The Securities and Exchange Board of India(SEBI) in its Notification dated 24th December, 2019 has introduced the Stewardship Code for all Mutual Funds and all categories of Alternative Investment Funds (AIFs) with regard to their investment in listed equities.
The importance of institutional investors in capital markets across the world is increasing the world over, thus SEBI has decided that all Mutual Funds and all categories of AIFs shall mandatorily follow the Stewardship Code in relation to their investment in listed equities under the SEBI Act, 1992 read with the provisions of SEBI (Mutual Funds) Regulations, 1996 and SEBI (Alternative Investment Funds) Regulations, 2012.
Stewardship code is a principles-based framework that assists institutional investors in fulfilling their responsibilities to help them protect and enhance the value of their clients and beneficiaries. Adherence to the code by institutional investors also enhances the corporate governance of the investee companies. The Code shall be effective from April 01, 2020.
6 policies have to be formulated by the AIFs/MFs, which need to be periodically updated and publicly made available for all investors.
The following policies need to be made by AIFs/MFs as per the Stewardship Code:
- Institutional Investors should formulate a comprehensive policy on the discharge of their stewardship responsibilities, publicly disclose it, review and update it periodically.
- Institutional investors should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it.
- Institutional investors should monitor their investee companies.
- Institutional investors should have a clear policy on intervention in their investee companies. Institutional investors should also have a clear policy for collaboration with other institutional investors where required, to preserve the interests of the ultimate investors, which should be disclosed.
- Institutional investors should have a clear policy on voting and disclosure of voting activity.
- Institutional investors should report periodically on their stewardship activities
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