In the Securities and Exchange Board of India (Merchant Bankers ) Regulations, 1992, through SEBI (Merchant Bankers) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/04/1109 dated 13th April 2010, the following updates were inserted:
(i) in regulation 13A, after the proviso and before the Explanation, the following proviso shall be inserted, namely:-,
“Provided further that a merchant banker, who has been granted certificate of registration under these regulations, may ensure market making in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
(ii) in regulation 22, after the proviso, the following proviso shall be inserted, namely:-
“Provided further that in any issue made in accordance with Chapter XA of
the Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009 the merchant banker shall, itself or jointly
with other merchant bankers associated with the issue, underwrite at least
fifteen per cent of the issue size.”
(iii) in regulation 27, the following proviso shall be inserted, namely:-
“Provided that complete particulars of any transaction for acquisition of securities made in pursuance of underwriting or market making obligations in accordance with Chapter XA of the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009 shall be
submitted to SEBI on quarterly basis.”
Friday, August 6, 2010
Merchant Bankers Regulation Amendment 2010 for SME segment & obligation extended thereof for Chapter XA of ICDR
No separate certificate of registration for stock & sub brokers to trade in SME platform under Chapter XA of ICDR: Amendment 2010
In the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, through SEBI (Stock Brokers and Sub- Brokers) (Amendment) Regulations, 2010 vide notification No. LAD-NRO/GN/2010-11/06/1097 dated 13th April 2010, the following updates were inserted:
(i) in regulation 6, the following proviso and Explanation shall be inserted, namely:-
“Provided that, subject to the conditions of regulation 6A, a stock broker holding a certificate of registration with respect to membership of a recognised stock exchange having nationwide trading terminals shall be eligible for trading on SME platform established by such stock exchange without obtaining a separate certificate of registration for trading on the SME platform.
Explanation: For the purpose of this regulation, SME platform means a trading platform of a recognised stock exchange having nationwide trading terminals and permitted by SEBI to list the securities issued in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
(ii) in regulation 11, the following sub-regulation and Explanation shall be inserted, namely:-
“(3) Subject to the provisions of regulation 12A, no fresh certificate need to be obtained under sub-regulation (1) where a registered sub-broker is affiliated to stock broker who is eligible to trade on SME platform.
Explanation: For the purpose of this regulation, SME platform means a trading platform of a recognised stock exchange having nationwide trading terminals and permitted by the Board to list the securities issued in accordance with Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.”
Regulation 3(1)(f)(vii): Automatic exemption from Reg 10, 11 & 12 for taking up shares in market making extended to Chapter XA of ICDR - Takeover Code Amendment 2010
In the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 through SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/05/1110 dated 13th April 2010, the following updates were made.
In regulation 3, in sub-regulation (1), in clause (f), after sub-clause (vi), the
following sub-clause shall be inserted, namely: -
“(vii) a merchant banker or nominated investor in the process of market making and subscription by the nominated investor to the unsubscribed portion of issue, in terms of Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009:
Provided that benefit of exception provided in sub-clause (vii) shall not be
available if the acquisition of securities in the process of market making or
subscription to the unsubscribed portion of issue results in change in control
over the target company, directly or indirectly.”
Market Making arrangement by Venture Capital Fund for securities listed on SME exchange: Regulation 12A insertion: VCF Amendment 2010
In the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996, through SEBI (Venture Capital Funds) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/07/1100 dated 13th April 2010, the following updates are inserted:
(i) after regulation 12, the following regulation shall be inserted, namely:-
“Investment in securities listed on SME exchange.
12A. The venture capital fund may enter into an agreement with merchant banker to subscribe to the unsubscribed portion of the issue or to receive or deliver securities in the process of market making under Chapter XA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and the provisions of regulation 12 shall not apply in case of acquisition or sale of securities pursuant to such subscription or market making.”
Understand Mutual Fund amendments 2010: offer period 15 days, refund & MF unit certificate 5 w.days & limits on fees/expenses on schemes
In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the following amendments were made through SEBI (Mutual Funds) (Amendment) Regulations, 2010 vide Notification No. LAD-NRO/GN/2010-11/13/13945 dated 29th July 2010 with immediate effect.
