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:

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

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:

160 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/137 dated October 22, 2018

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

124 · 163 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/42 dated March 25, 2019

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

164 · MFD/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

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:

5 · 12 Disclosure Of Executive Remuneration168

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

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.

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

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 Regulations 174 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

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 -M -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.

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

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 risko-meter of benchmark.

179 · SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/621 dated August 31, 2021

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

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 format

184 · .

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

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)

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 subregulation (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

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 w ell 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

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 halffyearly 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.

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 NoSEBI/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

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

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

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:

205 · SEBI Circular No. MFD/CIR No.010/024/2000 dated January 17, 2000.

206 · SEBI Circular No. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/17 dated February 09, 2022 which is applicable from August 1, 2022. <

6 · 1.2.2 Membership:

6 · 1.2.3 Meetings:

6 · 1.2.4 Reporting:

6 · 1.2.5 Powers and Responsibility:

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.

6 · 2 Review and Reporting of Transactions207

6 · 2.1 Reporting of transactions

6 · 2.1.1 Transaction(s) by directors of the AMC

6 · 2.1.2 Trustee(s) Directors

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.

208 · SEBI Circular No. SEBI/MFD/CIR/10/039/2001 dated February 9, 2001.

209 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021.

210 · Regulation 18(11) of SEBI (MF) Regulations, 1996 and SEBI Circular No. MFD/CIR/09/014/2000 dated January 5, 2000.

211 · Regulations 18(6) and 18(7) of SEBI (Mutual Funds), Regulations, 1996

212 · 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.

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

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 noncompliance. 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 biodata219 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

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:

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.

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:

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

147 · 224 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021

6 · 6 Investment and/or for / Trading in Securities by the employees of the AMC(s) and Trustee(s)226

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

6 · 6.1.2 The objectives and principles of these Guidelines are:

6 · 6.2 General

6 · 6.2.1 Investments Covered:

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:

6 · 6.3 Investments in Shares and/or Debentures and/or Bonds and/or Warrants and/or Derivatives

6 · 6.3.1 Investments through the primary markets:

6 · 6.3.2 Investments through the secondary markets:

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.

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:

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:

6 · 6.5.2 All employees other than access persons shall submit, in the form prescribed by the Mutual Fund, to the Compliance Officer:

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

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

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

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 /

6 · 7B Third Party Assurances230

6 · 7B.1 The responsibilities other than core responsibilities, for which the Trustees may avail services of third party fiduciaries, include the following:

230 · Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/117 dated July 07, 2023

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:

6 · 7C.3 The UHPC shall, inter-alia, have the following mandates:

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

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

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. <<

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 –

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/IMDIDOF5/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.

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.

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 noncompliance in this regard, shall be reported in the Quarterly CTR and halffyearly 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 .

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:

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

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

6 · 10.2 Redemption of units:

6 · 10.2.1 No redemptions of the said units shall be allowed during the lockin 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:

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.

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

6 · 10.8.3 that specific scheme.

6 · 10.9 Designated employees

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

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.

6 · 11 Minimum Number of investors240

6 · 11.1 Applicability for an open-ended scheme

6 · 11.1.1 The Scheme/Plan shall have:

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.

241 · Regulation 39(2)(c) of the SEBI (MF) Regulations, 1996

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:

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

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).

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:

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

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 halffyearly 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

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).

249 · SEBI circular no. HO/IMD/IMD-I DOF2/P/CIR/2021/550 dated April 12, 2021

1 · (Time period from the last day of the month preceding the date of date of inception

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

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.

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

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.

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:

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

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.

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

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.

196 · 263 SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2020/086 dated May 20, 2020

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:

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

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 · SEBI 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.

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:

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.'

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:

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

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 <

282 · 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

288 · SEBI Circular No. SEBI/HO/IMD/IMD-I POD2/P/CIR/2023/48 dated March 29, 2023

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:

285 · SEBI Circular No. SEBI/IMD/CIR No.5/63714/06 dated March 29, 2006 .

286 · 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 .

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

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:

8 · 4.3 Applicability

290 · SEBI Circular No. MFD/CIR/11/16159/2002 dated August 22, 2002.

