MANU/SMFD/0010/2021

Ministry : Securities and Exchange Board of India

Department/Board : Investment Management Department

Circular No. : SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/553

Date : 28.04.2021

All Mutual Funds (MFs)/
Asset Management Companies (AMCs)/
Trustee Companies/Board of Trustees of Mutual Funds/
Association of Mutual Funds in India (AMFI)

Sir/Madam,

Alignment of interest of key employees of Asset Management Companies with the unitholders of the Mutual Fund Schemes

1. While SEBI has taken steps to standardize the scheme categories and characteristics of each category, the management of risk return profile of the schemes rests with the AMCs and the Key Employees.

2. In order to align the interest of the Key Employees of the AMCs with the unitholders of the mutual fund schemes, it has been decided that a part of compensation of the Key Employees of the AMCs shall be paid in the form of units of the scheme(s), as under:

i. A minimum of 20% of the salary/perks/bonus/non-cash compensation (gross annual CTC) net of income tax and any statutory contributions (i.e. PF and NPS) of the Key Employees of the AMCs shall be paid in the form of units of Mutual Fund schemes in which they have a role/oversight.

ii. The compensation paid in the form of units, as mentioned in 2(i), shall be:

a. proportionate to the AUM of the schemes in which the Key Employee has a role/oversight. For this purpose, Exchange Traded Funds (ETFs), Index Funds, Overnight Funds and existing close ended schemes shall be excluded.

b. paid proportionately over 12 months on the date of payment of such salary/perks/bonus/non-cash compensation. In case of compensation paid in the form of employee stock options, the date of exercising such option shall be considered as the date of such payment.

c. locked-in for a minimum period of 3 years or tenure of the scheme whichever is less.