The B&B Regulatory Updates #3: MCA amends buyback rules and SEBI raises bar on disclosure

Bar & Bench will bring you the latest regulatory and policy updates from different ministries and regulatory authorities. In the third edition of the Bar & Bench Regulatory Updates, we analyse the latest SEBI circular, and the MCA amendments relating to buyback offers..SEBI tightens disclosure norms for MFs and AMCs.SEBI issued a circular on 18 March 2016 tightening disclosure norms for all Mutual Funds (“MFs”)/ Asset Management Companies (“AMCs”) as well as distributors. As per the latest circular, in order to increases transparency of information to investors, it has been decided to:.Disclose in the Consolidated Account Statement (“CAS”), the amount of actual commission (all direct monetary payments and other payments in the form of gifts/rewards, trips, event sponsorships etc.) paid by MFs/AMCs to distributors;Provide greater scheme related disclosure, which inter alia require (i) disclosure of the tenure for which the fund managers have been managing the scheme along with their names and; (ii) each MF to provide details, on their website, with respect to the scheme’s Asset Under Management (“AUM”), investment objective, expense ratio, among others;Disclose name, designation and remuneration of the CEO, CIO, COO and all employees of MFs/AMCs whose annual remuneration was equal to or exceeds Rs. 60 Lakh for that year;Formulate an appropriate policy to conduct in-house credit risk assessment/ due diligence in order to reduce reliance on credit rating agencies;Disclose soft-dollar arrangement between AMCs and brokers ..MCA amends norms relating to buyback offers.Provisions of the Companies (Share Capital and Debentures) Rules, 2014 provide for the various disclosures to be made in case of a buy-back offer. Among other disclosures, the company’s auditors are required to submit a report addressed to its Board of directors inter alia stating that the audited accounts on the basis of which calculations for buy-back is done, are not more than six months old from the date of offer document. In a recent notification issued by the Ministry of Corporate Affairs, a proviso has been added to this rule, which will allow companies to proceed with buy-back of their securities based on the most recent unaudited accounts, provided that the audited accounts are more than six months old.