In a move to ease regulatory burdens on certain asset management company (AMC) employees, the Securities and Exchange Board of India (SEBI) has proposed adjustments to its ‘skin-in-the-game’ requirements. Currently, SEBI mandates that designated AMC employees invest 20 per cent of their total remuneration—including non-cash compensation—into the funds they oversee, aiming to better align employee interests with fund performance.
However, a new SEBI consultation paper, released on November 6, proposes to relax this rule for employees whose non-cash pay, such as Employee Stock Options (ESOPs), makes up less than 20 per cent of their total compensation. This recommendation came from the Ease of Doing Business (EODB) working group, which argued that the existing rule reduces employees’ take-home pay and complicates finances, particularly as ESOPs typically vest over extended periods of four to five years, compounding deferral of income.
The EODB group proposed excluding non-cash pay from the minimum investment calculation to avoid excessive financial burden on employees. However, SEBI concluded that allowing full exclusion could weaken the intended alignment with fund performance. Instead, SEBI’s revised plan applies the exemption only to employees whose non-cash component is below the 20 per cent threshold, preserving the rule’s core objectives.
