SEBI (Mutual Funds) (Third Amendment) Regulations, 2021

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SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) (THIRD AMENDMENT) REGULATIONS, 2021

SEBI/LAD-NRO/GN/2021/56.— In exercise of the powers conferred by section 30 read with clause (c) of sub-section (2) of section 11 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, namely–

These Regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Third Amendment)
Regulations, 2021.
They shall come into force on the thirtieth day from the date of publication of these regulations in the Official Gazette.
In the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, –

I. In sub-regulation (1) of regulation 2,

i. clause (q) shall be substituted with the following clause, namely, –
“(q) “mutual fund” means a fund established in the form of a trust to raise monies through the sale of units to the public or a section of the public under one or more schemes for investing in securities, money market instruments, gold or gold related instruments, silver or silver related instruments, real estate assets and such other assets and instruments as may be specified by the Board from time to time:
Provided that infrastructure debt fund schemes may raise monies through private placement of units, subject to conditions specified in these regulations:
Provided further that mutual fund schemes investing in exchange traded commodity derivatives may hold the underlying goods in case of physical settlement of such contracts.”

ii. after clause (w), the following clauses shall be inserted, namely, –
“(wa) “silver exchange traded fund scheme” shall mean a mutual fund scheme that invests primarily in silver or silver related instruments;
(wb) “silver related instrument” shall mean such an instrument as may be specified by the Board from time to time, which has silver as the underlying product;”

II. Clause (g) of regulation 7 shall be substituted following clause, namely,

“(g) appointment of custodian in order to keep custody of the securities or goods or gold or gold related instruments or silver or silver related instruments or other assets of the mutual fund held in terms of these regulations, and provide such other custodial services as may be authorised by the trustees.”

III. In sub-regulation (1) of regulation 26,

i. after the first proviso, the following proviso shall be inserted, namely, –
“Provided further that in case of a silver exchange traded fund scheme, the assets of the scheme being silver or silver related instruments may be kept in the custody of a custodian registered with the Board:”

ii. in the fourth proviso, the word “also” shall be substituted with the word “further”.

IV. In regulation 43,

i. after clause (e) and before clause (f) in sub-regulation (1), the following clause shall be inserted, namely, –
“(ea) silver or silver related instruments;”

ii. after sub-regulation (5), the following sub-regulation shall be inserted, namely, –
“(6) Moneys collected under any silver exchange traded fund scheme shall be invested only in silver or silver related instruments, in accordance with sub-regulation (6) of regulation 44.”

V. In Regulation 44,

i. in proviso to sub-regulation (1), after the words “gold exchange traded fund scheme”, the words, “and silver exchange traded fund scheme” shall be inserted.

ii. after sub-regulation (5), the following sub-regulation shall be inserted, namely, –
“(6) A silver exchange traded fund scheme shall be subject to the following investment restrictions:
(a) the funds of any such scheme shall be invested only in silver or silver related instruments in accordance with its investment objective, except to the extent necessary to meet the liquidity requirements for honouring repurchases or redemptions, as disclosed in the offer document; and (b) pending deployment of funds in accordance with clause (a), the mutual fund may invest such funds in short-term deposits of scheduled commercial banks.”

VI. After sub-clause (xiia) of clause (b) of sub-regulation 4 of regulation 52, the following sub-clause shall be inserted, namely, –

“(xiiaa) in case of a silver exchange traded fund scheme, recurring expenses incurred towards storage and handling of silver;”

VII.In Eighth Schedule, after para 3A, the following para shall be inserted, namely, –

“3B. Value of Silver:
The silver held by a silver exchange traded fund scheme shall be valued at the AM fixing price of London Bullion Market Association (LBMA) in US dollars per troy ounce for silver having a fineness of 999.0 parts per thousand, subject to the following:
(a) adjustment for conversion to metric measure as per standard conversion rates;
(b) adjustment for conversion of US dollars into Indian rupees as per the RBI reference rate declared by the Foreign Exchange Dealers Association of India (FEDAI); and
(c) addition of-
(i) transportation and other charges that may be normally incurred in bringing such silver from London to the place where it is actually stored on behalf of the mutual fund; and
(ii) notional customs duty and other applicable taxes and levies that may be normally incurred to bring the silver from London to the place where it is actually stored on behalf of the mutual fund:
Provided that the adjustment under clause (c) above may be made on the basis of a notional premium that is usually charged for delivery of silver to the place where it is stored on behalf of the mutual fund:
Provided further that where the silver held by a silver exchange traded fund scheme has a greater fineness, the relevant LBMA prices of AM fixing shall be taken as the reference price under this sub-paragraph.”

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