INDIA Law and Practice Contributed by: Tejesh Chitlangi, Sushreet Pattanayak, Pooja Mehta and Anita Jain, IC Universal Legal
in order to ensure that, while investment deci - sions are made by the AMC, a balanced view is taken given the exposure inherent in certain instruments. For instance, the scheme must not invest more than 10% of its NAV in debt instru - ments rated investment grade (ie, BBB-) and above and issued by a single issuer, comprising money market instruments and non-money mar- ket instruments. A mutual fund should also not own more than 10% of any company’s paid-up capital carrying voting rights. Further, an industry-wide limit of USD7 billion has been set for overseas investments, with a USD1 billion cap per individual mutual fund. Retail Schemes Under GIFT Funds See 2.3.1 Regulatory Regime 3.3.2 Requirements for Non-Local Service Providers Domestic Mutual Funds Under MF Regulations, a mutual fund can only engage with SEBI-registered intermediaries. If any entity is not required to be registered with the SEBI, it can be engaged only in terms of compliance, with outsourcing conditions laid down by the SEBI. Further, AMCs are restricted from carrying out operations relating to including trading, investor servicing and investor opera - tions outside India. Retail Schemes Under GIFT Funds See 2.3.2 Requirements for Non-Local Service Providers . 3.3.3 Local Regulatory Requirements for Non- Local Managers Domestic Mutual Funds Under the MF Regulations, a sponsor of a Mutu - al Fund shall be required to appoint or incorpo - rate an AMC in India, which will undertake fund
management activities for the Mutual Fund. However, an asset management company can be formed by a sponsor which is a non-resident Indian entity and the same is permissible under automatic route as per the Foreign Direct Invest - ment Policy. Retail Schemes Under GIFT Funds See 2.3.3 Local Regulatory Requirements for Non-Local Managers . 3.3.4 Regulatory Approval Process Domestic Mutual Funds See 3.1.2 Common Process for Setting Up Investment Funds . Retail Schemes Under GIFT Funds See 2.3.4. Regulatory Approval Process . 3.3.5 Rules Concerning Pre-Marketing of Retail Funds Domestic Mutual Funds There is no pre-marketing of mutual fund schemes in India. Retail Schemes Under GIFT Funds See 2.3.5 Rules Concerning Pre-Marketing of Alternative Funds . 3.3.6 Rules Concerning Marketing of Retail Funds Domestic Mutual Funds As mentioned, at the time of investor on-board- ing, all fund documents – SID, SAI and KIM – must be made available to investors. • Marketing by AMCs – under MF Regulations, the SEBI’s Advertisement Code lays down the conditions for all forms of communica - tion issued, including any advertisements, with respect to the marketing of mutual fund schemes. However, any form of advertise -
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