The Securities and Exchange Board of India (“SEBI”) by way of SEBI (Mutual Funds) (Amendment) Regulations, 2022 dated January 25, 2022 (“Amendment Regulations”) amended the SEBI (Mutual Funds) Regulations, 1996 (“MF Regulations”), which, inter-alia, mandated that the AMCs are required to prepare the financial statements and accounts of the mutual fund schemes in accordance with IND-AS with effect from April 1, 2023.
With regard to the above, SEBI has vide its circular dated February 4, 2022 (“Circular”), now specified the following requirements:
i) Label the previous Generally Accepted Accounting Principles (GAAP) information prominently as not being prepared in accordance with IND-AS; and
ii) Disclose the nature of the adjustments that would be required to make it comply with IND-AS. Mutual fund schemes need not quantify those adjustments.
“It is clarified that Brokerage and transaction cost incurred for the purpose of execution shall be charged to the schemes as provided under Regulation 52 (6A) (a) up to 12 bps and 5 bps for cash market transactions and derivatives transactions respectively. Any payment towards brokerage & transaction costs, over and above the said 12 bps and 5 bps for cash market transactions and derivatives transactions respectively may be charged to the Scheme within the maximum limit of Total Expense Ratio (TER) as prescribed under Regulation 52 of the SEBI (Mutual Finds) Regulations, 1996.”
Please find a copy of the Amendment Regulations here, the Earlier Circular here and the Circular here.
This update has been contributed by Nidhi Arya (Partner) and Swaraj Narula (Senior Associate).
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