‘Invest 10% of salary in MF’: SEBI to junior staff of asset management companies

Securities and Exchange Board of India (SEBI) has issued a new circular, which states that junior employees of asset management companies will have to invest 10 per cent of their compensation in the mutual fund units of the fund house. The rule will come into effect on October 1. Since the rule will be applicable in phases, as per the new guidelines, starting next year, that is, October 1, 2022 these junior staff will need to invest 15 per cent of their compensation in the mutual fund scheme. The following year, this will increase to 20 per cent. Therefore, by October 1, 2023 these junior employees will be investing 20 per cent of their compensation in the mutual funds of their fund house.

The circular clarifies that any employee who is below 35 years of age is considered a junior employee. However, the same rule is not applicable for the CEOs, heads of department and fund managers. As per the new guidelines from SEBI, starting October 1, they are required to invest 20 per cent of their compensation, with a lock-in period of three years.

These rules were introduced by SEBI in April, but have now been revised a bit. In the earlier circular, these rules were applicable only to ‘key employees’, that is, the CEOs and senior officials, including fund managers, chief risk officer, chief information security officer (CISO), chief operation officer (COO), compliance officer, heads of sales, investor relations officers, heads of other departments, dealers of the asset management company, and all those who directly report to the CEO. In the new circular, SEBI has said that the term ‘key employees’ is changed to ‘designated employees’. Apart from all the above, fund managers, the dealers and research analysts are also covered under this rule.