SEBI notifies timelines for transfer of dividend and redemption proceeds to unitholders

Securities and Exchange Board of India (SEBI) on 25th November, 2022 has issues a circular vide notification no. SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/161 and came out with the Timelines for transfer of dividend and redemption proceeds to unit holders in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with the provision of Regulation 77 of SEBI (Mutual Funds) Regulation, 1996 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

SEBI has amended Regulation 53 of SEBI (Mutual Funds) Regulations, 1996 vide Gazette Notification No. SEBI/LAD-NRO/GN/2022/106 dated November 15, 2022.

  • Key Highlights:
  1. SEBI has notified new rules for asset management companies (AMCs) pertaining to transfer of dividend and redemption proceeds to mutual fund unitholders, in which, every mutual fund and asset management company would be required to transfer to the unitholders the dividend payments and the redemption or repurchase proceeds within a period specified by the regulator.
  • SEBI has reduced the timeline for dividends payout to 7 working days from the current 15 days.
  • Vide SEBI Circular SEBI/IMD/CIR No.7/104753/07 dated September 26, 2007, a list of permissible investments was prescribed for the purpose of overseas investments. For schemes investing atleast 80% of total assets in such permissible overseas investments, the transfer of redemption or repurchase proceeds to the unitholders shall be made within five working days from the date of redemption or repurchase.
  • SEBI clarified that the record date should be two working days from the issue of public notice, wherever applicable, for the purpose of payment of dividends.
  • The transfer of redemption or repurchase proceeds to the unitholders should be made within 3 working days from the date of redemption or repurchase.
  • Interest for the period of delay in transfer of redemption or repurchase or dividend shall be payable to unitholders at the rate of 15% per annum along with the proceeds of redemption or repurchase or dividend.
  • The details of such payments (point 6 above) shall be sent to SEBI as part of Compliance Test Reports in the format placed at Annexure A. Investors shall also be informed about the rate and amount of interest paid to them. Accordingly, circular SEBI/MFD/CIR/2/266/2000 dated May 19, 2000 is rescinded.

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