SEBI has asked AMCs to pay at least 20% of the total net salary in the form of mutual fund units. Here salary includes perks, bonus and non-cash compensation. Net salary will be arrived after deduction of income tax and PF contribution, clarified SEBI.
This will come into effect from July 1, 2021.
SEBI said that the move aims to align the interests of key employees with that of the unitholders.
The market regular clarified that AMCs will have to allot units of actively managed open ended schemes. This means, AMCs cannot allot units of index funds, ETFs and close end schemes to their employees.
Further, key employees will get units of MF schemes in which they have a role. If a key employee is involved in the management of more than one scheme, allocation has to proportionate to the AUM of the scheme. For example, if a fund manager manages two schemes – Scheme A with AUM of Rs 100 crore and Scheme B Rs 200 crore, respectively. AMC has to give him units in the proportion of 33% of the Scheme A and 66% of the Scheme B.
The new rules have a special provision for managers who manage a single scheme or a single category of schemes. AMCs can choose to give 50% of the units in different schemes to such employees to diversify holdings. However, such schemes should have higher level of risk compared to the scheme managed by the employee.
Key employees have to hold these units for at least 3 years. These units cannot be redeemed even if the employee leaves the company except retirement. In case of emergencies, AMCs can allow employees to borrow money against the units.
AMCs can take back such units in case of violation of code of conduct, fraud and gross negligence. In such a scenario, the units will be redeemed and the amount will be credited to the scheme.
Key employees include CEO, CIO and fund managers among others.