Regulation 34: Offering Period
No scheme of a mutual fund other than the [initial] offering period of any equity linked savings schemes shall be open for subscription for more than 15 days 45 days.
Regulation 35: Allotment of units & refund of moneys
(3) Any amount refundable under sub-regulation (2) shall be refunded within a period of 5 working days six weeks from the date of closure of subscription list, by Registered post with acknowledgement due and by cheque or demand draft marked “A/c payee” to the applicants.
(4) In the event of failure to refund the amounts within the period specified in subregulation (3), the asset management company shall be liable to pay interest to the applicants at a rate of fifteen per cent per annum from the expiry of 5 working days six weeks from the date of closure of the subscription list.
Regulation 36: Statement of accounts or unit certificates
(1) The asset management company shall issue to the applicant whose application has been accepted, a statement of accounts specifying the number of units allotted to the applicant as soon as possible but not later than 5 working days thirty days from the date of closure of the initial subscription list and/or from the date of receipt of the request from the unitholders in any open ended scheme:
Provided that if an applicant so desires, the asset management company shall issue the unit certificates to the applicant within 5 working days thirty days of the receipt of request for the certificate.
(2) An applicant in a close ended scheme whose application has been accepted shall have the option either to receive the statement of accounts or to hold units in dematerialised form and the asset management company shall issue to such applicant, a statement of accounts specifying the number of units allotted to the applicant or issue units in dematerialized form as soon as possible but not later than 5 working days thirty days from the date of closure of the initial subscription list.
Regulation 52: Limitation on fees and expenses on issue of schemes
(3) For schemes launched on a no load basis, the asset management company shall be entitled to collect an additional management fee not exceeding 1% of the weekly average net assets outstanding in each financial year. [Omitted]
(6) The total expenses of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits :— .
(i) On the first Rs.100 crores of the average weekly net assets 2.5%;
(ii) On the next Rs.300 crores of the average weekly net assets 2.25%;
(iii) On the next Rs.300 crores of the average weekly net assets 2.0%;
(iv) On the balance of the assets 1.75% :
Provided that such recurring expenses shall be lesser by at least 0.25% of the weekly average net assets outstanding in each financial year in respect of a scheme investing in bonds :
Provided further that in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall not exceed 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis.
Provided further that in case of an index fund scheme, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half percent (1.5%) of the weekly average net assets
[The total expenses of the scheme excluding issue or redemption expenses, whether initially borne by the mutual fund or by the asset management company, but including the investment management and advisory fee shall be subject to the following limits:—
(a) in case of a fund of funds scheme, the total expenses of the scheme including the management fees shall be either:-
(i) not exceeding 0.75% of the daily or weekly average net assets, depending upon whether the NAV of the scheme is calculated on daily or weekly basis; or
(ii) it may consist of -
(A)management fees for the scheme not exceeding 0.75% of the daily or weekly average net assets depending upon whether the NAV of the scheme is calculated on daily or weekly basis;
(B) other expenses relating to administration of the scheme;
and
(C) charges levied by the underlying schemes:
Provided that the sum total of (A), (B) and the weighted average of the total expense ratio of the underlying schemes shall not exceed 2.50% of the daily
or weekly average net assets (depending upon whether the NAV of the scheme is calculated on daily or weekly basis) of the scheme.
(b) in case of an index fund scheme or exchange traded fund, the total expenses of the scheme including the investment and advisory fees shall not exceed one and one half percent (1.5%) of the weekly average net assets;
(c) in case of any other scheme-
(i) on the first Rs.100 crores of the daily or average weekly net assets 2.5%;
(ii) on the next Rs.300 crores of the daily or average weekly net assets 2.25%;
(iii) on the next Rs.300 crores of the daily or average weekly net assets 2.0%;
(iv) on the balance of the assets 1.75%:
Provided that in respect of a scheme investing in bonds such recurring expenses shall be lesser by at least 0.25% of the daily or weekly average net assets outstanding in each financial year.”]