291 · 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.

293 · 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

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:

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

8 · 4.5.2 For allotment of units in respect of purchase in liquid fund & overnight fund schemes, it shall be ensured that:

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:

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:

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

208 · 295 SEBI Circular No. SEBI/IMD/CIR No. 11/78450/06 dated October 11, 2006

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 cutoff 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

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.

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 Reports 299 .

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

299 · For Trustee report, please refer format no. 2.C under the section on formats

300 · SEBI Circular No. SEBI/IMD/DF/19/2010 dated November 26, 2010

301 · 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

212 · 302 SEBI Circular No. SEBI/IMD/CIR No.11/78450/06 dated October 11, 2006

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

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 intraday 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

8 · 7.2 Appropriate disclosure in this regard shall be provided in the Scheme Information Document, Key Information Memorandum and Common application form .

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

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 · SEBI 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.

312 · SEBI Circular No. MFD/CIR/14/088/2001 dated March 28, 2001.

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

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 BBBor 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):

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

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:

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

9 · 2.3 Debt and Money Market Securities318

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

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

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

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.

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

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

9 · 3.1.2 Securities with Put option

9 · 3.1.3 Securities with both Put and Call option on the same day

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;

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

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:

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

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

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.

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:

235 · SEBI Circular No. MFD/CIR/03/526/2002 dated May 9, 2002

9 · 8.1.2 The above valuation methodology shall be subject to the following conditions:

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.

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

238 · 337 SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019

9 · 11 Inter -scheme transfers (IST) 338:

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 turnaround -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 preagreed 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

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

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

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

347 · SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019

9 · 17 Consistency

9 · 17.1 All AMC's shall ensure that similar securities held under its various schemes shall be valued consistently.

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.

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.

356 · per transaction, by individual investors shall be considered as inflows from "retail investor".

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.

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

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.

10 · 1.8 Total Expense Ratio – Change and Disclosure360

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,

361 · Please refer to format no. 7.E under the section on Formats.

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

10 · 1.12 Transparency in TER364

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

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.

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:

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/IMDII/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

52 · of the Regulations for investor education and awareness initiatives, except the following372:

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

10 · 1.17 375The following expenses cannot be charged to the schemes of Mutual Funds:

375 · SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000

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 .

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.

377 · 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.

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

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:

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

10 · 4.2 The above guidelines became applicable for:

10 · 5 Transaction Charges392

390 · Regulation 51A of SEBI (Mutual Funds) Regulations, 1996.

392 · SEBI Circular no. CIR/IMD/DF/13/2011 dated August 22, 2011

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:

393 · SEBI Circular No. CIR/IMD/DF/21/2012 dated September 13, 2012

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

258 · 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

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

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:

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' 14No. 405 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

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

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;

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

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.

12 · 1.2 Clarification on existing grandfathered unlisted NCDs416

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

266 · SEBI circular No. EBI/HO/IMD/DF2/CIR/P/2020/75 dated April 28, 2020

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:

417 · The 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.

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:

418 · SEBI circular No. SEBI/HO/IMD/DF4/CIR/P/2021/032 dated March 10, 2021

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:

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.

269 · 419 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 1, 2019

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.

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

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.

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.

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:

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.

424 · 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.

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

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:

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

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 schemes 434 435

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;

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

275 · 437 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021

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

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

276 · 438 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 1, 2019

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 halffyearly trustee report starting from the halfyear 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

277 · 441 SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2019/152 dated December 10, 2019

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.

444 · Regulation 44(4) of the SEBI (Mutual Funds) Regulations, 1996.

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:

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.

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 Instruments4 s447

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.

449 · Clauses 10 and 11, Seventh Schedule of SEBI (Mutual Funds), Regulations, 1996.

450 · SEBI Circular No. SEBI/IMD/CIR No.8/18944/03 dated October 6, 2003.

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.

452 · 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.

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.

456 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/101 dated September 20, 2019.

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.

458 · SEBI Circular No. MFD/CIR/6/73/2000 dated July 27, 2000.

