Mutual Funds: New rules on dividend, redemption proceeds notified by SEBI. Details here

“Notwithstanding payment of such interest to the unit-holders…the asset management company may be liable for action for failure to transfer the redemption or repurchase proceeds or dividend payments within the stipulated time,” Sebi said in the circular notified on Thursday.

It further said that physical despatch of redemption or repurchase proceeds or dividend payments would be carried out only in exceptional circumstances and AMCs would be required to maintain records along with reasons for all such physical despatches. To give this effect, the regulator has amended mutual funds rules and the new norms would come into force from January 15.

In addition, Sebi has amended Alternative Investment Funds (AIF) rules in order to prescribe the timeline for declaring first close of a scheme of an AIF. The commitment provided by sponsoror manager at the time of declaration of First Close, to the extent to meet the aforesaid minimum corpus requirement, shall not be reduced or withdrawn or transferred, post First Close.

“If the Alternative Investment Fund fails to declare the first close of the scheme in the specified manner, it shall be required to file a fresh application for launch of the scheme by paying the requisite scheme fee,” the regulator said. 

In another circular in September this year, the capital market regulator extended the two-factor authentication (2FA) for subscription transactions in the units of mutual funds as well With a view to safeguard the interest of investors. 

The Securities and Exchange Board of India (Sebi) in October 2021 had introduced various measures to prevent third-party payments and to safeguard the interest of unitholders. In a circular issued in September, Sebi said, “One of the factors for such two-factor authentication for non-demat transaction shall be a one-time password sent to the unit holder at his/her email/ phone number registered with the AMC/RTA.”