SEBI regulations for mutual fund trustees before winding up a scheme or premature redemption of units of a closed-ended scheme are now notified through a gazette. Following the Supreme Court’s decision in the Franklin Templeton case, SEBI made these rules mandatory in its board meeting held on December 28.
The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 were amended to give effect to the above directions. These regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2022.
Rule 39 of the Mutual Fund Rules deals with the closure of mutual fund schemes. Earlier, the rules mandated to be given notices disclosing the circumstances for winding up of the scheme only in the board and dailies.
Now, this regulation has been amended to include the approval of the unitholders before winding up.
A provision has been added which says – “Where a scheme is to be terminated .. the trustees shall obtain the consent of the unit holders participating in the voting by simple majority on the basis of one vote per unit and shall publish the results of the voting by notice.” 45 days from publication..”
The rules were also amended to allow the scheme to reopen if the trustees fail to obtain consent.
“If the trustees fail to obtain the necessary consent of the unitholders.., the schemes shall be reopened for business activities from the second business day after the publication of the results of the voting,” the new rules stated.
Among other major items, the rules were also amended to include that the financial statements of mutual fund schemes are prepared in accordance with the Indian Accounting Standards (IND AS).
Further, it also highlighted that existing and potential unitholders/investors can obtain a physical copy of the trust deed, annual report and scheme related documents on written request at a nominal cost.
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