Tenth Schedule (X): Amortisation of Initial Issue Expenses for close ended schemes
(e) For schemes floated on a ‘no-load’ basis, the asset management company may levy an additional management fee not exceeding 1% of the NAV. The asset management company may be entitled to levy a contingent deferred sales charge for redemption during the first four years after purchase, not exceeding 4% of the redemption proceeds in the first year, 3% in the second year, 2% in the third year and 1% in the fourth year. [Omitted]
Equity Research Report on listed companies available for download: BSE/NSE website links for investors
Independent Equity Research Reports on listed companies made available on Stock Exchange websites
In a meeting of SEBI recognized Investors’ Associations held on February 11, 2010, it was decided that independent equity research coverage on 20 listed companies each, for which research reports were not available hitherto, would be made available by Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on their websites by July 30, 2010 for the benefit of investors. Accordingly, both the exchanges have since made available on their respective websites, the first set of research reports. Further, exchanges have agreed to jointly frame the criteria for selection of further companies for such research coverage in future.
Website links:
SEBI guidelines on Market Access through Authorised Persons under Stock Brokers regulation as amended on 2010
To expand the reach of the markets for exchange traded products, it has been decided to allow SEBI registered stock brokers (including trading members) of stock exchanges to provide access to clients through authorised
persons.
Regulatory Framework for Market Access through Authorised Persons (MIRSD/ DR-1/ Cir- 16 /09 dated 6th November 2009)
1. Who is an “Authorised Person”?
Any person - individual, partnership firm, LLP or body corporate – who is
appointed as such by a stock broker (including trading member) and who
provides access to trading platform of a stock exchange as an agent of the
stock broker.
2. Appointment of Authorised Person
A stock broker may appoint one or more authorised person(s) after obtaining
specific prior approval from the stock exchange concerned for each such person. The approval as well as the appointment shall be for specific segment of the exchange.
3. Procedure for Appointment
a) Stock broker shall select a person in compliance with the criteria laid down
by the Exchange and this framework for appointment as an authorized
person and forward the application of the person to stock exchange for
approval.
b) On receipt of the aforesaid application, the stock exchange
i. may accord approval on satisfying itself that the person is eligible for
appointment as authorized person, or
ii. may refuse approval on satisfying itself that the person is not eligible for
appointment as authorized person.
4. Eligibility Criteria
4.1 An individual is eligible to be appointed as authorised person if he:
a) is a citizen of India;
b) is not less than 18 years of age;
c) has not been convicted of any offence involving fraud or dishonesty;
d) has good reputation and character;
e) has passed at least 10th standard or equivalent examination from an
institution recognized by the Government; and f) has the certification, as applicable to approved user / sales personnel of [vide SEBI/Cir/MIRSD/AP/8/2010 dated 23rd July 2010]
the respective segment, and undertakes to continue to have valid
certification thereafter.
(Stock Exchange shall prescribe appropriate certification if no such
certification is prescribed under SEBI Regulations and monitor
compliance.)
4.2 A partnership firm, LLP or a body corporate is eligible to be appointed as
authorized person
a) if all the partners or directors, as the case may be, comply with the
requirements contained in clause 4.1 above.
b) the object clause of the partnership deed or of the Memorandum of
Association contains a clause permitting the person to deal in securities
business.
4.3 The person shall have the necessary infrastructure like adequate office
space, equipment and manpower to effectively discharge the activities on
behalf of the stock broker.
4.4 The approved users and/or sales personnel of Authorised Persons shall have the necessary certification of the respective segments at all points of time. [vide SEBI/Cir/MIRSD/AP/8/2010 dated 23rd July 2010]
5. Conditions of Appointment
The following are the conditions of appointment of an authorised person:
a) The stock broker shall be responsible for all acts of omission and
commission of the authorized person.
b) All acts of omission and commission of the authorized person shall be
deemed to be those of the stock broker.
c) The authorized person shall not receive or pay any money or securities
in its own name or account. All receipts and payments of securities and
funds shall be in the name or account of stock broker.
d) The authorised person shall receive his remuneration - fees, charges,
commission, salary, etc. - for his services only from the stock broker and
he shall not charge any amount from the clients.
e) A person shall not be appointed as authorized person by more than one
stock broker on the same stock exchange.
f) A partner or director of an authorised person shall not be appointed as
an authorised person on the same stock exchange.
g) The stock broker and authorised person shall enter into written
agreement(s) in the form(s) specified by Exchange. The agreement shall
inter-alia cover scope of the activities, responsibilities, confidentiality of
information, commission sharing, termination clause, etc.
