Executive Summary:
This SEBI circular, issued on November 25, 2022, amends regulations regarding the timelines for transferring dividend and redemption proceeds to unitholders, following the amendment of Regulation 53 of SEBI Mutual Funds Regulations, 1996. It specifies revised timelines for dividend payments and redemption/repurchase proceeds, introduces interest penalties for delays borne by AMCs, and requires AMFI to publish a list of exceptional circumstances for delays within 30 days.
Key Points / Main Content:
Dividend Payments:
* The record date for dividend payments shall be two working days from the issue of public notice.
* Dividend payments to unitholders must be made within seven working days from the record date.
Redemption/Repurchase Proceeds:
* Transfer of redemption/repurchase proceeds to unitholders must be made within three working days from the date of redemption or repurchase.
* For schemes investing at least 80% of total assets in permissible overseas investments, the transfer of redemption/repurchase proceeds must be made within five working days.
* AMFI, in consultation with SEBI, will publish a list of exceptional circumstances for schemes unable to meet the above timelines, along with applicable extended time frames, within 30 days of this circular.
Interest on Delays:
* Interest at a rate of 15% per annum is payable to unitholders for delays in the transfer of redemption, repurchase, or dividend payments.
* Asset Management Companies (AMCs) will bear the cost of this interest.
* Details of interest payments must be reported to SEBI as part of Compliance Test Reports in the specified format (Annexure A).
* Investors must be informed about the rate and amount of interest paid to them.
Rescinded Circular:
* Circular SEBI/MFD/CIR/2266/2000 dated May 19, 2000, is rescinded.
Impact Analysis:
Mutual Funds / Asset Management Companies (AMCs):
* Impact: Must adhere to the revised timelines for dividend and redemption/repurchase proceeds transfers and bear the cost of interest for delays.
* Action Required: Update internal processes to comply with the new timelines, ensure accurate reporting of interest payments to SEBI, and prepare to pay interest on delayed payments.
Trustee Companies / Boards of Trustees of Mutual Funds:
* Impact: Oversee the compliance of AMCs with the revised regulations.
* Action Required: Monitor AMCs' adherence to the new timelines and ensure proper reporting of interest payments for delays.
Registrar and Transfer Agents (RTAs):
* Impact: Responsible for executing the transfer of dividend and redemption/repurchase proceeds within the specified timelines.
* Action Required: Adjust operational procedures to meet the new deadlines for payments and ensure accurate record-keeping.
Association of Mutual Funds in India (AMFI):
* Impact: Responsible for publishing a list of exceptional circumstances for delayed payments, in consultation with SEBI.
* Action Required: Consult with SEBI and publish the list of exceptional circumstances and applicable time frames within 30 days of the circular.
Investors/Unitholders:
* Impact: Benefit from faster receipt of dividend and redemption/repurchase proceeds and receive interest for delays.
* Action Required: Monitor the timelines for receiving payments and report any delays to the respective Mutual Fund or AMC.
SEBI:
* Impact: Responsible for enforcing the revised regulations and monitoring compliance.
* Action Required: Review Compliance Test Reports and take necessary action against non-compliant entities.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): The regulatory body issuing the circular regarding timelines for transfer of dividend and redemption proceeds to unitholders.
SEBI Mutual Funds Regulations, 1996: The regulations amended by SEBI related to mutual funds.
Association of Mutual Funds in India (AMFI): An organization that will publish a list of exceptional circumstances for delays in transfer of redemption proceeds, in consultation with SEBI.
SEBI Circular SEBI/IMDC/CIR No.16405706 dated April 4, 2006: A previous SEBI circular that is partially modified by the current circular, specifically paragraph IIc.
SEBI Circular SEBI/IMDC/CIR No.710475307 dated September 26, 2007: A previous SEBI circular prescribing a list of permissible investments for overseas investments.
Securities and Exchange Board of India Act, 1992: The act under which the circular is issued, specifically Section 11(1).
Chhavi M Kapoor: General Manager at SEBI, signatory of the circular.
Compliance Test Reports: Reports that AMCs must send to SEBI with details of interest paid on delayed transfer of dividend/redemption proceeds.
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Securities and Exchange Board of India
CIRCULAR
SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 November 25, 2022
To
All Mutual Funds/
All Asset Management Companies (AMCs)/
All Trustee Companies/ Boards of Trustees of Mutual Funds/
All Registrar and Transfer Agents (RTAs)/
Association of Mutual Funds in India (AMFI)
Dear Sir/ Madam,
Subject: Timelines for transfer of dividend and redemption proceeds to unitholders
1. SEBI has amended Regulation 53 of SEBI (Mutual Funds) Regulations, 1996 vide
Gazette Notification No. SEBI/LAD-NRO/GN/2022/106 dated November 15, 2022.
2. Consequent to the above amendment, the following has been decided:
I. Transfer of Dividend Payments
a. In partial modification of paragraph II(c) of SEBI Circular SEBI/IMD/CIR
No.1/64057/06 dated April 4, 2006, the record date shall be two working
days from the issue of public notice, wherever applicable, for the purpose of
payment of dividend.
b. The payment of dividend to the unitholders shall be made within seven
working days from the record date.
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Securities and Exchange Board of India
II. Transfer of Redemption or Repurchase Proceeds
a. The transfer of redemption or repurchase proceeds to the unitholders shall
be made within three working days from the date of redemption or
repurchase.
b. Vide SEBI Circular SEBI/IMD/CIR No.7/104753/07 dated September 26,
2007, a list of permissible investments was prescribed for the purpose of
overseas investments. For schemes investing atleast 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 from the date of redemption or repurchase.
c. AMFI, in consultation with SEBI, shall publish a list of exceptional
circumstances for schemes unable to transfer redemption or repurchase
proceeds to investors within time as stipulated at II (a) and II (b) above, along
with applicable time frame for transfer of redemption or repurchase proceeds
to the unitholders in such exceptional circumstances. The list shall be
published within 30 days of issuance of this circular.
III. Interest for the period of delay in transfer of redemption or repurchase or
dividend shall be payable to unitholders at the rate of 15% per annum along with
the proceeds of redemption or repurchase or dividend, as the case may be.
Such Interest shall be borne by AMCs. The details of such payments shall be
sent to SEBI as part of Compliance Test Reports in the format placed at
Annexure A. Investors shall also be informed about the rate and amount of
interest paid to them. Accordingly, circular SEBI/MFD/CIR/2/266/2000 dated
May 19, 2000 is rescinded.
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Securities and Exchange Board of India
3. This circular is issued in exercise of the powers conferred under Section 11 (1) of
the Securities and Exchange Board of India Act 1992, read with the provision of
Regulation 77 of SEBI (Mutual Funds) Regulation, 1996 to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities market.
Yours faithfully,
Chhavi M Kapoor
General Manager
Tel no.: 022-26449112
Email: chhavim@sebi.gov.in
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Securities and Exchange Board of India
Annexure – A
A. Statement of Interest Paid to the investors for delays in transfer dividend
payments
PAN/
Date of Amount of
Investor PEKRN Period of
Record Date transfer of Interest
Name of delay
Dividend Paid
Investor
B. Statement of Interest Paid to the investors for delays in transfer of
redemption or repurchase proceeds
PAN/ Date of
Date of
PEKRN receipt of Amount of
Investor transfer of Period of
of Redemption/ Interest
Name Redemption/ delay
Investor Repurchase Paid
Repurchase
request
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