Investment by the sponsor or asset management company in the scheme

Last updated: 13 June 2020

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The Securities and Exchange Board of India (SEBI) has issued a new circular requiring sponsors or asset management companies to invest a minimum of one percent of the amount raised in a new fund offer (NFO) or fifty lakh rupees, whichever is less. This investment must be made in the growth option of the scheme. If a growth option isn't available, the investment will be directed to the dividend reinvestment option, or the dividend option if neither of the other two are present. This regulation aims to protect investor interests and promote market development.

Securities and Exchange Board of India

CIRCULAR

SEBI/HO/IMD/DF4/CIR/P/2020/100

June 12, 2020

All Mutual Funds (MFs)/Asset Management Companies (AMCs)/Trustee Companies/Boards of Trustees of Mutual Funds/ Association of Mutual Funds in India (AMFI)

Sir / Madam,

Subject: Investment by the sponsor or asset management company in the scheme

1. In terms of Regulation 28 (4) of SEBI (Mutual Funds) (Amendment) Regulations, 2020, the sponsor or asset management company is required to invest not less than one percent of the amount which would be raised in the new fund offer or fifty lakh rupees, whichever is less in such option of the scheme, as may be specified by the Board.

2. In this regard, it has been decided that the above referred investment shall be made in growth option of the scheme. For such schemes where growth option is not available the investment shall be made in the dividend reinvestment option of the scheme. Further, for such schemes where growth option as well as dividend reinvestment option are not available the investment shall be made in the dividend option of the scheme.

3. This Circular shall come into force with immediate effect.

4. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

Lamber Singh
Deputy General Manager
Tel no.: 022-26449667
Email: lambers@sebi.gov.in

FAQ :

Sponsors or asset management companies are required to invest a minimum of one percent of the amount raised in a new fund offer (NFO) or fifty lakh rupees, whichever is less.

The investment must be made in the growth option of the scheme. If the growth option is not available, it should be in the dividend reinvestment option. If neither is available, it will be in the dividend option.

This circular comes into effect immediately.

The circular is issued to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.