The Securities and Exchange Board of India on 20th September 2021 has issued clarification with respect to circular dated April 28, 2021 on ‘Alignment of interest of Key Employees (‘Designated Employees’) of Asset Management Companies (AMCs) with the Unitholders of the Mutual Fund Schemes.
SEBI has clarified the term, ‘key employees’ in the circular associated with the compensation rules refers to ‘designated employees’, and the phrase ‘paid in the form of units’ shall be read as ‘mandatorily invested in units’ which means a portion of designated employees’ remuneration will have to be mandatorily in the form of units of scheme they manage.
SEBI has mandated that all designated employees of asset management companies (AMC) be paid up to 20% of their monthly compensation in units of the schemes in which they have a role or oversight with effect from 1st October 2021.
Junior employees below 35 years must invest 10% of their monthly compensation from 1 October 2021 to 30 September 2022, and 15% from 1 October 2022 to 30 September 2023, in the MF schemes they have a role or oversight. This cap will be increased to 20% from 1 October 2023 onwards.
Designated employees may set off their existing investments in the prescribed schemes as on April 28, 2021, the day new Sebi rules on salaries came into effect, against the required fresh investments. They may set off their units for which the required lock-in period of 3 years is expired. In such cases, AMC shall ensure that such units are locked in for the further period of 3 years or tenure of the scheme, whichever is less.
The investment of the Designated Employees, shall be made in ‘Growth option’ of the mutual fund schemes. For schemes where growth option is not available, the investment shall be made in the ‘Reinvestment of Income Distribution cum capital withdrawal option’. For schemes where both the above options are not available, investment shall be made in the ‘Payout of Income Distribution cum capital withdrawal option.
