The B&B Regulatory Updates #3: MCA amends buyback rules and SEBI raises bar on disclosure

Bar & Bench will bring you the latest regulatory and policy updates from different ministries and regulatory authorities. In the third edition of the Bar & Bench Regulatory Updates, we analyse the latest SEBI circular, and the MCA amendments relating to buyback offers.

SEBI tightens disclosure norms for MFs and AMCs

SEBI issued a circular on 18 March 2016 tightening disclosure norms for all Mutual Funds (“MFs”)/ Asset Management Companies (“AMCs”) as well as distributors. As per the latest circular, in order to increases transparency of information to investors, it has been decided to:

• Disclose in the Consolidated Account Statement (“CAS”), the amount of actual commission (all direct monetary payments and other payments in the form of gifts/rewards, trips, event sponsorships etc.) paid by MFs/AMCs to distributors;
• Provide greater scheme related disclosure, which inter alia require (i) disclosure of the tenure for which the fund managers have been managing the scheme along with their names and; (ii) each MF to provide details, on their website, with respect to the scheme’s Asset Under Management (“AUM”), investment objective, expense ratio, among others;
• Disclose name, designation and remuneration of the CEO, CIO, COO and all employees of MFs/AMCs whose annual remuneration was equal to or exceeds Rs. 60 Lakh for that year;
• Formulate an appropriate policy to conduct in-house credit risk assessment/ due diligence in order to reduce reliance on credit rating agencies;
• Disclose soft-dollar arrangement between AMCs and brokers .

MCA amends norms relating to buyback offers

Provisions of the Companies (Share Capital and Debentures) Rules, 2014 provide for the various disclosures to be made in case of a buy-back offer. Among other disclosures, the company’s auditors are required to submit a report addressed to its Board of directors inter alia stating that the audited accounts on the basis of which calculations for buy-back is done, are not more than six months old from the date of offer document. In a recent notification issued by the Ministry of Corporate Affairs, a proviso has been added to this rule, which will allow companies to proceed with buy-back of their securities based on the most recent unaudited accounts, provided that the audited accounts are more than six months old.