The Securities and Exchange Board of India (SEBI) has announced proposed adjustments to the “skin in the game” rule for mutual fund employees, aiming to reduce compliance burdens, particularly for lower-salaried and operational staff.
The amendments aim to create a balanced regulatory environment that supports employee retention while ensuring that essential safeguards remain in place.
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Adjusted Investment Percentages by Salary Bracket:
- Employees earning less than Rs 25 lakh annually would be exempt from mandatory investments.
- Those with salaries between Rs 25-50 lakh would be required to invest 10% of their annual pay.
- For employees earning Rs 50 lakh-1 crore, the investment requirement would be 14%.
- Employees with annual earnings over Rs 1 crore must invest 18%.
SEBI suggests reduced investment requirements for non-investment roles, such as sales heads and operations managers, allowing adjustments based on each employee’s role within an Asset Management Company (AMC).
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Non-cash components like Employee Stock Ownership Plans (ESOPs) would be excluded from the calculation of minimum investments, addressing concerns about delayed compensation and debt burdens for employees.
The proposal includes options for early release of units when employees resign, along with public access to stress testing results for all mutual fund schemes except closed-ended ones.
To minimise the impact on asset allocation, SEBI suggests that AMCs ensure at least 75% of the mandatory investment is allocated to funds of similar or higher risk than liquid schemes.
SEBI has invited public comments on these proposals until November 21, signalling a proactive approach to fine-tuning regulations in India’s dynamic mutual fund sector.
