Back in April, market watchdog Securities and Exchange Board of India (SEBI) had determined that key employees of asset management companies should be exposed to the schemes managed by them. This was to be done by paying a part of their salary as units of the scheme in which they have a role or oversight.
Now, based on representation from the mutual fund industry and the Mutual Fund Advisory Committee (MFAC), SEBI said it has decided to provide clarity on certain provisions and applicability of these ‘skin-in-game’ rules to key mutual fund employees. have taken.
As per Sebi’s clarification, in the circular attached to the compensation rules, the word ‘key employee’ refers to ‘designated employees’, and the phrase ‘pay as units’ will read as ‘compulsory investment in units’ . This means that a part of the remuneration of the designated employees must mandatorily be in the form of units of the scheme managed by them.
As per SEBI norms, junior employees are required to invest 10 per cent of their compensation during October 01, 2021 to September 30, 2022 and 15 per cent during October 01, 2022 to September 30, 2023. This limit will be increased to 20 percent with effect from October 01, 2023. The regulator said this arrangement would not be applicable from the date such junior employees attain the age of 35 years.
A designated employee of an AMC below the age of 35 years, excluding CEO, Head of any Department and Fund Manager, is treated as a ‘Junior Employee’. Other designated employees are required to invest 20 per cent of the compensation paid to them with effect from October 01, 2021.
Designated employees can set their existing investment in prescribed schemes as on April 28, 2021, the day the new SEBI rules on salaries came into force, against the required fresh investment. They can close their units for which the required lock-in period of 3 years has expired. In such cases, the AMC shall ensure that such units are closed for a further period of 3 years or the tenure of the scheme, whichever is less.
The investment in the units of the scheme would be made on the day of payment of salary, Sebi said, adding that the closing AUM of the previous month would be taken to split the investment in eligible schemes.
“All non-cash benefits and allowances shall be included in CTC on perquisite value as per Form 16 under Income Tax Act, 1961. However, retirement benefits and gratuity paid at the time of death/retirement will not be included in CTC. ,” the regulator said.
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