RIGHTS AND OBLIGATIONS OF TRUSTEES

RIGHTS AND OBLIGATIONS OF TRUSTEES :

Regulation 18 lays down the following rights and obligations for the trustees:

(1) The trustees and the AMC shall with the prior approval of SEBI enter into an investment management agreement.

(2) Such agreement shall contain all the clauses as prescribed in these Regulations or as well as other clauses necessary for the purpose of making investments; The fourth Schedule contains clauses which are to be included as contents of the investment management agreement.

(3) The trustees are entitled to obtain from the AMC all the information which the trustees consider necessary;

(4) The trustees shall ensure before the launch of any scheme that the asset management company has—

(a) systems in place for its back office, dealing room and accounting;

(b) appointed all key personnel including fund manager(s) for the scheme(s) and submitted their bio-data which shall contain the educational qualification, past experience in the securities market with the trustees, within 15 days of their appointment;

(d) appointed a compliance officer who shall responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc. issued by SEBI or the Central Government and for redressal of investors grievances.

(e) appointed registrars and laid down parameters for their supervision;

(f) prepared a compliance manual and designed internal control mechanisms including internal audit systems;

(g) specified norms for empanelment of brokers and marketing agents;

(h) obtained, wherever required under these regulations, prior in-principle approval from the recognised stock exchange(s) where units are proposed to be listed.

(5)The compliance officer appointed under clause (d) of sub-regulation (4) shall in immediately and independently report to SEBI any non-compliance observed by him.

(6) The trustees shall ensure that the asset management company (AMC) has been diligent in empaneling the brokers, in monitoring the securities transactions with brokers and avoiding undue concentration of business with any broker;

(7) The trustees shall ensure the AMC has not given any undue or unfair advantage to any associate or dealt with any of the associates of the AMC in a manner detrimental to the interest of the unit holders;

(8) The trustees shall ensure that the transaction entered into by the AMC or in accordance with these regulations and the mutual fund scheme concerned;

(9) The trustees shall ensure that the AMC has been managing the mutual fund schemes independently of other activities and have taken adequate steps to ensure that the interest of the investors of one scheme are not being compromised with those of any other scheme or of other activities of the AMC;

(10) The trustees shall ensure that all the activities of the AMC are in accordance with the provisions of these regulations;

(11) Where the trustees have reason to believe that the conduct of business of the mutual fund is not in accordance with these regulations and the scheme, they shall forthwith take such remedial steps as are necessary by them and shall immediately inform SEBI of the violation and the action taken by them;

(12) Each trustee shall file the details of his transactions of dealing in securities with a mutual fund on a quarterly basis;

(13) The trustees shall be accountable for and be the custodian of the funds and the property of the respective
schemes and shall hold the same in trusts for the benefit of the unitholders in accordance with these regulations and the trust deed;

(14) The trustees shall take steps to ensure that the transactions of the mutual fund are in accordance with the provisions of the trust deed;

(15) The trustees shall be responsible for the calculation of any income due to be paid to the mutual fund and also of any income received in the mutual fund for the holders of the unit of any scheme in accordance with these regulations and the trust deed;

(16) The trustees shall obtain the consent of the unit holders –

(a) whenever required to do so by SEBI in the interest of the unit holders; or

(b) whenever required to do so on the requisition of 3/4 of the unit holders of any scheme; or

(17) The trustees shall ensure that no change in the fundamental attributes of any scheme or the trust or fees and expenses payable or any other change which would modify the scheme and affects the interest of unit holders, shall be carried out unless, –

(i)a written communication about the proposed change is sent to each unit holder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the mutual fund is situated; and

(ii) the unit holders are given an option to exit at the prevailing Net Asset Value without any exit load;

(18) The trustees shall on a quarterly basis review all transactions carried out between the mutual funds, AMC and its associates and also the networth of the AMC. In case of any short fall in the networth the trustees shall ensure that the AMC make up for the short fall;

(19) The trustees shall periodically review all service contracts such as custody arrangements, transfer agency of the securities and satisfy itself that they are executed in the interest of the unit holders. Similarly, the trustees shall periodically review the investor complaints received and ensure redressal of the same by the AMC;

(20) The trustees shall ensure that there is no conflict of interest between the manner of deployment of its networth by the asset management company and the interest of the unit-holders.

(21) The trustees shall furnish to SEBI on a half yearly basis –

(a) a report on the activities of the mutual fund;

(b) a certificate stating that the trustees have satisfied themselves that there have been no instances of self
dealing or front running by any of the trustees, directors or key personnel of the AMC.

(c) a certificate that the trustees have not found any instances of self dealing or front running by any of the trustees, directors or key personnel of the AMC and a certificate to the effect that the AMC has been managing the schemes independently of any other activities and protecting the interest of the unit holders.

(22) The independent trustees shall give their comments on the report of the AMC as regards investments by the mutual fund in the securities of group companies of the sponsor.

(23) The trustees shall abide by the code of conduct as specified in the Fifth Schedule.

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