SEBI eases mandatory investment norms for AMC employees

The Nomination and Remuneration Committee or its equivalent in an AMC will have to conduct a preliminary examination and submit recommendations to SEBI in case of violations, according to the circular. File
| Photo Credit: Reuters

The Securities and Exchange Board of India (SEBI) has eased norms pertaining to the share of compensation that fund managers and chief investment officers (CIOs) of asset management companies (AMCs) are mandated to invest in the units they manage.

The regulator has devised two methods to determine the minimum share of salaries to be invested in the schemes under their supervision by the manager of schemes (designated employees). The first one will be based on the annual compensation determined by the cost to company (CTC) and the second by their designation. Earlier in the June 2024 master circular on Mutual Fund Regulations, this share was a flat 20% of their annual compensation without any exemption.

In the new system, employees earning less than ₹25 lakh need not earmark part of their salary to invest in their units. Alternatively, employees based on their designation are also subjected to invest in the units they manage.

While the minimum investible has been eased, the components of it have increased. In the June 2024 regulations, dedicated fund managers had to invest half of their investible share on funds managed by the AMC. This has now been increased to 75%.

“This shall be applicable for designated employees associated with only liquid fund scheme and also for designated employees associated with other schemes in addition to liquid fund scheme, only with respect to the quantum required to be invested in liquid fund schemes,” the markets regulator said in the circular.

A designated employee who quits or retires from the AMC can redeem his or her positions for open-ended schemes and after the end of tenure of a close ended scheme. Earlier, the employees were not allowed to redeem before the lock-in period until they reach the age of super-annuation. For open-ended and end of maturity for close-ended schemes, the lock-in period has also been reduced.

In case of violations, the Nomination and Remuneration Committee or its equivalent in an AMC will have to conduct a preliminary examination and submit recommendations to SEBI, according to the circular.

All schemes are mandated to disclose the mandatory investment of compensation on units on a quarterly basis on the stock exchange websites.