SEBI’s new rule for fund manager compensation

The Securities and Exchange Board of India (SEBI) has said that a minimum 20% of the compensation of mutual fund managers and other key personnel in an asset management company (AMC) should be in the form of units of the mutual fund schemes they manage.

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Key personnel here refers to the likes of chief executive officer, chief investment officer, research head and their direct reportees.

The compensation of fund managers — at least the variable pay component — is linked to performance. What SEBI has done here is crystallise the rules and extend it beyond fund managers to so-called key employees.

Moreover, SEBI has specified the rules of allocation of this 20% by saying that is should be proportional to the assets under management of the schemes in which an employee has a role or oversight.

The regulator has also specified that these units offered by way of compensation are locked-in for three years.