Mutual funds (MFs) have to pay dividend to unit-holders within seven working days after the declaration of the record date. In a circular issued, SEBI said the record date will be two working days from the issue of public notice on dividend payment.
More About The Transition:
The transfer of redemption proceeds to the unit-holders should be made in three working days from the date of redemption, it said. On paying redemption proceeds for schemes investing at least 80 per cent of total assets overseas, the transfer of redemption proceeds should be made in five working days from the date of redemption, it said.
List Of Exceptions Of The Rule:
AMFI, in consultation with SEBI, will publish a list of exceptional circumstances for schemes unable to transfer redemption proceeds to investors within the stipulated time. It will also mention the time frame for payment in such circumstances and the list will be published within 30 days, said SEBI. In case of delay in payment of redemption proceeds, MFs have to pay an interest of 15 per cent per annum to unit-holders and the cost will be borne by the fund houses, it added.
About The Record Date:
The record date is the date which is set by the mutual funds that determine which unit holders are eligible to receive the dividends. SEBI has also directed that the record date should be two working days from the date of a public notice, for the purpose of payment of dividend.
Regulations On Mutual Funds:
In the case of schemes investing at least 80 per cent of the money in securities overseas, upon such redemption or repurchase, the investors should be paid within five working days from the date of redemption. Redemption means the investors sell back the units it holds in a mutual fund scheme back to the mutual fund’s Asset Management Company.
If the fund house fails to pay dividend or redemption or repurchase payout within the stipulated time period then the fund house is liable to pay interest at the rate of 15 per cent per annum along with the payout of dividend or redemption.
About The Erstwhile Case:
Earlier the fund houses were allowed to pay dividend within 30 days and the redemption proceeds were allowed to be paid in 10 days. Now the transactions are processed much faster using digital means and hence the regulator may have curtailed this time period. Nowadays most fund houses pay the proceeds within the time frames revised today.
