Sebi To Strengthen MF Norms: Winding Up Of Schemes Only After Majority Unitholder's Consent

In a move aimed to further safeguard the interest of mutual fund investors, Sebi on Tuesday decided to mandate trustees of mutual funds to obtain the consent of unitholders when the majority of trustees decide to wind up a scheme. As part of amending the mutual fund regulations, the watchdog will make it mandatory for the funds to follow Indian Accounting Standards (Ind AS) from 2023-24 financial year onwards.

Mutual fund trustees will be required to obtain the consent of the unitholders when the majority of the trustees decide to wind up a scheme or prematurely redeem the units of a close-ended scheme, Sebi said in a release. "The trustees will have to obtain consent of the unitholders by simple majority of the unitholders present and voting on the basis of one vote per unit held and publish the results of voting within 45 days of the publication of notice of circumstances leading to winding up," it said.

In case the trustees fail to obtain the consent, Sebi said the scheme should be open for business activities from the second business day after publication of results of voting. The decision to amend the regulations was taken at the Sebi board meeting on Tuesday. Apart from the Ind AS requirements, Sebi has decided to amend the norms with respect to accounting-related regulatory provisions to remove redundant provisions and to bring more clarity.

Meanwhile, to enhance the role of KYC Registration Agencies (KRAs), the regulator has decided to make them responsible to carry out independent validation of the KYC records uploaded onto their system by the Registered Intermediary (RI). Besides, such agencies will have to maintain an audit trail of the upload/modification/download with respect to KYC records of clients.

"It has also been prescribed that the systems of the RIs and KRAs should be integrated to facilitate seamless movement of KYC documents to and from RIs to KRAs," the release said.

(PTI)