EDEN IAS

NEWS IMPULSE |SEBI RULE FOR FUND MANAGER COMPENSATION| 30 APRIL

Syllabus Section:Economy

Why in News?

  • The Securities and Exchange Board of India (SEBI) has said that a minimum 20% of the compensation of mutual fund managers and other key personnel in an asset management company (AMC) should be in the form of units of the mutual fund schemes they manage.

About:

  • To align the interest of the Key Employees of the AMCs with the unitholders of the mutual fund schemes, it has been decided that a part of compensation of the Key Employees of the AMCs shall be paid in the form of units of the scheme(s),
  • Minimum of 20% of the salary/perks/ bonus/ non-cash compensation (gross annual CTC) net of income tax and any statutory contributions (i.e. PF and NPS) of the Key Employees of the AMCs shall be paid in the form of units of Mutual Fund schemes in which they have a role/ oversight
  • Key employees include CEO, CIO, COO, fund managers and others.
  • Exchange Traded Funds (ETFs), Index Funds, Overnight Funds and existing close ended schemes have been excluded from the order. 
  • The provisions of this circular shall be applicable with effect from July 01, 2021.

Significance:

  • It will boost the transparency of fund manager compensation.
  • It helps build accountability.
  • It ensures that fund houses actually link the pay of fund managers to performance and go beyond lip service.
  • It could encourage whistleblowing if wrongdoing is happening.
  • It will give a lot of psychological comfort to investors 

Source: Live Mint

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