The Securities and Exchange Board of India has asked mutual funds to disclose various details in order to ensure transparency.
Mutual funds (MFs) will also have to disclose the annual salary of those earning Rs 60 lakh or above, and also the ratio of CEO’s remuneration to median employee salary.
In a bid to promote transparency in remuneration policies so that top executive remuneration is aligned with the interest of investors, fund houses will have to make the disclosures pertaining to a financial year on its website under a separate head ‘Remuneration’, it said in a circular.
The market regulator has also asked fund houses to publish disclosures with regard to commissions paid to distributors and the expense ratio. The regulator also wants fund houses to reduce reliance on credit agencies and develop their own in-house systems to assess credit risk.
Every six months, fund houses will have to inform it of the commission paid to distributors (in absolute terms) during the half-year period against the investors’ total investments in each scheme. This will be done through the Consolidated Account Statement (CAS) issued to investors.
The regulator further asked MFs to provide additional disclosures in their scheme documents, including the tenure for which a fund manager has been managing the scheme, the portfolio holdings, and also illustrate impact of expense ratio on the scheme’s returns.
Under pressure from distributors, some large fund houses were against the idea of additional disclosures, including about total commissions, when the proposal was first discussed at AMFI (Association of Mutual Funds in India).
Subsequently, Sebi had to step into the matter in the interest of investors. The fund house is required to have a dashboard on their website providing performance and key disclosures pertaining to each scheme managed by it.
The information should include the scheme’s AUM (asset under management), investment objective, expense ratios, portfolio details and its past performance, among others.
Mutual funds are allowed to deploy new fund offer (NFO) proceeds in CBLO (collateralized borrowing and lending obligation) before the closure of NFO period. However, AMCs shall not charge any investment management and advisory fees on funds deployed in CBLOs during the NFO period.
The appreciation received from investment in CBLO will be passed on to investors.
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