SEBI’s rules for mutual fund trustees to secure unitholders’ consent before winding up a scheme or prematurely redeeming units of a close-ended scheme are now notified through a gazette. SEBI mandated these rules in its board meeting held on December 28 following a Supreme Court’s ruling in the Franklin Templeton case.
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 Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2022.
Regulation 39 of the MF regulations talks about winding up of mutual fund schemes. Earlier, the rules mandate just giving notice disclosing the circumstances leading to the winding up of the scheme to the board and in daily newspapers.
Now, this regulation is amended to include unitholders approval before winding up.
A provision has been added that says – “where a scheme is to be wound up.. the trustees shall obtain consent of the unit holders participating in the voting by simple majority on the basis of one vote per unit and publish the results of voting within 45 days from the publication of notice ..”
The regulations were also amended to include that the scheme will reopen if the trustees fail to obtain the consent.
“In case the trustees fail to obtain the required consent of the unitholders .., the schemes shall be reopened for business activities from the second business day after publication of results of the voting,” the new regulations added.
Among the other key items, the regulations were also amended to insert that the financial statements of the mutual fund schemes be prepared in accordance with Indian Accounting Standards (IND AS).
Further, it also highlighted that the present and prospective unitholders/investors can obtain a physical copy of the trust deed, the annual report and scheme related documents at a nominal price, on written request.
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