Mutual funds have to pay 15% interest for delay in redemption, dividend payment

  • Mutual fund: The transfer of redemption or repurchase proceeds to the unitholders shall be made within three working days from the date of redemption or repurchase

Livemint
Updated25 Nov 2022, 06:39 PM IST
Mutual fund: The payment of dividend to the unitholders shall be made within seven working days from the record date
Mutual fund: The payment of dividend to the unitholders shall be made within seven working days from the record date

Capital market regulator has amended mutual fund regulations with regard to transfer of dividend and redemption proceeds to unitholders. In case of delay beyond the stipulated period, mutual fund houses have to pay interest for the period of delay in transfer of redemption or repurchase or dividend to unitholders at the rate of 15% per annum along with the proceeds of redemption or repurchase or dividend. 

Here are the new rules for Mutual fund transfer of Dividend Payment

-The record date shall be two working days from the issue of public notice, wherever applicable, for the purpose of payment of dividend

-The payment of dividend to the unitholders shall be made within seven working days from the record date.

Here are the new mutual fund rules for transfer of redemption or repurchase proceeds

 -The transfer of redemption or repurchase proceeds to the unitholders shall be made within three working days from the date of redemption or repurchase

-For schemes investing at least 80% of total assets in permissible overseas investments, the transfer of redemption or repurchase proceeds to the unitholders shall be made within five working days from the date of redemption or repurchase.

Mutual fund AMFI, in consultation with Sebi, shall publish a list of exceptional circumstances for schemes unable to transfer redemption or repurchase proceeds to investors, along with applicable time frame for transfer of redemption or repurchase proceeds to the unitholders in such exceptional circumstances, the circular said. 

Separately, the capital markets regulator also amended norms to bring buying and selling of mutual fund units under the ambit of insider trading rules.

At present, insider trading rules are applicable to dealing in securities of listed companies or those proposed to be listed, when in possession of Unpublished Price Sensitive Information (UPSI). The units of mutual funds are specifically excluded from the definition of securities under the rules.

Sebi's latest decision follows the Franklin Templeton episode, in which the fund house's few executives were accused of redeeming their holdings in the schemes ahead of the six debt schemes shutting for redemption.

"No insider shall trade in the units of a scheme of a mutual fund, when in possession of unpublished price sensitive information, which may have a material impact on the net asset value of a scheme or may have a material impact on the interest of the unit holders of the scheme," Sebi said in a notification issued on Thursday.

Under the new rules, asset management companies (AMCs) will have to disclose the details of holdings in the units of its mutual fund schemes, on an aggregated basis, held by the AMC, trustees and their immediate relatives on the platform of stock exchanges.

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First Published:25 Nov 2022, 06:39 PM IST
HomeMutual FundsNewsMutual funds have to pay 15% interest for delay in redemption, dividend payment

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