459 · SEBI Circular 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.

463 · RBI Circular No.P.D.O.SGL.CIRR/1945/2002-2003 dated November 1, 2002.

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.

284 · 464 SEBI Circular No. CIR/IMD/DF/19/2011 dated November 11, 2011

12 · 18.1.3 [Mutual funds shall participate in repo transactions on following corporate debt securities:

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:

466 · Inserted vide SEBI Circular No. SEBI/HO/IMD/IMD PoD-2/P/CIR/2023/85 dated June 8, 2023 .

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:

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:

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.

287 · 469 SEBI Circular No. SEBI/HO/IMD/IMD-II/DOF3/P/CIR/2021/571 dated June 03, 2021.

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

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

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:

12 · 19.3.1 Appointment of a Dedicated Fund Manager:

12 · 19.3.2 Due Diligence:

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.

12 · 19.3.4 Investment by Existing Schemes:

474 · For Half Yearly Results, please refer to format no. 3.A under the section on Formats

12 · 19.3.5 Detailed periodic reporting to Trustees by AMC(s) shall include:

12 · 19.3.6 Review of Performance:

12 · 19.3.7 Reporting to the Board:

12 · 19.3.8 Prudential Investment Norms:

12 · 20 Investments in Indian Depository Receipts (IDRs) 476

12 · 20.1 Mutual funds can invest in Indian Depository Receipts 477 [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

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 25(2) of the SEBI (Mutual Funds) Regulations, 1996.

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

296 · 487 Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/17 dated January 16, 2019

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:

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

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:

298 · 489 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/17 dated January 16, 2019

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

300 · 492 SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/109 dated September 27, 2017

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 , u up to maximum of 20% of the net assets of the scheme, subject to the following:

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.

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:

12 · 25.10 Disclosure of Derivative Positions

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.

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:

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

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:

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:

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

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:

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:

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:

12 · 26.13 In case of mutual fund schemes investing in ETCDs, the AMC shall adhere to the following:

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

308 · 499 SEBI Circular No. CIR/IMD/DF /19/2010 dated November 26, 2010

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.

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.

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

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

12 · 29.3 For orders pertaining to equity and equity related instruments:

504 · SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2020/253 dated December 31, 2020

12 · 29.4 Requirements with respect to investment in all instruments506

506 · Refer SEBI email dated July 16, 2010

12 · 29.5 Monitoring of Compliance:

507 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2020/253 dated December 31, 2020

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:

508 · SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2020/202 dated October 08, 2020

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

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.

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

510 · SEBI 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

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, pointto -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

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:

515 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021

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

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

324 · 518 SEBI Circular No -SEBI/HO/IMD/DF3/CIR/P/2018/69 dated April 12, 2018

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 email 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

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

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

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 .

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.

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.

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

527 · SEBI Circular No. MFD/CIR/9/120/2000 dated November 24, 2000 & SEBI/HO/IMD/DF2/CIR/P/2016/37 dated February 25, 2016

329 · 528 SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/608 dated July 30, 2021

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 alongwith the income earned on its deployment. Investors, who claim these amounts after 3 years, shall be paid initial unclaimed amount alongwith 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:

330 · 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

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

530 · SEBI 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

14 · 4.2 Option to hold units in demat form531

531 · SEBI circular no. CIR/IMD/DF/9/2011, dated May 19, 2011

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

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

14 · 4.4 Transferability of Mutual Fund units541

542 · 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.

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

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.

546 · Refer SEBI email dated August 12, 2010

547 · SEBI Circular No -SEBI/IMD/CIR No./ 13/187052 /2009 December 11, 2009

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

338 · 551 SEBI Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/608 dated July 30, 2021

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:

552 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2017/39 dated May 08, 2017

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 ,

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

555 · 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

556 · 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

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

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.

560 · 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.

561 · Refer SEBI letter No. – OW / 14970 / 2012 dated July 5, 2012

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:

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

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:

15 · 5.1.4 In this respect, customer relationship and transactions shall be categorized as:

15 · 5.1.5 Compliance and risk management functions of the distributor shall include review of defined management processes for:

565 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated March 04, 2021

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

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

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)

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

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

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.

