Sebi clears path for self-sponsored AMCs, lists duties of trustees

The Securities and Exchange Board of India (Sebi) on Friday opened the doors for asset management companies (AMCs) to become 'self-sponsored', while adding to the responsibilities of their trustees. The regulator also released the framework for the 'Unit Holder Protection Committee'. (UHPC)

According to a circular issued on Friday, any AMC willing to become self-sponsored should have had at least five years of experience in the financial services industry with strong financials — positive net worth and minimum Rs 10 crore net profit in all of the previous five years.

Moreover, the sponsor planning to move out should have been a sponsor for at least 5 years. The dis-associating sponsor will have to mandatorily bring down the shareholding to below 10 per cent within five years in the case of listed AMCs and three years in the case of unlisted ones.
 

At present, any entity that owns 40 per cent or more stake in a mutual fund is considered a sponsor. The regulation will come into force from August 1, 2023.

In a separate circular, Sebi also entrusted Trustees with the responsibility of ensuring that the AMCs are charging the investors fairly and not providing any undue advantage to any of the group entities. They have also been given the responsibility of addressing conflicts of interest and ensuring that AMC has put in place adequate systems to prevent misconduct like misuse of information by employees, AMC and connected entities.

The trustees can avail services of third parties like audit firms, legal firms and merchant bankers to fulfill certain responsibilities.

For UPHC, the regulator has specified responsibilities ranging from review of compliance issues relating to unit holder interests to recommending and ensuring implementation of measures to protect investor interests.