Investor consent not required for existing schemes proposing investing in derivatives

AMCs will have to disclose to investors about the extent and the manner of the proposed participation in derivatives along with the risks associated with the strategy.
By Ravi Samalad |  20-02-17 | 
 
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Ravi Samalad is Assistant Manager - Editoral for Morningstar.in.

AMCs can now provide a 30-day exit option to investors, without charging any exit load, if any of their existing schemes propose to invest in derivatives in case the SIDs does not envisage the same, says a SEBI circular. The circular is applicable with immediate effect.

“SEBI has received representations  that for  existing  schemes’ whose  SIDs  do  not currently  envisage  investments in   derivatives, obtaining  positive  consent  from majority  of  unit  holders  is  challenging  on  account  of  vast geographical spread of unit holders and hence the request for doing away with such requirements,” sates the SEBI circular.

SEBI has done away with the requirement of obtaining positive consent from a majority of investors if any existing scheme wants to tweak its strategy by taking exposure to derivatives in case the SID does not envisage such investments. This was suggested by SEBI's Mutual Fund Advisory Committee.

Further, AMCs will have to disclose to investors about the extent and the manner of the proposed participation in derivatives along with the risks associated with the strategy.

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