6. Withdrawal of Approval
Approval given to an authorised person may be withdrawn by the stock
exchange:
a) on receipt of a request to that effect from the stock broker concerned or
the authorised person, subject to compliance with the requirements
prescribed by the stock exchange, or
b) on being satisfied that the continuation of authorised person is
detrimental to the interest of investors or securities market or the
authorised person at a subsequent date becomes ineligible under clause
4 above.
7. Obligations of Stock Broker
a) The stock broker shall be responsible for all acts of omission and
commission of his authorised person(s) and/or their employees,
including liabilities arising there from.
b) If any trading terminal is provided by the stock broker to an authorised
person, the place where such trading terminal is located shall be treated
as branch office of the stock broker.
c) Stock broker shall display at each branch office additional information
such as particulars of authorised person in charge of that branch, time
lines for dealing through authorised person, etc., as may be specified by
the stock exchange.
d) Stock broker shall notify changes, if any, in the authorised person to all
registered clients of that branch at least thirty days before the change.
e) Stock broker shall conduct periodic inspection of branches assigned to
authorised persons and records of the operations carried out by them.
f) The client shall be registered with stock broker only. The funds and
securities of the clients shall be settled directly between stock broker and
client and all documents like contract note, statement of funds and
securities would be issued to client by stock broker. Authorised person
may provide administrative assistance in procurement of documents and
settlement, but shall not issue any document to client in its own name.
No fund/securities of clients shall go to account of authorized person.
g) On noticing irregularities, if any, in the operations of authorised person,
stock broker shall seek withdrawal of approval, withhold all moneys due
to authorised person till resolution of investor problems, alert investors in
the location where authorised person operates, file a complaint with the
police, and take all measures required to protect the interest of investors
and market.
8. Obligations of Exchange
a) The stock exchange shall maintain a database of all the authorised
persons which shall include the following:
I. PAN Number of authorised person and in case of partnership or body
corporate, PAN Number of all the partners or directors as the case
may be.
II. Details of the broker with whom the authorised person is registered.
III. Locations of branch assigned to authorised person(s).
IV. Number of terminals and their details, given to each authorised person.
V. Withdrawal of approval of authorised person.
VI. Change in status or constitution of authorised person.
VII. Disciplinary action taken by the Exchange against the authorised
person.
All the above details, except I above, shall be made available on web site of
the stock exchange.
b) While conducting the inspection of the stock broker, the stock exchange
shall also conduct inspection of branches where the terminals of
authorised persons are located and records of the operations carried out
by them.
c) Dispute between a client and an authorised person shall be treated as
dispute between the client and the stock broker and the same shall be
redressed by the stock exchange accordingly.
d) In case of withdrawal of approval of authorised person due to
disciplinary action, the stock exchange shall issue a press release and
disseminate the names of such authorised persons on its website citing
the reason for cancellation.
How to find whether your Investors Complaints are received by Mutual Fund - AMFI website link
Disclosure of investor complaints with respect to Mutual Funds
SEBI has received feedback from investors and Investors’ Associations to improve transparency in the ‘grievance redressal mechanism’. Based on the same, transparency in ‘grievance redressal’ is identified as a key area to augment investor protection. It is envisaged that transparency will also improve the general functioning of the market by providing investors the wherewithal to make an informed choice.
Accordingly, it has been decided that Mutual Funds shall henceforth disclose on
- their websites,
- as well as in their Annual Reports,
the details of investor complaints received by them from all sources. The said details should be vetted and signed off by the Trustees of the concerned Mutual Fund.
The format for the aforesaid disclosure is given as Annexure to this Circular Cir / IMD / DF / 2 / 2010 dated 13th May 2010.
