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Voting on corp resolutions compulsory for MFs: Sebi

  • These votes should be disclosed to unit holders below present laws. Voting can be on the MF degree (relatively than scheme degree).

By Neil Borate, Hindustan Instances, Mumbai

PUBLISHED ON MAR 06, 2021 01:57 AM IST

The Securities and Change Board of India (Sebi) on Friday made voting on company resolutions obligatory for mutual funds (MFs).

Beforehand, MFs have been required to reveal voting patterns, however have been allowed to abstain from votes. Mutual funds will now be required to vote on a spread of company resolutions, comparable to governance issues, adjustments to capital constructions, inventory possibility plans, appointment and elimination of administrators, and another challenge that will have an effect on the pursuits of shareholders or unit holders.

These votes should be disclosed to unit holders below present laws. Voting can be on the MF degree (relatively than scheme degree). Fund managers of particular person schemes can vote in another way from different schemes within the fund home, however should document an in depth rationale for a similar.

Index funds and ETFs (change traded funds), that are passive in nature, may also be required to vote. The round lists sure essential issues comparable to associated get together transactions or company governance issues on which voting can be required from April 1. For different issues, voting can be obligatory from April 1, 2022.

“It is a good transfer by Sebi. I don’t see a problem even for index funds or ETFs. Even when a mutual fund owns one share of an organization, it ought to vote on its resolutions. In any other case, it has no enterprise proudly owning these shares,” mentioned Shriram Subramanian, founder and managing director, InGovern Analysis. “MFs should vote objectively even when the AMCs have stake in affiliate corporations,” he added.

Amit Tandon, founder and managing director, Institutional Investor Advisory Providers mentioned the change can be minor. MFs and pension funds as a class abstained on solely 11% of resolutions in FY20, he mentioned.

“This presents an issue for passive funds which would not have analysis analysts monitoring every inventory. Sebi ought to have additionally laid down a threshold of shares above which voting is obligatory. This can elevate compliance prices and burden. Attrition in compliance groups has spiked,” mentioned the compliance head of a mid sized mutual fund on situation of anonymity.

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