SEBI on Friday made it mandatory for mutual funds to exercise voting rights attached to securities held by the funds.
The market regulator also issued additional guidelines to ensure mutual funds use voting rights in best interest of the unitholders.
The regulation will come into force on April 1, 2021.
The rule applies to all mutual funds including passive funds - index funds and ETFs.
Mutual funds are exempted from casting their votes if they do not have any economic interest on the day of voting.
Other key highlights of the voting regulations:
- Vote has to be casted at the fund house level. In case a fund manager strongly disagrees with managers of other schemes within the fund house, voting at scheme level can also be done
- Fund managers have to submit a declaration on quarterly basis to the trustees that the votes cast by them were in the best interest of the unit holders
- Trustees have to submit half yearly report to SEBI
