Publish Date:
The capital market regulator Securities and Exchange Board of India (SEBI) has notified new rules for asset management companies (AMCs) pertaining to transfer of dividend and redemption proceeds to mutual fund unit holders.
Every mutual fund and asset management company would be required to transfer to the unit holders the dividend payments and the redemption or repurchase proceeds within a period specified by SEBI.
Redemption and Dividend Payout Timelines:
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Despatch to the unitholders the dividend payments within 15 days from the record date. The said timeline of 15 days from the record date was reduced from erstwhile timeline of thirty days from the date of declaration of dividend pursuant to amendment to MF Regulations that came into effect from March 5, 2021.
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Despatch the redemption or repurchase proceeds within 10 working days from the date of redemption or repurchase. The existing timeline of 10 working days for despatch/ transfer of redemption proceeds of Mutual Fund units was prescribed in 1996.
In the event of failure to despatch the redemption or repurchase proceeds or dividend payments within the specified period, the asset management company shall be liable to pay interest to the unitholders at such rate as may be specified by the Board for the period of such delay.
However, notwithstanding payment of such interest to the unit-holders, the asset management company may be liable for penalty for failure to despatch the dividend or redemption or repurchase proceeds within the stipulated time.
SEBI states that in the event of failure to despatch the redemption or repurchase proceeds within 10 working days, AMC is liable to pay interest to the unitholders at the rate of 15% per annum for the period of delay. Further, considering that payout of both redemption and dividend are largely through electronic mode, physical payouts may only be allowed in exceptional instances and AMCs would be required to maintain records along with reasons for all such physical despatches.
Thus, Securities and Exchange Board of India (SEBI) has amended mutual funds rules and the new norms would come into force from January 15, 2023.
Separately, the regulator has amended norms governing clearing corporations for orderly winding down of such corporations. In addition, SEBI has amended Alternative Investment Funds (AIF) rules in order to prescribe the timeline for declaring first close of a scheme of an AIF.