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 thereunder"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

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

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-

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

16 · 2.4.2 Time stamping

16 · 2.4.3 Investor grievance mechanism

16 · 2.4.4 Know your client (KYC)

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

585 · 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

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:

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):

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

16 · 2.4.8 The following may be noted in this regard:

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

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 .

592 · SEBI 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

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 Platforms 598

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

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;

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:

364 · 599 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/29 dated March 15, 2022

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

365 · 600 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/41 dated March 31, 2022

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

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:

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:

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

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.

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.

602 · SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/29 dated March 15, 2022

16 · 4.4 For the purpose of these provisions, the term:

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:

372 · 603 Refer SEBI letter No. SEBI/IMD1/DoF-1/SK/2021/25517/1 dated September 06, 2021

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

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,

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

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 interroperable 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 userfriendly 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.

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

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

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 Funds 612

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

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.

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.

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.

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:

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

16A · 1.3.2 The fees and expenses of the Fund shall be as follows:

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

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:

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/LADNRO/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.

384 · 614 Inserted by SEBI Circular No. SEBI/HO/IMD/PoD2/P/CIR/2023/129 dated July 27, 2023

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.

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.

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 Halffyearly 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.

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

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

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-ometer, 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.

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

16B · 2 Applicability and Scope

16B · 2.1 An EOP for facilitating transactions in direct plans of schemes of Mutual Funds, shall mean:

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

16B · 3.1 Category 1 EOP

16B · 3.2 Category 2 EOP

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.

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;

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:

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 advalorem), 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.

16B · 6.2 As Category 2 EOP, the entity may levy a flat transaction fee (not advalorem), 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.

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

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

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 .

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

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

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:

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 noncompliance .

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

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:

16B · 15.2 The Stock Exchanges desirous of providing an EOP segment had been directed to:

16B · 15.3 The AMFI had been directed to:

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

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

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.

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:

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

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

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

408 · 623 SEBI Circular no. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/49 dated April 11, 2022

15 · years' prices of benchmark index of the said commodity and risk score for the commodity shall be in terms of the following table:

17 · 4.3 Product label shall be disclosed in:

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

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.

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:

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

17 · 5.9 The debt securities of schemes are to be assigned a value for credit risk in the following manner:

17 · 5.10 For the purpose of nomenclature, the 3 x 3 matrix shall have the following syntax for each matrix cell:

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:

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:

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-

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

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:

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

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:

628 · Inserted vide SEBI Circular No. SEBI/HO/IMD/POD-II/CIR/P/2023/0069 dated May 12, 2023 .

17 · 6.2 Process for transmission of Units

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

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:

17 · 8.1 Requirement of Regulations:

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

17 · 8.2 New Sponsor(s):

17 · 8.3 Undertakings by new Trustee(s)/Sponsor(s):

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:

17 · 8.4 Disclosures to Unitholders:

17 · 8.5 Revision of all Standard Offer Documents:

17 · 8.6 Other Situations:

17 · 8.7 Change in control of the asset management company involving scheme of arrangement under Companies Act, 2013633

424 · 633 SEBI Circular No. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2022/10 dated January 31, 2022

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

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

426 · 638 SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/610 dated August 04, 2021

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.

17 · 14 639Guidelines on Accounting with respect to Indian Accounting Standards (IND AS):

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:

639 · SEBI circular no SEBI/HO/IMD-II/DOF8/P/CIR/2022/12 dated February 04, 2022

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:

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

17 · 16.1.3 All AMCs shall ensure that adequate systems are in place for providing the eSign 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

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/LADNRO/GN/2022/92 dated August 03, 2022. The revised definition of Associate is as under:

645 · SEBI Circular No. SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/47 dated March 28, 2023

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:

1 · 0 RMF Standards

647 · SEBI/HO/IMD/IMD -1 DOF2/P/CIR/2021/630dated September 27, 2021

1 · 1 Governance and Organization

1 · 1.1 Risk Management Policy

1 · 1.1.1 Mandatory Elements

1 · 1.1.2 Recommended Elements

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

1 · 1.2.2 Risk Management - Role of the Management

1 · 1.2.2.1 Risk Management - Role of Chief Executive Officer (CEO)

