AMCS to be penalised for delay in dividend, redemption payment

The Securities and Exchange Board of India (Sebi) has amended the timelines for transfer of dividend and redemption proceeds for mutual fund unitholders along with mandating an interest payment of 15 per cent per annum, payable to investors from fund houses for the period of delay.

In a circular released on Friday, Sebi mandated asset management companies (AMCS) to make dividend payment within seven working days from record date. Fund houses will also have to transfer proceeds to the investors within three working days from the date of redemption or repurchase.

Earlier, AMCS could make dividend payments within 30 days without any penalty and transfer of redemption proceeds could be done in 10 working days.

However, for schemes with at least 80 per cent investments in overseas instruments, fund houses will have a time of five working days to transfer the proceeds from the date of redemption or repurchase.

Amending the previous norms, the markets regulator has decided that the record date for dividends will be two working days from the issue of public notice.

In case there is a delay in transfer of redemption or repurchase or dividend, AMCS will have to pay an interest for the period at the rate of 15 per cent per annum along with the proceeds. Fund houses will also have to furnish details of such payments to Sebi as part of compliance test reports.

In the next 30 days, the Association of Mutual Funds in India (Amfi), in consultation with Sebi, will publish a list of exceptional circumstances for schemes unable to transfer redemption or repurchase proceeds within the stipulated timeline. Amfi will also update on the new timeline to be followed in such circumstances.