NEW DELHI: The capital market regulator – Securities and Exchange Board of India (Sebi) – has asked the mutual fund industry to reduce the time taken to transfer dividend and redemption payments to unit holders.
In a circular issued on Friday, the Sebi has directed the mutual fund houses to make the payment of dividend to the unit holders within seven working days from the record date against the existing 15 days. The record date, as per the new circular, should be two working days from the issue of public notice for the purpose of payment of dividend.
Similarly, Sebi has directed mutual funds to transfer redemption or repurchase proceeds to the unit holders within three working days from the date of redemption or repurchase. Currently, the payment is received within 10 days of redemption.
However, schemes which invest at least 80% of total assets in permissible overseas instruments, the transfer of redemption or repurchase proceeds to the unit holders should be made within five working days. In case of any delay, the investor must be paid an interest at 15% per annum along with the proceeds of redemption or repurchase or dividend.
The Sebi circular has also asked the fund industry to prepare a list of exceptional circumstances for schemes unable to transfer redemption or repurchase proceeds to investors within the stipulated time. Meanwhile, Sebi has prepared a framework to deal with technical glitches in the electronic trading platforms of stock brokers. The new framework requires brokers to maintain at least a capacity of 1.5 times the peak load.