AMFI Website Link to view Details of Investors Complaints received by Mutual Fund
Change of status or constitution or control of Credit Rating Agency requires prior approval of SEBI - CRA amendment 2010
CIR/MIRSD/CRA/7/2010 dated 13th May 2010 read with Gazette Notification No. LAD-NRO/GN/2009-2010/30/199044 dated 19th March 2010 and issue of SEBI (CREDIT RATING AGENCIES) (AMENDMENT) REGULATIONS, 2010
In the Securities and Exchange Board of India (Credit Rating Agencies) Regulation, 1999: -
(i) in regulation 2, in sub-regulation (1), after clause (e), the following clauses shall be inserted, namely:-
‘(ei) “change of status or constitution” in relation to a credit rating agency -
(i) means any change in its status or constitution of whatsoever nature; and
(ii) without prejudice to generality of sub-clause (i), includes—
(A) amalgamation, demerger, consolidation or any other kind of corporate
restructuring falling within the scope of section 391 of the Companies Act,
1956 (1 of 1956) or the corresponding provision of any other law for the
time being in force;
(B) change in its managing director or whole-time director; and
(C) any change in control over the body corporate;
(eii)“change in control”, in relation to a credit rating agency being a body
corporate, means:—
(i) if its shares are listed on any recognised stock exchange, change in control
as defined under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997;
(ii) in any other case, change in the controlling interest in the body corporate.
Explanation: For the purpose of sub-clause (ii), the expression “controlling interest” means an interest, whether direct or indirect, to the extent of at least 51% of voting rights in the body corporate;’
In regulation 9, in sub-regulation (1), after clause (b), the following clause shall be inserted, namely:-
“(c) where the credit rating agency proposes to change its status or constitution, it shall obtain prior approval of SEBI for continuing to act as such after the change.”
Declaration & Undertakings regarding PCC, MCV or equivalent structure by FIIs to be submitted within 30th September 2010
Sub: Additional information regarding PCC, MCV or equivalent structure by FIIs.
In order to ascertain the constitution of Foreign Institutional Investors (FII)
and Sub Accounts (SA), it has been decided to gather additional information pertaining to their structure.
In view of the above, all applications submitted for registration w.e.f April
07, 2010 shall be accompanied by the following declarations and undertakings on the letter head of respective FII, duly signed by its authorised signatory on behalf of itself and all its Sub Accounts.
Declarations
The applicants are required to provide the following declarations on its letter
head (Please tick whichever applicable).
(a) The applicant declares that it is not a Protected Cell Company (PCC) or
Segregated Portfolio Company (SPC) and does not have an equivalent
structure by whatever nomenclature.
(b) The applicant declares that it is not a Multi Class Share Vehicle (MCV) by
constitution and does not have an equivalent structure by whatever
nomenclature. It contains only single class of share.
(c) The applicant declares that it is a MCV by constitution and has more than
one class of shares or has an equivalent structure and that a common
portfolio is maintained for all classes of shares and satisfies broad based
criteria.
OR
(c) A segregated portfolio is maintained for separate classes of shares
wherein each such class of shares are in turn broad based.
Undertakings
In case the applicant is/ proposed to be a MCV or an equivalent structure and have more than one class of shares, it shall undertake the following on its letter head:
(a) Common portfolios shall be allocated across various share classes and it
shall be broad based;
OR
(a) If portfolios are segregated for each distinct share class, then each such
share class shall satisfy the broad based criteria;
(b) In case of change in structure/ constitution/ addition of classes of shares,
prior approval of SEBI shall be taken;
(c) In case of any addition of share classes, it shall follow the criteria at (a)
above.
All the existing Foreign Institutional Investors and Sub Accounts who are already registered as on April 07, 2010, shall provide the abovementioned declarations and undertakings on or before September 30, 2010.
The custodians are requested to bring the contents of this circular to the notice of their respective FII clients for compliance with the timelines indicated herein.
Three principles for identification of deprived persons, amount and the method of reallocation in SEBI's disgorgement process - Justice Wadhwa Committee
SEBI’s Disbursement Process of Disgorged Amount in IPO
It is with regard to the disbursement of reallocation amount to investors from the amount disgorged in the matter of IPO irregularities.
