Onus is on depositories to certify an investor is a first timer, says SEBI

The Securities and Exchange Board of India has clarified that close-ended mutual funds considered eligible under the Rajiv Gandhi equity savings scheme (RGESS) shall be listed and traded on stock exchanges.

They will be settled through depositories.

Upon maturity of a close-ended scheme, asset management companies have to advice depositories on extinguishing the scheme units which would then be considered settled.

SEBI’s circular on Thursday to MFs, AMCs, exchanges, depositories, trustees and their boards directs them to comply with the Income Tax department’s November 23 notification and implement the scheme.

Henceforth, AMCs have to disclose in their scheme, information document on the compliance of RGESS guidelines.

Eligible securities under RGESS have a mandatory one year lock-in and an optional lock-in of two years.

The onus is on the depositories to certify that an investor is a first timer. They have the power to seek information from exchanges on investor transactions (trade value, trading date and settlement number) through their RGESS designated demat account.

Eligible securities are scrips of BSE-100, CNX-100 Maharatna, Navaratna and Miniratna PSUs and their FPOs; ETFs and mutual fund schemes investing in these stocks and are listed and traded on exchanges; IPOs of PSU with Government stake not less than 51 per cent having revenue of Rs 4,000 crore in the last three years. RGESS investors have the option to exercise their choice (voluntary) for two corporate actions that is rights issue and buy-back of shares.

For one-time investments in RGESS, the demat account is converted into an ordinary demat account after one fixed year and two flexible years of lock-in. For investments in instalments, one year fixed lock-in and two year flexi –lock would be determined from the date of the last instalment.


(This article was published on December 6, 2012)
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