The Securities and Exchange Board of India (Sebi) on Monday gave some relief to the mutual fund industry from the onerous conditions of its April 28 circular by allowing junior staff to invest in a phased manner.
The market regulator also allowed other employees to set off their existing investments against the fresh purchases they have to compulsorily make in their own schemes.
In the April circular on the skin-in-the-game norms, Sebi had stipulated that at least 20 per cent of the salary of senior executives of mutual funds should be paid in the form of units of mutual fund schemes in which they have an oversight. The regulator had also said that such investments in mutual fund units will be locked-in for a minimum period of three years or for the full tenure of the scheme, whichever is less.
In a set of clarifications issued on Monday, the market regulator retained the October 1, 2021 timeline for implementation of the rules. However, it gave some breathing space to junior employees. A junior employee is one below 35 years of age, excluding the CEO, head of department and fund manager.
Such staff will have to invest 10 per cent of their compensation in the mutual fund units of the fund house from October 1, 2021. From October 1, 2022, this will rise to 15 per cent and from October 1, 2023, it will be further go up to 20 per cent.
The phased implementation for junior employees will cease to apply from the date such an employee attains the age of 35 years.
For key employees (in its April circular) — called designated employees by Sebi — the circular said they may set off their existing investments, as on the date of the applicability of the circular, against the requirement of fresh investments in the same schemes. This could see their take-home pay not getting affected severely. However, such investments will be locked in for a period of three years.
The market regulator did not specify who were these designated employees. In its previous circular it had said that the key employees will include the CEO, chief investment officer (CIO), chief risk officer (CRO) and others.