SEBI”s New Investment Rules: A Game-Changer for Mutual Fund Employees

Market regulator SEBI has launched a special initiative for select employees of mutual fund companies. On Thursday, SEBI proposed changes to ease the “risk and responsibility” rule for these employees.

According to a report by Bhasha, the proposals aim to reduce the mandatory investment percentage for mutual fund (MF) company employees, apply investment requirements based on salary categories, and exclude components like ESOPs from the minimum investment calculations.

Purpose of the proposals

According to the news, the purpose of these proposals of the Securities and Exchange Board of India (SEBI) is to make compliance easier, especially for employees working in low salaries and operational roles.

Currently, MF employees working in positions like Chief Executive Officer (CEO), Chief Investment Officer (CIO) and Fund Manager have to invest 20 percent of their annual salary and allowances in the mutual funds they manage. This amount is locked in for three years.

Can be decided according to the salary category

SEBI has said in its consultation paper that the minimum mandatory investment amount can be reduced from 20 percent and it can be implemented according to the slab based on the total salary of the employees.

The regulator suggested that there will be no mandatory investment for employees earning less than Rs 25 lakh, while 10 percent of those with salaries between Rs 25-50 lakh, 14 percent of those with salaries of Rs 50 lakh-Rs one crore and 18 percent of those with salary more than Rs 1 crore will invest.

Also proposed to allow flexibility

SEBI has also proposed to relax mandatory investment conditions for non-investment employees such as Chief Operating Officer (COO) and Head of Sales and allow flexibility based on the role and activities of each employee within fund companies.

Under the current rules, the same percentage of investment is required for all designated employees of the company managing the mutual fund. SEBI has suggested excluding non-cash components such as the Employee Stock Option Plan (ESOP) from the minimum investment calculation.

Sebi has also proposed to allow the premature release of units on the resignation of employees, subject to restrictions.

Under the current rules, if employees leave the job before the age of retirement, the units allotted to them are locked. In case of retirement, lock-in is removed except for close-ended schemes.