Unitholders' consent mandatory before winding up Mutual Fund scheme: SEBI
Mumbai/IBNS: Mutual fund (MF) trustees have to take the consent of unitholders’ while winding up any MF scheme, the market regulator Securities Exchange Board of India has decided in a board meeting.
The decision was taken after unitholders sued Franklin Templeton Mutual Fund questioning the legality of its sudden decision to close six of its schemes.
After a year-long legal battle, the Supreme Court upheld that unit holders' consent was required for winding up any mutual fund scheme.
SEBI in its board meeting stated that “the trustees shall obtain the consent of the unitholders by a simple majority of the unitholders present and voting on the basis of one vote per unit.”
However, if unitholders vote against the closure, the scheme will be re-opened for investments and withdrawals from the second business day after the voting results are published.
SC in its order had said that after wind-up notice is sent to unitholders, fresh investments and redemptions in the schemes can be frozen.
However, it mandated that unitholders’ consent on winding-up needs to be taken before moving forward.