Markets regulator SEBI has taken an important decision in the interest of investors. Now mutual fund companies cannot close any scheme of their own free will.
Markets regulator SEBI has taken an important decision in the interest of investors. Now mutual fund companies cannot close any scheme of their own free will. SEBI has made the mutual fund rules strict to protect the interests of investors and now before closing any scheme, the approval of the unitholders i.e. investors will have to be taken. As per SEBI rules, now if mutual fund trustees decide to discontinue or prematurely redeem a scheme by majority vote, they will need to take the consent of the mutual fund unit holders. SEBI has taken this decision on an order of the Supreme Court, in which the court had said that mutual fund houses cannot close any scheme without the approval of the unitholders.
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Decision on the basis of one unit i.e. one vote
According to the new rules of SEBI, the trustees will have to obtain the consent of the unitholders present and voting by simple majority on the basis of one vote per unit. When the trustees decide to discontinue a scheme, they will inform the regulator within a day. In this, the reason for discontinuing the scheme will have to be given. After this, voting will be done by the unit holders and then its results will have to be declared within 45 days from the publication of the notice. If the trustee is not successful in getting the consent of the unit holders, then from the very next day after the voting results are out, that scheme will again be opened for business activities.
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The decision came after the order of the Supreme Court
This decision of SEBI has come after the direction of the Supreme Court in July 2021 last year. The country’s biggest court had given a verdict on a petition related to the closure of six debt schemes of Franklin Templeton Mutual Fund. The fund house had closed six debt mutual fund schemes on 23 April 2020 citing redemption pressure and lack of liquidity in the bond market. Regarding this, the Supreme Court had again ruled that before the closure of any scheme, the trustees have to get a majority of the unitholders of the mutual fund scheme.
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