1 · 1.2.2.2 Risk Management - Role of Chief Risk Officer (CRO)

1 · 1.2.2.3 Risk Management - Role of Chief Investment Officer (CIO)

1 · 1.2.2.4 Risk Management Role of other CXOs

1 · 1.2.2.5 Risk Management - Role of Fund Manager (FM)

1 · 2 Identification of Risks

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

1 · 2.5.2 Recommendatory Elements

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:

1 · 3.4 The mandatory and recommendatory elements for measurement and management of risks, are outlined below:

1 · 3.4.1 Mandatory Elements

1 · 3.4.2 Recommendatory Elements

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

2 · 0 Managing 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

2 · 1.5 The mandatory and recommendatory elements for managing investment risk, are outlined below:

2 · 1.5.1 Mandatory Elements

2 · 1.5.2 Recommendatory Elements

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

2 · 2.2.2 Recommendatory Elements

2 · 3 Liquidity Risk

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

2 · 3.2.2 Recommendatory Elements

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

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

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

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.

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.

15 · The back office system should facilitate daily fund projections to ascertain liquidity and settlement requirements.

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

2 · 6.2.2 Recommendatory Elements

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.

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.

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

2 · 8.3.2 Recommendatory Elements

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

2 · 9.3 The mandatory and recommendatory elements for managing Outsourcing risk, are outlined below:

2 · 9.3.1 Mandatory Elements

2 · 9.3.2 Recommendatory Elements

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

2 · 10.2.2 Recommendatory Elements

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:

2 · 11.2 The mandatory elements for managing financial reporting risk, are outlined below:

2 · 11.2.1 Mandatory Elements

2 · 12 Legal & Tax Risks

2 · 12.1 Legal & Tax risk is the risk of loss to an institution which is primarily caused by:

2 · 12.2 The mandatory elements for managing legal and tax risk, are outlined below:

2 · 12.2.1 Mandatory Elements

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

2 · 13.2.2 Recommendatory Elements

648 · SEBI Cir No -MFD/CIR.No 23 / 066 /2003 dated March 7, 2003

649 · SEBI/IMD/CIR No.4/124477/08 dated May 2, 2008

650 · SEBI Cir no Cir / IMD / DF / 5 / 2010 dated June 24, 2010

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

1 · Natural Language Processing (NLP), sentiment analysis or text mining systems that gather intelligence from unstructured data. –

653 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/57 dated April 11, 2019

545 · SEBI Circular no. SEBI/HO/IMD/DF3/CIR/P/2020/197 dated October 05, 2020

655 · SEBI Circular No. SEBI/HO/IMD/IMD -II DOF3/P/CIR/2022/49 dated April 11, 2022

4 · Risk -o-meter value

5 · Illustrations:

1 · Debt scheme

560 ·  Hence, the average for the total portfolio is 6.2 + 0.1 x 1 = 6.3

3 · Multi asset scheme:

656 · SEBI Circular no. CIR/CFD/CMD1/ 168 /2019 dated December 24, 2019

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-

2 · Areas of monitoring which shall, inter-alia, include:

1 · Mechanisms to be used for voting (e.g. e-voting, physically attending meetings, voting through proxy, etc.)

2 · Internal mechanisms for voting including:

3 · Disclosure of voting including:

657 · SEBI Circular no. SEBI/HO/IMD/IMD -II DOF3/P/CIR/2022/82 dated June 15, 2022

1 · Market Making 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

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.

659 · Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-I –PoD1/P/CIR/2023/86 dated July 13 , 2023

1 · Exclusion

2 · Integration

3 · Best -in -class & Positive Screening

4 · Impact investing

660 · Inserted by SEBI Circular No. SEBI/HO/IMD/IMD-I –PoD1/P/CIR/2023/125 dated July 20, 2023

5 · Sustainable objectives

6 · Transition or transition related investments

1 · Membership / constitution:

2 · Meetings:

3 · Reporting:

4 · Powers and responsibilities

4 · 1 Unit holder complaints and redressal

4 · 2 Investor education and awareness

4 · 3 Regulatory and other functions

4 · 4 Review of Unitholder Protection (UP) metrics

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.

