SEBI reduces exit option window to 15 days in case of change in control of AMC

According to the prevailing guidelines, if an AMC opts to change a fundamental attribute of a mutual fund scheme then it must send a notice to that effect to all the unitholders. Then the unitholders are given a window of 30 days to redeem their units, without paying exit load.

Capital market regulator Securities and Exchange Board of India (SEBI) on August 11 announced a reduction in the timeline for the exit option window period for change in control of an asset management company (AMC).

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As per extant guidelines when the control of an AMC changes hands, it is considered a change in fundamental attributes of the scheme. In line with the regulations, the investors in the mutual fund schemes are given an intimation. They are also given an exit load-free window of 30 days if they are not agreeing with the change and are keen to redeem their investments.

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“Considering that growth in technological communication has enabled faster dissemination of information to unitholders, a request has been received from industry to review the timeline for exit option window period for change in control of AMC,” the SEBI circular said.

SEBI has reduced the exit window period to not less than 15 calendar days, in case of a change in the control of AMC. However, the regulator clarified that if such a change in control of AMC results in consolidation or merger of schemes then the unitholders be given an option to exit on the prevailing Net Asset Value (NAV) without any exit load within a time period not less than 30 calendar days from the date of communication.

The regulator has asked the AMCs to make necessary changes, to facilitate the implementation of the above guidelines, before September 11, 2023.

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According to the prevailing guidelines, if an AMC opts to change a fundamental attribute of a mutual fund scheme then it must send a notice to that effect to all the unitholders. Then the unitholders are given a window of 30 days to redeem their units, without paying exit load. Exercising their right to redeem their units in such an exit window is optional for the unitholders. A merger of schemes and change in the potential risk class matrix are some examples of change in the fundamental attribute of the scheme. A change of fund manager is not considered as a change in fundamental attribute of the scheme.