Section 24 in Securities and Exchange Board of India (Mutual Funds) Regulations, 1996
24. [ Restrictions on business activities of the asset management company. [Substituted by Notification F. No. LAD-NRO/GN/2011-12/22/27668, dated 30.8.2011.]
- The asset management company shall, -(a)not act as a trustee of any mutual fund;(b)not undertake any business activities other than in the nature of management and advisory services provided to pooled assets including offshore funds, insurance funds, pension funds, provident funds,[or [such categories of foreign portfolio investor subject to such conditions, as maybe specified by the Board from time to time],] if any of such activities arc not in conflict with the activities of the mutual fund:Provided that the asset management company may itself or through its subsidiaries undertake such activities, as permitted under clause (b), if,(i)it satisfies the Board that bank and securities accounts arc segregated activity wise;(ii)it meets with the capital adequacy requirements, if any, separately for each such activity and obtain separate approval, if necessary under the relevant regulations;(iii)it ensures that there is no material conflict of interest - across different activities;(iv)the absence of conflict of interest shall be disclosed to the trustees and unit holders in scheme information document and statement of additional information;(v)there are unavoidable conflict of interest situations, it shall satisfy itself that disclosures are made of source of conflict, potential 'material risk or damage' to investor interests and detailed parameters for the same;(vi)it appoints separate fund manger for each separate fund managed by it unless the investment objectives and asset allocation are same and the portfolio is replicated across all the funds managed by the fund manger, within a period of six months from the date of notification of Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2011;[Provided that the requirements of this clause shall not apply if the funds manged are of [such categories of foreign portfolio investor subject to such conditions, as maybe specified by the Board from time to time] [Inserted by No. LAD-NRO/GN/2015-16/005, dated 15.5.2015.].] [Inserted by S.O. 1223(E), dated 8.12.1999](vii)it ensures fair treatment of investors across different products that shall include, but not limited to, simultaneous buy god sell in the same equity security only through market mechanism and a written trade order management system; and(viii)it ensures independence to key personnel handling the relevant conflict of interest is provided through removal of direct link between remuneration to relevant asset management company personnel and revenues generated by that activity:Provided further that the asset management company may, itself or through its 'subsidiaries, undertake portfolio management services and advisory services for other than broad based fund till further directions, as may be specified by the Board, subject to compliance with the following additional conditions:-(i)it satisfies the Board that key personnel of the asset management company, the system, back office, bank and securities accounts arc segregated activity wise and there exist system to prohibit access to inside information of variOus activities;(ii)it meets with the capital adequacy requirements, if any, separately for each of such activities and obtain separate approval,; if necessary under the relevant regulations.[Provided further that the asset management company may become a proprietary trading member for carrying out trades in the debt segment of a recognised stock exchange, on behalf of a mutual fund.] [Inserted by Notification No. LAD-NRO/GN/2013-14/18/6384, dated 19.8.2013.]Explanation: - For the purpose of this regulation [Provided that the requirements of this clause shall not apply if the funds manged are of Category I foreign portfolio investors and/or Category II foreign portfolio investors which are appropriately regulated broad based funds, as specified in Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014,] [Inserted by Notification No. LAD-NRO/GN/2015-16/005, dated 15.5.2015.] the term broad based fund' shall mean the fund which has at least twenty investors and no single investor account fbr more than twenty five percent of corpus of the fund.] [Inserted by S.O. 484 (A), dated 22.5.2000]