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

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.

663 · Inserted by SEBI Circular No. SEBI/HO/IMD/POD2/P/CIR/2023/128 dated July 27, 2023

10 · 00

10 · 00

10 · 05

10 · 05

10 · 01

10 · 01

10 · 03

10 · 03

10 · 02

10 · 02

10 · 02

10 · 02

10 · 02

10 · 02

10 · 02

19 · 96

4 · 5

4 · 5

0 · 9

10 · 07

10 · 07

10 · 07

3 · 6

10 · 03

1 · 8

10 · 05

0 · 9

10 · 04

9 · 95

10 · 04

10 · 02

0 · 02

1 · 82

10 · 02

13 · 7

9 · 88

10 · 02

10 · 02

10 · 02

3 · 6

10 · 03

1 · 8

10 · 05

0 · 9

10 · 04

9 · 1

9 · 95

10 · 04

10 · 02

0 · 02

1 · 82

10 · 02

13 · 7

9 · 88

10 · 02

10 · 02

10 · 02

0 · 7

10 · 03

0 · 4

10 · 05

0 · 2

10 · 04

1 · 8

9 · 95

16 · 36

9 · 22

2 · 5

9 · 09

7 · 72

3 · 64

16 · 36

300 · Significant cash loss (realised loss)

10 · 02

10 · 02

7 · 72

19 · 96

12 · 96

2 · 30

75 · 87

329 · 87

1 · 77

1 · 77

0 · 58

330 · 45

32 · 92

4 · 13

4 · 13

10 · 04

10 · 04

10 · 04

10 · 04

10 · 04

10 · 04

10 · 02

10 · 02

0 · 02

0 · 02

10 · 02

10 · 02

21 · 45

9 · 39

10 · 02

10 · 02

9 · 39

100 · 00

100 · 00

32 · 92

21 · 45

232 · 92

10 · 02

10 · 02

9 · 39

0 · 63

20 · 87

329 · 87

3 · 92

3 · 92

1 · 29

331 · 16

100 · 00

100 · 00

32 · 92

9 · 13

9 · 13

10 · 06

10 · 06

10 · 06

1 · Post achieving parity in NAV again the normal accounting would start

10 ·

11 ·

12 ·

13 ·

665 · SEBI/IMD/CIR No.14 /84243/07 dated January 15, 2007

666 · IIMARP/MF/CIR/05/788/97 dated April 28, 1997

2 · REPORTS

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

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.

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.

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.

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

674 · SEBI Cir No SEBI/HO/IMD/IMD -I DOF2/P/CIR/2021/550 dated April 12, 2021

629 · 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

675 · Inserted by SEBI Circular SEBI/HO/IMD/IMD-I –PoD1/P/CIR/2023/126 dated July 26, 2023

10 · year constant

634 · 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

677 · SEBI/IMD/CIR No 3/124444/08 dated April 30, 2008

678 · SEBI/IMD/CIR No. 15/87045/2007 dated February 22, 2007

680 · SEBI Cir No -MFD/CIR/07/384/99 dated December 17, 1999 and MFD/CIR/08/23026/99 dated December 23, 1999

681 · SEBI Circular SEBI/HO/IMD/IMD -I DOF2/P/CIR/2021/550 dated April 12, 2021

3 · FINANCIALS

684 · MFD/CIR/1/200/2001 dated April 20,2001

685 · SEBI Circular -SEBI/MFD/CIR No. 6 / 12357 /03 June 26, 2003

686 · SEBI Circular – – SEBI/IMD/Cir No 7/104753/07 dated September 26, 2007

1 · Scheme Performance, Future Outlook and Operations of the Schemes

2 · Brief background of Sponsors, Trust, Trustee Co. and AMC co.

687 · SEBI Circular No. IMD/CIR No.8/132968/2008 dated July 24, 2008

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.

