Without prejudice to any order under these regulations, and directions, guidelines and circulars as may be issued by the Authority including an order under Chapter VI of these regulations, the Authority may in the interest of the interest of the subscribers or for the purpose of securing the proper management of pension fund, issue necessary direction:
Provided that before issuing any directions the Authority shall give a reasonable opportunity of being heard to the persons concerned:
Provided further that if the circumstances warrant any interim direction is required to be passed immediately, the Authority may give a reasonable opportunity of hearing to the persons concerned after passing the direction, without any undue delay.
52 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4]
SCHEDULE I PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulation 9(3)] CERTIFICATE OF REGISTRATION Pension Fund Regulatory and Development Authority CERTIFICATE OF REGISTRATION AS PENSION FUND In exercise of the powers conferred by sub-section (3) of section 27 of the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013), read with regulations made thereunder, the Authority hereby grants this certificate of registration to____________________________________________ as pension fund subject to the terms and conditions specified in the Act and the regulations made thereunder.
The Registration Code for the Pension Fund is _________________________.
Date :___________ Place : __________ By order For and on behalf of Pension Fund Regulatory and Development Authority ¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 53
SCHEDULE II PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulation 8(3) (e) ] CRITERIA FOR ‘FIT AND PROPER’ For the purpose of determining as to whether the sponsor or pension fund is a 'fit and proper person', the Authority may take account of any consideration as it deems fit, including but not limited to the following criteria in relation to the applicant or the intermediary , the principal officer and the key management persons , by whatever name called:
(a) financial integrity;
(b) absence of convictions or civil liabilities;
(c) competence;
(d) good reputation and character;
(e) efficiency and honesty; and
(f) financial solvency and net worth.
A sponsor or pension fund shall not be considered as a" fit and proper person" for the purpose of appointment, if it incurs any of the following disqualifications:-
(a) the sponsor or pension fund or its principal officer or key management personnel has been convicted by a court for any offence involving moral turpitude, economic offence, securities laws or fraud;
(b) an order for winding up has been passed against the sponsor or pension fund;
(c) the sponsor or pension fund or its key promoter has been declared insolvent and has not been discharged;
(d) an order(other than an order of suspension of appointment as an intermediary), restraining, prohibiting or debarring the sponsor or pension fund or its principal officer or key management personnel from dealing in securities in the capital market or from accessing the capital market has been passed by any regulatory authority or court and a period of three years from the date of the expiry of the period specified in the order has not elapsed;
(e) an order cancelling the appointment of the sponsor or pension fund has been passed by the Authority or the concerned financial sector regulator on the ground of its indulging in insider trading, fraudulent and unfair trade practices or market manipulation and a period of three years from the date of the order has not elapsed;
(f) an order withdrawing or refusing to grant any license or approval to the sponsor or pension fund or its whole time director or managing partner which has a bearing on the capital market, has been passed by the concerned financial sector regulator or any other regulatory authority and a period of three years from the date of the order has not elapsed; however, the Authority may for reasons to be recorded in writing, allow the sponsor or pension fund to seek appointment before the lapse of three years as specified in clauses (d), (e) and (f);
(g) the sponsor or pension fund is financially not sound;
(h) there is a notice of any action or investigation or other proceedings of any nature whatsoever, against the sponsor or pension fund, or its Chief Executive Officer, any of its directors or employees, or a related group concern, by any governmental or statutory authority which would restrain, prohibit or otherwise challenge or impede the performance of obligations as sponsor or pension fund of the pension schemes regulated by the Authority, and that there is adverse proceedings against it from any financial sector regulator including the Reserve Bank of India, Insurance Regulatory and Development Authority or the Securities and Exchange Board of India, of a nature that could adversely affect the ability to provide the services as sponsor or pension fund for the pension schemes regulated by the Authority;
(i) any other reason, to be recorded in writing by the Authority, which in its opinion renders such sponsor or pension fund or its principal officer or key management personnel unfit to operate in the pension or financial market.
Explanation.- For the purpose of clause (g), the Authority may take into consideration the capital adequacy or tangible net worth of the sponsor or pension fund, wherever it has been so specified in the relevant application for appointment.
54 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4]
SCHEDULE III PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulations 4(1), 9(3) and 13 ] FEES PAYABLE UNDER THE REGULATIONS
PART A AMOUNT TO BE PAID AS FEES TO THE AUTHORITY
PART B I. —For the purpose of this part, the expression "assets under management" shall mean the value of the assets held by the pension fund as disclosed by it under sub-paragraph VI of Part B below.
