Enabling mutual funds to directly trade on the debt platforms of the bourses, SEBI has permitted asset management companies appointed by the fund houses to take membership of the stock exchanges.

With the notification of norms by the Securities and Exchange Board of India on August 19, asset management companies (AMCs) can register themselves under ‘proprietary trading members’ category.

“... the asset management company may become a proprietary trading member for carrying out trades in the debt segment of a recognised stock exchange on behalf of a mutual fund,” SEBI said.

Subject to certain conditions, the custodian in which the sponsor of a mutual fund or its associates hold 50 per cent or more of the voting rights, would be allowed to act as custodian “for a mutual fund constituted by the same sponsor or any of its associates or subsidiary”.

These include the sponsor having a net worth of at least Rs 20,000 crore at all points of time, and 50 per cent or more of the directors of the custodian having to be those who do not represent the interests of the sponsor or its associates.

Generally, custodians are referred to entities that are responsible for safe keeping of securities and they also offer other services.

Other conditions include the custodian and the AMC of a mutual fund not being subsidiaries of each other and no person is a director of both the custodian and the AMC of a mutual fund.

So far the mutual funds were not allowed to appoint a custodian belonging to the same group, if the sponsor of the mutual fund or its associates held 50 per cent or more of the voting rights of such a custodian, or where 50 per cent or more of the directors of the custodian represent the interests of the sponsor or its associates.

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