SEBI (MF) - Notification No 11/LC/GN/2007/4646

SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) (SECOND AMENDMENT) REGULATIONS, 2007

NOTIFICATION NO. 11/LC/GN/2007/4646, DATED 31-10-2007

In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following Regulations to further amend the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, namely :—

1.         These regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Second Amendment) Regulations, 2007.

2.         (1) The provisions of clauses (ii), (iii) and (v) of regulation 3 shall come into force on such date as may be specified by the Board by notification in the Official Gazette. (2) All other provisions of these regulations shall come into force on the date of their publication in the Official Gazette.

3.         In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996,—

(i)         in regulation 2, after clause (mm), the following clause shall be inserted, namely :— “(mn) ‘index fund scheme’ means a mutual fund scheme that invests in securities in the same proportion as an index of securities;”

(ii)        in regulation 44, for sub-regulation (4), the following sub-regulation shall be substituted, namely:—

“(4) A mutual fund may lend and borrow securities in accordance with the framework relating to short selling and securities lending and borrowing specified by the Board.”

(iii)       for regulation 45, the following regulation shall be substituted, namely :—

“45. Carry forward transactions, derivatives transactions and short selling transactions.— (1) The funds of a scheme shall not in any manner be used in carry forward transactions :

Provided that a mutual fund may enter into derivatives transactions on a recognized stock exchange, subject to the framework specified by the Board. (2) A mutual fund may enter into short selling transactions on a recognized stock exchange, subject to the framework relating to short selling and securities lending and borrowing specified by the Board.”

(iv)       in regulation 52,—

a. after sub regulation (2), the following proviso shall be inserted, namely :—

“Provided that in case of an index fund scheme, the investment and advisory fees shall not exceed three fourths of one per cent (0.75%) of the weekly average net assets.”

b. in sub-regulation (6), after the second proviso, the following new proviso shall be inserted, namely :—

“Provided further that in case of an index fund scheme, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half per cent (1.5%) of the weekly average net assets.”

(v)        in the Seventh Schedule, for clause 6 and the proviso thereto, the following clause and provisos shall be substituted, namely :—

“6. Every mutual fund shall buy and self securities on the basis of deliveries and shall in all cases of purchases, take delivery of relevant securities and in all cases of sale, deliver the securities :

Provided that a mutual fund may engage in short selling of securities in accordance with the framework relating to short selling and securities lending and borrowing specified by the Board:

Provided further that a mutual fund may enter into derivatives transactions in a recognized stock exchange, subject to the framework specified by the Board.”