II. The fees specified in part A shall be payable by demand draft or bankers cheque in favour of " Pension Fund Regulatory and Development Authority” payable at New Delhi or through e-payment .
III. A pension fund shall pay pro rata annual fee on quarterly basis,if the business is done for a part of the year. The payment of annual fee shall be accompanied by a statement of assets under management which shall be in such format as may be specified by the Authority and shall be certified to be true and complete by the functional head of the pension fund. The pension fund shall pay any extension fees as may be determined by the Authority where the registration granted to it has been extended beyond the period of registration.
IV. The Authority reserves the right to amend all or any of the fees from time to time.
Type of Fee Amount Nature/Calculation Time of Payment Application fee -Rs 10,00,000 Non Refundable / Flat Rate At the time of submission of application for acting as sponsor of pension fund .
Registration fee Rs 25,00, 000 Non Refundable / Flat Rate At the time of grant of Certificate of Registration (One time) Annual fee
0.005% of Assets under Management or Rs 10,00, 000 Whichever is higher Non-Refundable / % of AUM:
Assets under Management shall be considered as on 31 st March of preceding financial year.
Payable by 15th of April of every financial year or within fifteen days of grant of Certificate of Registration.
¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 55
SCHEDULE IV PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulation 11(3) ] CERTIFICATE FOR COMMENCEMENT OF BUSINESS
SCHEDULE V PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulations12(h),and 22(8)] REPORTS AND DISCLOSURE
1. Reporting to NPS Trust, PFRDA, CRA and Other Parties The pension fund shall furnish periodic reports as well as such information and documents as may be required by the Authority, National Pension System Trust and the central recordkeeping agency from time to time. This would include, but not limited to the following:-
(a) Indicative Reports to National Pension System Trust Reports must be provided in writing for each successive period by delivery to the office of National Pension System Trust within ten days of the end of the period in the case of a monthly or quarterly or half yearly or yearly report and must contain at least the following information as at a stated end of period date.
Report Contents Monthly Form 1 Reconciliation of AUM and Units Form 2 Details of Portfolio for - Scheme CG Form 3 Details of Portfolio for - Scheme SG Form 4 Details of Portfolio for - Scheme E- Tier I Form 5 Details of Portfolio for - Scheme C - Tier I Form 6 Details of Portfolio for -Scheme G Tier I Pension Fund Regulatory and Development Authority CERTIFICATE FOR COMMENCEMENT OF BUSINESS AS PENSION FUND ___________________________________ which has been granted a certificate of registration as pension fund vide __________ on __________ is hereby allowed to commence the activities as pension fund for the pension Schemes regulated by the Pension Fund Regulatory and Development Authority on this ____ day of _____ 20 Place : __________ By order For and on behalf of Pension Fund Regulatory and Development Authority 56 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4] Form 7 Details of Portfolio Value for - Scheme E -Tier II Form 8 Details of Portfolio for - Scheme C - Tier II Form 9 Details of Portfolio for - Scheme G Tier II Form 10 Details of Portfolio for - Scheme NPS Lite Form 11 Details of Portfolio for - Scheme Corporate CG Form 12 Statement of Purchases and Sales effected by PFM Form 13 Amount Received or Accrued during the Period Form 14 Report on transactions in securities in Group company / PF's associates Form 15 Statement of Down Graded Investments MC Compliance Certificate at Monthly Interval Quarterly Form 1a Report on Transactions in securities by the key personnel of the PF in their own name Form 1b Report on transactions in securities with any of the PF's associates Form 2 Portfolio overview Form 3 Statement of mutual fund investments Form 4 Market value - quarter - on -– quarter Form 5 Details of investment portfolio - maturity proceeds & interest overdue (NPA) Form 6 Overview of portfolio positioning including evaluation of a) Current economic conditions b) Prospects for securities markets, c) Justification for the positions and transactions in the portfolio, d) Attribution of performance over last quarter (and year when applicable) on absolute basis as well as relative to the specific market benchmark, e) Outlook for returns for the portfolio QC Compliance Certificate at Quarterly Interval Half-Yearly HY.1 Copy of half yearly unaudited accounts of Schemes as per Scheme accounting regulations. (before the expiry of one month from the close of each half year) HYC Compliance certificate at half yearly Interval Annual A.1 Statement regarding the current status of the sponsor’s regulatory licenses and details of any changes in the name or capitalisation of the PF company or Sponsor(s) A.2 Statement showing the amount of interest accrued but not realised as on closing date of the financial year A.3 All service contracts carried out between Schemes, PF and its associates. (Including outsourced activity).
A.4 All service contracts such as for custody arrangements and transfer agency of the securities are executed in the interest of subscribers.
