Capital market regulator SEBI has allowed asset management companies to become self-sponsored in case the existing sponsors want to disassociate themselves from the business.
For becoming a self-sponsored AMC, it should have been in the financial services business for over five years and positive networth in all the immediately preceding five years, said SEBI in a circular on Friday.
Sponsor, proposing to disassociate, should have been associated with the mutual fund for at least five years, it said.
The regulator has also allowed private equity (PE) funds to become sponsors of mutual funds.
Considering the evolution of the mutual fund industry and significant shift in the nature of roles and responsibilities of the AMCs in the last few decades, most of the AMCs are well-prepared to stand on their own and create trust among their investors, said the circular.
In view of the above, it has been decided to allow a sponsor to voluntarily reduce its stake in an AMC, it said.
A self-sponsored AMC should have registered a profit in each of the immediately preceding five years with average net annual profit of at least ₹10 crore.
Any sponsor proposing to disassociate may undertake to reduce shareholding below 10 per cent in five years in case of listed AMCs and in three years in case of unlisted AMCs.
Post disassociation, the upper limit of shareholding for any financial investor shall be below 10 per cent.
The PE companies should have a minimum of five years experience and should have managed committed and drawn-down capital of over ₹5,000 crore. The PE funds should have an initial shareholding of sponsor equivalent to capital contributed to an AMC to the extent of over ₹150 crore which will be locked-in for five years.
ROLE OF TRUSTEE
The Trustees has to exercise independent due diligence to ensure the fairness of the fees and expenses charged by the AMCs and will review the performance of AMC in its schemes against the performance of peers or the appropriate benchmarks.
The trustees should also ensure that the AMCs have put in place adequate systems to prevent mis-selling to increase assets under their management and valuation of the AMCs, said SEBI.
Trustees can rely on audit firms, legal firms, merchant bankers to carry out due diligence, said the regulator .
The new framework for trustees would come into force from next January, SEBI said said in a circular.