India: Disclosure of Total Expense Ratio by Asset Management Companies
The Total Expense Ratio (hereinafter referred as ‘TER’) of a mutual fund refers to the total expense incurred in an accounting period with respect to the total net assets of the fund. The Securities and Exchange Board of India (hereinafter referred as ‘SEBI’) vide circular SEBI/HO/IMD/DF2/CIR/P/2018/18 dated February 5, 2018, has mandated that the Asset Management Companies (hereinafter referred as ‘AMCs’) shall disclose on their website on a daily basis the TER of all schemes under a separate head ‘Total Expense Ratio of Mutual Fund Schemes’.
SEBI has stated that there have been very frequent changes in the TER being carried out
by the AMCs, however, changes done in TER are not being disclosed to the investors in a noticeable manner. In order to help the investors take more informed decisions, SEBI has mandated such disclosure. It is important to note that this also brings uniformity in disclosure of actual TER charged to mutual fund schemes.
Applicability of the circular:
In reference to the above-mentioned circular, base TER shall mean the TER excluding additional expenses provided in Regulation 52(A) (b) and 52 (6A) (c) of SEBI (Mutual Funds) Regulations, 1996. Further, SEBI has stated that such mandatory disclosure shall apply to any new schemes to be launched and also for existing schemes with effect from March 1, 2018.
Manner of disclosure:
Apart from disclosure on a daily basis on the website, any change carried out in the base TER needs to be disclosed by the AMCs through notice to the investors of the scheme via email or SMS at least 3 working days prior to effecting such change.
Note that such change in base TER along with the rationale of such change needs to be intimated to the Board of Directors of the AMC as well. Lastly, such changes in base TER as well as the rationale for such changes shall also be required to be placed before the Trustees on a quarterly basis.
India: SEBI issues Circular on role of Independent Oversight Committee for Product Design
In light of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, for the purpose of protecting the interests of investors in securities and to promote the development and regulation of the securities market, the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide Circular No. SEBI/HO/CDMRD/DMP/CIR/P/2018/12 dated January 22, 2018, had issued a circular with regards to the role of the Independent Oversight Committee for Product Design.
Prior to the above mentioned circular, SEBI vide circular no. CIR/CDMRD/DEA/03/2015 dated November 26, 2015, advised all the commodity derivatives exchanges to set up an oversight committee to overlook into matters pertaining to product design. Paragraph 21 of the said circular states as under-
“21. Commodity derivative exchanges shall comply with the requirements of Regulation 29 read with Regulation 44D (1) (b) of SECC Regulations within three months. National commodity derivatives exchanges shall constitute an oversight committee for ‘Product design’, chaired by a Public Interest Director, within three months.”
SEBI observed that the commodity derivatives exchanges have been adopting varied approach in complying with the above requirement both in the constitution and the functioning of such oversight committees.
Function of the oversight committee –
In order to bring uniformity with respect to the role of the oversight committee on product design, and after having discussions with commodity derivatives exchanges on this issue, SEBI listed the following functions of the oversight committee for ‘Product Design’ —
- To oversee matters related to product design such as introduction of new products/contracts, modifications of existing product/contract designs etc. and review the design of the already approved and running contracts.
- To oversee SEBI inspection observation on Product Design related issues.
- To estimate the adequacy of resources dedicated to Product design related function.
Requirements as per the Circular –
The head(s) of department(s) handling the product design shall report directly to the oversight committee and also to the Managing Director. Any action of the Exchange against the aforesaid head(s) shall be subject to an appeal to the committee, within such period as may be determined by the governing board.
Recognized stock exchanges operating in the International Financial Services Centres (IFSC) shall also be required to constitute an oversight committee for product design and discharge their functions enumerated at para ‘2’ and ‘3’ above.
The provisions of this circular shall come into effect from 30 days from the date of the circular being issued.
Henceforth, the Exchanges are advised to:
- take steps to make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the same.
- bring the provisions of this circular to the notice of the members of the Exchange and also to disseminate the same on their website.
India: SEBI issues Circular for online registration mechanism and filing system for depositories
Source : www.sebi.gov.in
In exercise of the powers conferred by Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with Regulation 72 and 73 of Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, for the purpose of protecting the interest of investors in securities and to promote the development and regulation of securities market, the Securities and Exchange Board of India (hereinafter referred to as the ‘SEBI’) vide Circular No. SEBI/HO/MRD/DSA/CIR/P/2018/13 dated January 29, 2018, had issued a circular with regards to the online registration mechanism and filing system for depositories.
The circular was issued so as to ease the process of application for recognition/renewal, reporting and other filings in terms of Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 (Regulation), and other circulars which are issued from time to time. To this effect, SEBI has introduced a digital platform for online filings related to depositories.
As per the circular issued, all applicants desirous of seeking registration as a depository in terms of Regulation 3 of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, shall henceforth submit applications online, through the SEBI intermediary portal, viz.,https://siportal.sebi.gov.in.
Along with the application, the applicants would be required to upload scanned copy of relevant documents such as any declaration or undertaking or notarized copy of documents as may be prescribed in the above Regulation and keep a hard copy of the same to be furnished to SEBI whenever required. Further, all other filings such as annual financial statements and returns, monthly development report, rules, bye-laws, etc., shall also be submitted online.
In light of the above, SEBI made it clear in the circular that the aforesaid online registration and filing system for depositories is operational and advised recognized depositories to take note of the same for immediate compliance.