Justice Wadhwa committee submitted its report to SEBI while concluding that reallocation in terms of shares will not be practical it enunciated three principles for identification of deprived persons, amount and the method of reallocation, as under: (Source: PR No.93/2010)
I. Quantification of the amount of unjust enrichment: The gains associated with the number of shares allotted to applicants who had illegally cornered shares in the IPOs shall be treated as unjust allotments / enrichment.
II. Identification of “deprived” applicants: The totally unsuccessful applicants shall have a call on the reallocation. These applicants will be considered for the amount which is the difference of closing price of shares on the first day of listing / trading at NSE and the IPO issue price.
III. Basis for re-allocation amongst deprived applicants: The totally unsuccessful applicants shall be reallocated money value as computed above from recovered unjust gains, till they each receive the gains associated with minimum shares allotted to the lowest category in the IPO.
Disgorgement
It is well established worldwide that the power to disgorge is an equitable remedy and is not a penal or even a quasi-penal action. Thus it differs from actions like forfeiture and impounding of assets or money. Unlike damages, it is a method of forcing a defendant to give up the amount by which he or she was unjustly enriched. Disgorgement is intended not to impose on defendants any demand not already imposed by law, but only to deprive them of the fruit of their illegal behavior. It is designed to undo what could have been prevented had the defendants not outdistanced the investors in their unlawful project. In short, disgorgement merely discontinues an illegal arrangement and restores the status quo ante (See 1986 (160) ITR 969). Disgorgement is a useful equitable remedy because it strips the perpetrator of the fruits of his unlawful activity and returns him to the position he was in before he broke the law. The order of disgorgement would not prejudice the right of the regulator to take such further administrative, civil and criminal action as the facts of the case may warrant.
Disgorgement amount = No. of shares allotted to specified persons X (closing price on the date of listing – allotment price in IPO)
SEBI’s Power to Issue directions for disgorgement of ill-gotten gains
In the matter of construction of enabling statutes, the principle applicable is that if the Legislature enables something to be done, it gives power at the same time, by necessary implication, to do everything which is indispensable for the purpose of carrying out the purpose in view (see Craies on Statutes, 7th edn., p. 258). It has been held that the power to make a law with respect to any subject carries with it all the ancillary and incidental powers to make the law effective and workable and to prevent evasion (see Sodhi Transport Co. v. State of UP 1986 (1) SCR 939 at pp. 947-48 : AIR 1986 SC 1099)
In the case of ITO v. Mohammed Kunhi AIR 1969 SC 430, it has been observed as under:
".... It is a firmly established rule that an express grant of statutory power carried with it by necessary implication the authority to use all reasonable means to make such grant effective.
***
Therefore, in our view, the express grant of statutory power conferred by section 11B carries the authority to use of reasonable means to make such power effective."
Closing/shifting your Demat account, get refund of AMC collected upfront on annual/half yearly basis by Depository Partcipant (DP) now
Account Maintenance Charges collected upfront on annual/ half
yearly basis on demat accounts
The Depository Participants (DPs) have a system of collecting account maintenance charge (AMC) from beneficial owners (BOs) towards maintenance of demat accounts for varied periodicity of collection (viz. monthly, quarterly, half yearly and annually). It has been noticed that in cases where AMC is collected on an annual upfront basis, on closure/shifting of demat account, the AMC for the balance period for which no service has been provided by the DP, is not refunded to the BO.
In view of the above, it has been decided that in the event of closing of the demat account or shifting of the demat account from one DP to another, the AMC collected upfront on annual/half yearly basis by the DP, shall be refunded by the DP to the BO for the balance of the quarter/s. For instance, in case annual AMC has been paid by the BO and if the BO closes/shifts his account in the first quarter, he shall be refunded the amount of the balance 3 quarters i.e. 3/4th of the AMC. Likewise, if a BO closes/shifts his account in the third quarter, he shall be refunded the amount for the balance one quarter i.e. 1/4th of the AMC.
For the purpose of the above requirement the year shall begin from the date
of opening of the account in quarterly rests.
The above requirements shall be applicable to all existing and new accounts held with DPs which collect annual/half yearly upfront AMC. It is hereby clarified that the above requirements shall not be applicable to those DPs who collect quarterly/ monthly AMC.
