SEBI NORMS FOR MUTUAL FUNDS

SEBI NORMS FOR MUTUAL FUNDS

Subject : Economics

Context: Recently, the Securities and Exchange Board of India (SEBI) has said that a minimum 20% of the compensation of mutual fund managers in an asset management company (AMC) should be in the form of units of the mutual fund schemes they manage.

Concept :

What are changes announced by SEBI?

• The SEBI has specified the rules of allocation of this 20% by saying that is should be proportional to the assets under management of the schemes in which an employee has a role or oversight.
• The SEBI has also said that a fund manager who manages only one fund will have at least 50% of this type of compensation in the scheme she manages.
• The regulator has also specified that the units offered by way of compensation are locked-in for three years.

Reasons for changes announced by SEBI

• The primary objective of new rule is to align the interest of the key employees of the AMCs with the unit holders of the mutual fund schemes.
• The SEBI wants fund managers to have skin in the game, or demonstrate to investors that they have confidence in the schemes they manage.