Mumbai, Apr 4 (UNI) Mutual Funds (MFs) have been asked to undertake conversion of closed-ended scheme or interval scheme to open-ended schemes or issuance of new units be done only after the balance of unamortised amount has been fully recovered from the scheme.
This was one of the guidelines issued by the Securities and Exchange Board of India (SEBI) today for rationalisation of initial issue expenses and dividend distribution procedure for Mutual Funds (MF).
Amortisation is all about spreading out the initial issue expenses over specific period as detailed in close-ended schemes and not charging it on the entry load like in the case of open-ended schemes. Initial issue expenses are permitted for closed-ended schemes only.
While open ended scheme should meet the sales, marketing and other such expenses connected with sales and distribution of schemes from the entry load and not through initial issue expenses, SEBI circular said. Since closed-ended schemes are allowed to charge initial issue expenses,they shall not charge entry load.
Accordingly, in close-ended schemes where initial issue expenses are amortised, for an investor exiting the scheme before amortisation is completed, AMC (Asset Managment Company) shall redeem the units only after recovering the balance proportionate unamortised issue expenses.
On Dividend distribution procedure, the SEBI said, ''It was noted that mutual funds were following different procedures for dividend distribution.'' To amend that SEBI has introduced uniform practices in procedure for dividend distribution by the mutual funds and for development of the mutual funds industry for unlisted schemes/plans.
''Quantum of dividend and the record date shall be fixed by the trustees in their meeting. Dividend so decided shall be paid, subject to availability of distributable surplus,'' SEBI said.
''Record date shall be the date which will be considered for the purpose of determining the eligibility of investors whose names appear on the register of unit holders for receiving dividends.
Further, the NAV (Net Asset Value) shall be adjusted to the extent of dividend distribution and statutory levy, if any, at the close of business hours on record date,'' clarified SEBI.
Within one calendar day of the decision by the trustees, AMC shall issue notice to the public communicating the decision including the record date, it added.
UNI RRP-SN KD NV2055