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The capital market regulator, Securities and Exchange Board of India (SEBI) announced in a circular dated August 11, 2023, that there will be a reduction in the timeline for the exit option window period for change in control of an asset management company (AMC).
SEBI has directed fund houses to give mutual fund investors a 15-day window to take exit call in case of change in control of AMC. Investors need not pay any exit load if they choose to redeem their mutual fund units during this window.
At the moment, as per the prevailing guidelines, if an AMC opts to change the control of an AMC, it is considered a change in fundamental attributes of the scheme. In line with the regulations, the investors in the mutual fund schemes are given an intimation and a window of 30 days to redeem their units, without paying any exit load. Exercising their right to redeem their units in such an exit window is optional for the unitholders. A merger of schemes and change in the potential risk class matrix are some examples of change in control of AMC. However, do note that a change of fund manager is not considered as a change in fundamental attribute of the scheme.
Consequently, the SEBI circular stated that this move is made, “Considering that growth in technological communication has enabled faster dissemination of information to unitholders, a request has been received from industry to review the timeline for exit option window period for change in control of AMC.”
According to the new guideline, the exit window timeline for investors in the schemes undergoing ‘change in control of AMC’ has been reduce to an exit load-free period of 15 days from 30 days. The regulator has asked the AMCs to make necessary changes, to facilitate the implementation with effect from September 11, 2023.
However, SEBI clarified that if the change in control results in consolidation or merger of schemes, the exit window remains unchanged at not less than 30 days on the prevailing Net Asset Value (NAV) without any exit load.
Download SEBI Circular – Reduce Timeline For The Exit Option Window Period For Change In Control Of AMC