Disclose voting rights rationale, SEBI tells mutual funds

Our Bureau Chennai | Updated on March 24, 2014

Directs AMCs to obtain auditor’s certification annually

Market regulator Securities and Exchange Board of India on Monday directed mutual fund houses to record and disclose the rationale behind exercising their voting rights in companies.

To enhance transparency and increase the quality of disclosures for investors, “AMCs shall additionally be required to publish summary of the votes cast across all its investee companies and its break-up in terms of total number of votes cast in favour, against or abstained from,” SEBI said in a circular on Monday.

Besides, SEBI also directed AMCs to obtain auditor’s certification annually on the voting reports being disclosed by them. “Such auditor’s certification would be submitted to trustees and also disclosed in the relevant portion of the MFs’ annual report and website.”

Quarterly disclosure

SEBI said that the board of AMCs as well as trustees of mutual funds would be required to review and ensure that these players have voted on important decisions that may affect the interest of investors and the rationale recorded for vote decision is ‘prudent and adequate’.

AMCs would also be required to make disclosure of votes cast on their websites on a quarterly basis, within 10 working days from the end of the quarter. Besides, fund houses would have to continue disclosing their voting details in their annual reports, said the SEBI circular.

The market regulator also said MFs would be required to disclose additional details about their assets under management (AUM) on a monthly basis on their websites. The details include monthly disclosure of AUM from different categories of schemes, AUM from places beyond top-15 cities, contribution of sponsor and its associates in AUM, contribution from different types of investors (retail, corporate, etc) and State-wise contribution.

With an aim to increase the penetration of mutual fund products and to energise the distribution network, SEBI has allowed additional expense ratio of 30 basis points for garnering funds from B-15 cities. SEBI has asked mutual funds to develop a system for active support to PSU banks for distribution of mutual funds. Besides, all MFs would need to provide online investment facility and tap the Internet and mobile phone users for direct distribution of products.

Published on March 24, 2014

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