SEBI has relaxed the criterion for mutual fund employees by allowing those below 35 years to comply with the rules over the next two years. Junior members of fund management teams can invest 10 percent of their salary in the schemes they manage between October 1, 2021, and September 30, 2022, and 15 percent from October 1, 2022, to September 30, 2023. After October 2023, they will need to invest 20 percent of their income. However, other designated employees, who are older than 35, have to invest from October 20 percent of their annual salary in the scheme they manage.

SEBI, in April, mandated a minimum of 20 percent of the salary of key employees be compensated in the form of units of the mutual fund schemes in which they have a role or oversight, with the allotments locked for three years.  Even though the new norm is meant to align employees’ interests with that of unitholders, industry players had raised anxieties over growing wage costs. The industry also asked for more time to implement it, and SEBI had postponed the implementation to October instead of the earlier notified deadline of July 1. SEBI now has also allowed fund managers to set off their current investments against the mandatory investment to be made under the new regulation. According to SEBI, investment in MF units has to be made on the salary day and the previous month’s closing AUM will be taken for apportioning the investment across eligible schemes. All non-cash benefits and perks, excluding superannuation benefits and gratuity, will be added to the salary for calculating the 20 percent investment level.

Designated employees can set off their existing investments upon the fresh investments as needed in the corresponding schemes but the three-year lock-in will be applicable from the day of set-off.  After the expiry of the lock-in period, employees can turn their investment for further commitment and the new investment will be locked for three years.