SEBI has implemented 'skin in the game' rules with some relaxation to junior AMC officials other than CEO, fund managers and heads of departments. The rules, which mandate AMCs to pay 20% salary to top officials in the form of MF units, will now be implemented in a phased manner for officials below the age of 35.
These officials, referred as 'junior employees' by SEBI, will be required to invest only 10% of the salary in the AMC's schemes during the first year. The ratio will go up to 15% in the next year and 20% after that.
"Junior employees shall be required to invest 10% during October 01, 2021 to September 30, 2022 and 15% during October 01, 2022 to September 30, 2023. All junior employees shall be mandatorily required to invest 20% from October 1, 2023 onwards," SEBI said in a circular.
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./
Other clarifications issued by SEBI are:
- Investment in units has to be made on the day of salary payment. In case of employees involvement in more than one scheme, the investment amount for each scheme will be decided on the basis of previous month's closing AUM
- Employees can choose to reinvest the amount which has completed the mandatory lock-in period instead of deduction from salary
- Employees can redeem investment which has completed lock-in period twice in a financial year
- AMCs have to invest the amount only in growth schemes. If growth scheme is not available, investment has to be made in the payout of income distribution cum capital withdrawal option’
- In fund of funds schemes, only fund managers have to make investment
