The regulator has now decided to revise and consolidate the existing forms into one application form for registration of mutual funds.
The move is aimed at making the entry process easier for entities looking to become sponsors of mutual funds. It will also give Sebi a single format to capture details on ownership, capital structure, financial strength, management, regulatory history, policies, infrastructure and investor service arrangements.
The circular was issued on August 17 and applies to entities seeking to become sponsors of mutual funds, all asset management companies, trustee companies, boards of trustees of mutual funds and the Association of Mutual Funds in India.
The revised Form A has two broad stages. The first stage covers application for in-principle approval. The second stage covers final registration of the asset management company.
For in-principle approval, the sponsor will have to provide details such as name, type of sponsor, registered and operating addresses, contact person, shareholding pattern, ultimate beneficial owners, capital structure and proposed net worth contribution to the asset management company.
The form also requires the latest net worth of the sponsor and audited financial statements for the last five financial years.Also Read: Sebi chief Tuhin Kanta Pandey says CAS here to stay, will study concerns over rollout
Sebi has also built the eligibility route into the form. Sponsors will have to state whether they are applying under Route 1 or Route 2 under Regulation 5.
Under Route 1, the sponsor must have at least five years of experience in financial services, positive net worth in each of the previous five years and positive liquid net worth above the proposed capital contribution to the AMC. It must also show net profit in financial services in each of the immediately preceding five years and average net annual profit of at least Rs 10 crore during that period.
Route 2 gives another option. Under this route, the asset management company must appoint experienced personnel such that the combined experience of the chief executive officer, chief operating officer, chief risk officer, chief compliance officer and chief investment officer is at least 30 years. Each of them must have at least three years of relevant experience. The AMC must also have net worth of at least Rs 150 crore at the time of registration, infused by the sponsor. The initial shareholding equivalent to capital contributed to the AMC, up to at least Rs 150 crore, must be locked in for five years.
The form seeks detailed disclosures on the sponsor’s business activities, regulated operations, associates and subsidiaries. Sponsors must also furnish details of their management structure, board of directors, key management personnel and group companies.
Sebi has also added database checks and regulatory history disclosures. Applicants must provide verification and an undertaking covering the sponsor, associates, subsidiaries, group companies and directors against databases such as CIBIL, the United Nations Security Council consolidated sanctions list, the IOSCO database and Sebi’s prosecution list. They must also submit a fit-and-proper declaration and disclose regulatory actions in the last five years.
The revised form also asks for customer onboarding, grievance handling, complaint history, compliance process, conflict of interest policy and insider trading and employee trading policy.
For pooled investment vehicles and private equity funds acting as sponsors, Sebi has added separate requirements. These include certificate of incorporation, AIF registration where applicable, identification as a PE fund for foreign entities, proof of at least five years of fund or investment management experience and evidence of committed and drawn-down capital of at least Rs 5,000 crore as on the date of application.
The second stage of the form covers final registration of the AMC. Applicants must give details of the AMC’s name, office address, compliance officer, main object clause, capital structure, shareholding, latest net worth, associates, group companies, board, key management personnel and internal controls.
They must also provide a detailed business plan, infrastructure details, investor services framework, IT infrastructure, business continuity and disaster recovery framework, compliance process, conflict of interest policy and insider trading policy.
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