The regulator believes that the management of risk return profile of MF schemes rests with the fund houses and its key employees. To align the interest of the key employees of the fund houses with the unitholders of the MF schemes, “it has been decided that a part of compensation of the key employees of (the fund houses) shall be paid in the form of units of the scheme(s),” the circular noted.
According to the regulator, the compensation paid in the form of units should be proportionate to the assets under management of the schemes in which the key employee has a role or any oversight. Sebi said exchange-traded funds (ETFs), index funds, overnight funds and existing closed-ended schemes are excluded from this rule.
All these units will be locked-in for three years. The lock-in rule will continue even if the person leaves the fund house. However, a fund house may put in place a system for its executives to borrow from the fund house “against such units in exigencies such as medical emergencies or on humanitarian grounds”, Sebi said. In case an executive retires from the fund house, the units could be released from the lock-in rule.
According to Sebi, to allow key employees of fund houses to diversify their unit holdings, in case of dedicated fund managers managing only a single scheme/single category of schemes, “50% of the aforementioned compensation shall be by way of units of the scheme/category managed by the fund manager and the remaining 50% can, if they so desire, be by way of units of those schemes whose risk value as per the risk-o-meter is equivalent or higher than the scheme managed by the fund manager”.