A.5 Summary of all activities and compliance with regulations and guidelines.
A.6 Copy of the Audited Annual Report and other information including details of investments as per the Scheme accounting regulations. (within sixty days from the date of closure of each financial year) ¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 57 A.7 Copy of unaudited provisional financial statements (Balance Sheet, Revenue Account , notes and schedules) of each scheme. (within thirty days from the date of closure of each financial year) A.8 Voting report including the number of votes cast (for, against, or abstained) and a statement of whether the PF has complied with its obligation to exercise its voting rights in the client’s interests only.
A.9 Any change in the interests of Directors every six months AC Compliance certificate at annual Interval Ad hoc M.1 Bio-data of all its Directors along with their interest in other companies within 15 days of their appointment M.2 Conflicts of interest M.3 All such information as is considered necessary by the NPS Trust
(b) Reports to Authority
(i) In addition to the reports, pension fund would need to adhere to disclosures in accordance with para 2 of this Schedule.
(ii) Any other information as required by the Authority.
(iii) Exception reporting to be done by the National Pension System Trust to Authority.
(iv) National Pension Trust shall keep the Authority informed of the operations of the Pension Fund on periodic basis.
(c) Reports to central recordkeeping agency The pension fund shall interface with the central recordkeeping agency for:-
(i) Sending and receiving reports in the required format.
(ii) Compilation and consolidation of investment instruction by central recordkeeping agency
(iii) Confirmation Report by pension fund to central recordkeeping agency.
(iv) Daily investment report by pension fund
(v) Report of scheme wise payout position of pension fund to central recordkeeping agency
(vi) Daily Report on Net Asset Values as specified by the Authority from time to time.
(vii) Net fund receipt from National Pension System Trust Account report by PFs on different investment schemes.
(viii) Discrepancy/confirmation report on net payout.
(ix) The daily performance reports of the schemes measured using Net Asset Values
(d) Reports to other parties
(i) The pension fund shall interface and provide such reports as may be required by the National Pension System Trust, Trustee Bank, Custodian and other entities of the National Pension System architecture as may be prescribed by Authority and National Pension System Trust from time to time.
(ii) The pension fund will disclose the basis of calculating the transaction price and Net Asset Value of the various schemes in the Scheme particulars and disclose the same to subscribers at such intervals as may be specified by the National Pension System Trust and the Authority.
2. Public disclosures -Under Regulation22(8)
(a) The pension fund shall be expected to comply with the disclosure requirements specified by Authority from time to time.
(b) In order to ensure uniformity and timeliness of dispensation of information by the Authority in the interest of all stakeholders, the following public disclosures have been prescribed:
58 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4] Sl Particulars Frequency Format Time Limit Sub-heading on website 1 Latest Net Asset Value (NAV)_ (Scheme wise) Daily Up to four decimal points By 9.00 PM on the same day NAV 2 NAV History (since inception) (scheme wise- both in Tabular data as well as graphical form) Daily --- do --- NAV History 3 Scrip wise details of Portfolio of each scheme Monthly Appended below Within 10 days from the end of month Portfolio Details 4 Unaudited financial statements* along with statement of scheme portfolio Half-Yearly -----do---- (For scrip wise details of Portfolio of each scheme) before the expiry of one month from the close of each half year Financials 5 Annual Report (with Financials) and portfolio details of each scheme** Yearly -----do---- (For scrip wise details of Portfolio of each scheme) after approval by the National Pension System Trust (within 15 days) Financials 6 Investment Policy and Investment Review Mechanism Updated version at all times - Within 10 Days after Board approval Policy
7. Annual Report and Financials of pension fund.
Yearly - After AGM (within 10 days) Financial
8. Scheme wise Fee (pension fund should also simultaneously upload the Public Notice for change in fee on its website) Yearly - To be updated when revised (within 4 days) Investment Management Fee * ‘Financial Statements’ includes balance sheet, revenue account and notes, schedules and other integral reports.
** Contents of ‘Annual Report’ are as per Financial Statements and Auditor’s Report under Schedule VIII
(c) Pension Funds are advised to publish the above Public Disclosures on their respective websites at a prominent place on home page with heading ‘Public Disclosure’ and with sub-headings like NAV, Portfolio Details, Financials, Policy etc as applicable.
Scrip wise details of Portfolio of each scheme Name of the Pension Fund :
Name of the scheme :
Portfolio Statement as on……………… (month end) ¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 59 Name of the instrument ISIN No.
Industry Quantity Mkt value % of Portfolio Ratings Equity Instruments Shares 1 2 3…..
