Companies that have net worth lower than the paid-up capital and have been making profit for the last three consecutive years without having been blacklisted are eligible to work as mutual fund. [break]
SEBON has forwarded the regulations to the Ministry of Finance (MoF) recently for endorsement.
"Due to the delay in formulating the concerned act, we have forwarded the Mutual Fund Regulations to the MoF," said SEBON Chairman Surbir Poudel.
Mutual fund is set up for collecting funds from small investors to purchase shares of different companies. "Investment of small investors would be more secure with the enforcement of the regulations," added Poudel. He said the regulations were framed as per SEBON Act 2006.
The promoter institution has to appoint trustee and scheme manager with the permission of SEBON for setting up a mutual fund.
Any company having less net worth compared to paid-up capital of at least Rs 200 million cannot become trustee of the mutual fund, according to the regulations. The trustee´s job is to collect funds and sign agreements on behalf of the mutual fund.
As per the regulations, the registration of the mutual fund will be revoked if the fund fails to commence its operation within one year of its registration.
The new regulations have specified trustee´s fee at a maximum of 0.5 percent of net assets of mutual fund after the completion of a fiscal year and 5 percent of the trustee´s fee has to be paid as royalty to SEBON.
The regulations also prohibit mutual funds from purchasing more than 20 percent shares of one single company. A mutual fund cannot deposit more than 10 percent of total assets of the scheme, in banks.
Similarly, the fund can invest 25 percent of its total funds in foreign security markets of those countries which have signed agreement with SEBON.
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