Sebi Relaxes 'Skin in the Game' Rule for AMC Employees
Sebi has eased the 'skin in the game' rule for mutual fund employees, reducing the mandatory investment percentage based on salary brackets. The new rules aim to align employee interests with those of unitholders.
New Delhi, Mar 21 (PTI) With an aim to address concerns about the "skin in the game" rule for designated employees of mutual funds, including CEO, CIO, and fund managers, markets regulator Sebi on Friday reduced the mandatory investment percentage, with the requirement now based on specific salary brackets.
Earlier, AMC-designated employees were required to invest 20 per cent of their annual salary and perks in the mutual funds they manage. This amount is locked in for three years.
The new framework will come into effect from April 1, 2025, Sebi said in a circular.
Apart from easing regulatory framework pertaining to reduction of minimum investment amount, Sebi has reduced frequency of disclosure, lowered lock-in period for employees who have resigned, empowered Nomination and Remuneration Committee to verify compliances by designated employees and relaxed requirements for employees managing liquid funds.
On investment requirements of designated employees, Sebi said such employees are required to invest a percentage of their salary or compensation (after tax and statutory deductions) in mutual fund schemes where they have oversight.
The required investment percentage is determined by their gross annual compensation.
Employees with a compensation below Rs 25 lakh are not required to make any investment. For those earning above Rs 25 lakh, a minimum of 10 per cent of their salary (or 12.5 per cent if employees stock options or ESOPs are included) must be invested.
Further, employees with compensation between Rs 50 lakh and Rs 1 crore must invest at least 14 per cent of their salary (or 17.5 per cent with ESOPs), while those earning above Rs 1 crore are required to invest a minimum of 18 per cent (or 22.5 per cent with ESOPs).
For employees managing liquid funds, up to 75 per cent of their required investment can be in riskier schemes, while the rest must be in liquid funds, Sebi said.
With regards to lock-in period for investments, Sebi said if an employee retires, they can redeem their mutual fund units after a lock-in period, except for close-ended schemes, which remain locked until the scheme's tenure ends.
If an employee resigns or leaves before retirement, the lock-in period for their investment will be reduced to one year from their last employment date.
If a designated employee violates the code of conduct or engages in fraud or gross negligence, the AMC's Nomination and Remuneration Committee is required to investigate and recommend actions to Sebi.
Sebi has asked AMCs to disclose the total compensation invested in mutual fund units by employees on the stock exchange website within 15 days after each quarter.
The move is aimed at aligning the interests of AMC employees with those of the mutual fund unitholders.
Earlier, AMC-designated employees were required to invest 20 per cent of their annual salary and perks in the mutual funds they manage. This amount is locked in for three years.
The new framework will come into effect from April 1, 2025, Sebi said in a circular.
Apart from easing regulatory framework pertaining to reduction of minimum investment amount, Sebi has reduced frequency of disclosure, lowered lock-in period for employees who have resigned, empowered Nomination and Remuneration Committee to verify compliances by designated employees and relaxed requirements for employees managing liquid funds.
On investment requirements of designated employees, Sebi said such employees are required to invest a percentage of their salary or compensation (after tax and statutory deductions) in mutual fund schemes where they have oversight.
The required investment percentage is determined by their gross annual compensation.
Employees with a compensation below Rs 25 lakh are not required to make any investment. For those earning above Rs 25 lakh, a minimum of 10 per cent of their salary (or 12.5 per cent if employees stock options or ESOPs are included) must be invested.
Further, employees with compensation between Rs 50 lakh and Rs 1 crore must invest at least 14 per cent of their salary (or 17.5 per cent with ESOPs), while those earning above Rs 1 crore are required to invest a minimum of 18 per cent (or 22.5 per cent with ESOPs).
For employees managing liquid funds, up to 75 per cent of their required investment can be in riskier schemes, while the rest must be in liquid funds, Sebi said.
With regards to lock-in period for investments, Sebi said if an employee retires, they can redeem their mutual fund units after a lock-in period, except for close-ended schemes, which remain locked until the scheme's tenure ends.
If an employee resigns or leaves before retirement, the lock-in period for their investment will be reduced to one year from their last employment date.
If a designated employee violates the code of conduct or engages in fraud or gross negligence, the AMC's Nomination and Remuneration Committee is required to investigate and recommend actions to Sebi.
Sebi has asked AMCs to disclose the total compensation invested in mutual fund units by employees on the stock exchange website within 15 days after each quarter.
The move is aimed at aligning the interests of AMC employees with those of the mutual fund unitholders.
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