The Market Regulator SEBI amended on march 06, 2002 mutual fund regulations to allow non- bank SEBI registered Custodians to oversee gold and gold related instruments. Previously the banks, those are registered under Security and Exchange Board of India were permitted to manage the gold exchange traded- funds (ETFs).
SEBI Board introduced following amendments in the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.
In regulation 26, first proviso to sub-regulation (1) shall be substituted by the following clause, namely,-
“That in case of a gold exchange traded fund scheme, the assets of the scheme being gold or gold related instruments may be kept in the custody of a custodian registered with the Board”
In regulation 28, sub-regulation (4) shall be substituted by the following clause, namely,-
“The sponsor or asset management company shall invest not less than one percent of the amount which would be raised in the new fund offer or fifty lakh rupees, whichever is less, and such investment shall not be redeemed unless the scheme is wound up”.
Provided that the investment by the sponsor or asset management company shall be made in such option of the scheme, as may be specified by the Board.”
PRIOR TO THE AMENDMENT
In case of a gold exchange traded fund scheme, the assets of the scheme being gold or gold related instruments may be kept in custody of a bank that is registered as a custodian with the Board.
The sponsor or asset management company shall invest not less than one percent of the amount which would be raised in the new fund offer or fifty lakh rupees, whichever is less, in the growth option of the scheme and such investment shall not be redeemed unless the scheme is wound up;Provided that this sub-regulation shall not apply to close ended schemes.
Providing the above amendment SEBI states that the objective of this change in the regulation was to reduce concentration of Custodial services for gold or gold associated instruments.
SEBI (MUTUAL FUNDS) REGULATIONS, 1996
SEBI (Mutual Fund) Regulations, 1996 has been notified on December 09, 1996 with objective to enhance the operating and regulation of the mutual fund industry, so that mutual funds could provide a improved performance and service to all categories of investors and offer a range of innovative merchandise in a competitive manner to match investor needs and preferences across various investor segments.
The key provisions of the SEBI Regulations, 1996 include:
All the schemes to be launched by the AMC must be approved by the Board of Trustees and copies of offer documents of such schemes are to be filed with SEBI.
The offer documents shall contain adequate disclosures to enable the investors to make informed decisions.
The listing of close-ended schemes is mandatory and they ought to be listed on a recognised stock exchange within six months from the closure of subscription. However, the listing is not necessary in case:
If the scheme provides for monthly income or caters to senior citizens, women, children and physically handicapped;
If the scheme discloses details of repurchase in the offer document; or
If the scheme opens for repurchase within six months of closure of subscription.
If the scheme is a capital protection oriented scheme.
Units of a close-ended scheme can be opened for sale or redemption at a predetermined fixed interval if the minimum and maximum amount of sale, redemption and periodicity is disclosed in the offer document.
Mutual Fund investment is one of the avenues available to the investor for investment. The Mutual Fund investment is a process of pooling the resources by offering units to the public/investors. The working of the mutual fund is directed and regulated by the Securities Exchange Board of India. After taking consideration of the loopholes of the mutual fund regulations, SEBI has notified the above-mentioned amendment, which will mainly result in investor satisfaction.
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