Ravi Samalad
AMCs get time till October 31st to inform all their investors who will get affected due to SEBI regulation on implementing single plan structure.
SEBI has acceded to AMFI’s request to allow fund houses to implement discontinuance of existing SIPs, STPs and dividend reinvestments under schemes which run separate plans for retail and institutional clients from November 01, 2012 instead of 01 October, 2012.
As per SEBI’s September 16, 2012 circular, AMCs are supposed to accept subscriptions only in one plan – either retail or institutional from 01 October 2012. The AMC has a choice to choose which plan they wish to continue. Take for instance, an AMC wants to accept subscriptions only under institutional plan. Thus, the retail plan needs to stop accepting fresh money or add units from 1st October. However, the retail plan could have existing SIPs, STPs and dividend reinvestment mandates from investors. In this case, AMCs need to discontinue such SIPs, STPs and dividend reinvestments which would add units. However, implementing this rule was a tall order for AMCs in such a short span of time.
Institutional plans usually have a higher minimum application size. Thus, retail investors are not be able to invest in such schemes. In case an AMC wants to discontinue retail plan, they may lower the minimum investment size of institutional plan in a bid to attract retail investors.
From today onwards, AMCs have stopped accepting fresh subscriptions under the plans which they want to discontinue. These plans will never accept fresh inflows till the last investor redeems. These schemes would cease to exist thereafter. Now AMCs have one month’s time to inform all their investors about the new rule.
My Comments : It seems that our regulator has no other work other than increasing work of the Investors, Distributors and AMCs. After major changes in the KYC process, this step will lead to substantial increase in unproductive paperwork for all the entities involved in the process.
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