6 · Statutory Information:

2 · 1

2 · 2

2 · 3

4 · 1

4 · 2

1 · 1.

1 · 1.1

1 · 1.2

1 · 1.3

1 · 1.4

1 · 1.5

1 · 2

1 · 2.1

1 · 2.2

1 · 2.3

1 · 2.4

1 · 2.5

1 · 3

1 · 3.1

1 · 3.2

1 · 3.3

1 · 3.4

1 · 3.5

1 · 4

1 · 5

1 · 6

1 · 7

1 · 8

1 · 9

1 · 10

3 · 1

3 · 2

3 · 3

1 · 1

1 · 2

1 · 3

1 · 4

1 · 5

1 · 6

1 · 7

2 · 1

2 · 2

2 · 3

2 · 4

2 · 5

2 · 6

2 · 7

2 · 8

2 · 9

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.

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.

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.

669 · SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/102 dated September 24, 2019

1 · NAV per

2 · Closing

3 · Gross

4 · Expense

5 · Net Income

6 · Portfolio

7 · Total

8 · Returns:

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)

3 · Portfolio Turnover = Lower of sales or purchase divided by the Average AuM for the year/period.

4 · AAuM=Average daily net assets

690 · MFD/CIR/9/120/2000 dated November 24, 2000, MFD/CIR/14/18337/2002 dated September 19, 2002

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

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

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

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.

699 · SEBI Cir SEBI/IMD/CIR No.7/104753/07 dated September 26, 2007

1 · 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

1 · : Retail Investor

2 · : Corporates

3 · : Banks/FIs

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.

702 · SEBI Circular no SEBI/HO/IMD -II/DOF8/P/CIR/2022/12 dated February 04, 2022 (effective from April 1, 2023).

703 · Circular no. SEBI/HO/IMD/DF2/CIR/P/2016/89 dated September 20, 2016

4 · APPLICATION FOR OVERSEAS INVESTMENTS

704 · SEBI Cir No -IMD/CIR No 7/104753/07 dated September 26, 2007

5 · STANDARD OFFER DOCUMENTS705

705 · SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008

706 · SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008

707 · SEBI Circular No. CIR/IMD/DF/7/2013 dated April 23, 2013

6 · STANDARD OBSERVATIONS708

708 · SEBI/IMD/CIR No. 5/126096/08 dated May 23, 2008

7 · DISCLOSURES

709 · SEBI Cir no SEBI/CIR/IMD/DF/23/2017 dated March 15, 2017

750 · 710 SEBI/IMD/CIR No 18 / 198647 /2010 dated March 15 ,2010

751 · 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

712 · SEBI Circular No. SEBI/HO/IMD -II/IMD -II_DOF10/P/CIR/2021/00677 dated December 10,2021

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

714 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/17 dated January 16, 2019

759 · SEBI Circular No. CIR/IMD/DF/23/2012 dated November 15, 2012

8 · FORMAT FOR REPORTING OF ALL TRANSACTION IN DEBT AND MONEY MARKET SECURITIES716

716 · SEBI circular no. Cir/IMD/DF/6/2012 dated February 28, 2012

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

717 · SEBI circular no. SEBI/HO/IMD/DF5/CIR/P/2019/63 dated May 09, 2019

10 · EXCEPTION (OBSERVATION) REPORTING FORMAT 718

718 · SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/57 dated April 11, 2019

11 · FORMAT FOR TEMPLATE TO BE MAINTAINED WITH RESPECT TO INTER SCHEME TRANSFERS719

719 · SEBI Circular No. SEBI/HO/IMD/DF4/CIR/P/2020/202 dated October 08, 2020

772 · 720 SEBI/HO/IMD -II/IMD -II_DOF10/P/CIR/2021/00677 dated December 10, 2021

12 · INVESTOR CHARTER FOR MUTUAL FUNDS720

13 · REPORTING FORMATS FOR OFFSITE INSPECTION

1 · 1. Tables pertaining to MFs

1 · 2. Tables pertaining to RTAs

15 ·

20 · Digits number with 6 decimal