Equity oriented MFs Equity ETFs Debt Instruments - Central Government Security 1 2 …….
State Development Loans 2 …….
2 PSU / PFI Bonds:- 1 2 …….
Private Corporate Bonds:- 1 2 …….
Bank Fixed Deposits (> 1 Year) 1 2 …….
Gilt Mutual Fund 1 2 …….
Money Market Instruments:- Treasury Bills :
1 2 …….
Certificate of Deposits / Commercial Papers 1 2 …….
Application Pending Allotment 1 2 …….
Bank Fixed Deposits (< 1 Year) 1 2 …….
Cash / cash Equivalent & Net Current Assets 1 2 …….
GRAND TOTAL 60 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4] Average Maturity of Portfolio (in yrs) Modified Duration (in Yrs) Yield to Maturity (%) (annualised)(at market price) Credit Rating Exposure Central Govt. Securities State Development Loans AAA / Equivalent A1+ (For Commercial Paper) AA+ / Equivalent AA / Equivalent AA- / Equivalent A+ / Equivalent A / Equivalent A- / Equivalent BBB+ / Equivalent BBB / Equivalent BBB- / Equivalent Lower (Below Investment Grade) (out of above Net NPA ) Total Bank FD Equity Equity Mutual Funds Money Market Mutual Funds Cash / Cash Equivalent Net Current Assets Application Pending Allotment – NCDs Others Grand Total ¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 61 Units Outstanding NAV
1. Entire portfolio irrespective of the quantity, market value and percentage to NAV of any scrip should be disclosed in descending order of weightage within each sub-group. If percentage to portfolio of any security is less than 0.01%, it may be indicated by giving asterisk or any other mark instead of showing 0.00.
2. An asterisk/suitable mark should be given against debt instruments which are classified NPAs in accordance with Authority’s guidelines issued from time to time.
4. The following information may be given by way of footnotes :
a. Total NPAs provided for and its percentage to NAV.
b. Total value and percentage of illiquid equity shares.
c. NAV at the beginning and end of the period.
d. Total outstanding exposure in derivative instruments at the end of the period.
3. Total 'Infrastructure investments' may be disclosed by way of foot note.
SCHEDULE VI PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulations 12(k) and 21] CODE OF CONDUCT I. SUBSCRIBER PROTECTION
(a) Investors/Authority/National Pension System Trust (NPS Trust ) A pension fund shall make all efforts to protect the interests of subscribers and shall render the best possible service to the Authority/ National Pension System Trust having regard to the subscribers needs and the environments and its own professional skills.
(b) High Standards of Service A Pension fund shall ensure that it and its key management personnel, employees, contractors and agents, shall in the conduct of their business, observe high standards of integrity, dignity, fairness, ethics and professionalism and all professional dealings shall be affected in a prompt, effective and efficient manner. A pension fund shall be responsible for the acts or omissions of its employees and agents in respect to the conduct of its business.
(c) Exercise of Due Diligence and no Collusion A Pension fund shall at all times render high standards of service, exercise due skill and diligence over persons employed or appointed by it, ensure proper care and exercise independent professional judgment and shall not at any time act in collusion with other intermediaries in a manner which is detrimental to the subscribers.
(d) Fees A pension fund shall levy charges/ fees for the services rendered as may be determined by the Authority.
II. DISBURSAL OF AMOUNTS A pension fund shall be prompt in crediting dividends, interests or any such accrual income received or collected by it on behalf of the Authority, the National Pension System Trust or subscribers to the scheme accounts.
III. DISCLOSURE OF INFORMATION
(a)A pension fund shall ensure that adequate disclosures are made to the Authority, the National Pension System Trust or subscriber in a comprehensible and timely manner so as to enable them to make a balanced and informed decision.
(b)A pension fund shall not make any misrepresentation and ensure that the information provided to the Authority the National Pension System Trust or subscriber is not misleading.
(c) A pension fund shall not make any exaggerated statement whether oral or written to the Authority, the National 62 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4] Pension System Trust or subscribers, either about its qualification or capability to render certain services or its achievements in regard to services rendered to other Authority ,National Pension System Trusts or subscribers.
3.4 A Pension fund shall not divulge to anybody, either orally or in writing, directly or indirectly, any confidential information about the Authority, the National Pension System Trusts or subscribers, which has come to its knowledge, without taking prior permission of the Authority, the National Pension System Trusts, except where such disclosures are required to be made in compliance with any law for the time being in force.
IV. CONFLICT OF INTEREST
(a) A pension fund shall avoid conflict of interest and make adequate disclosure of its interest and shall put in place a mechanism to resolve any conflict of interest situation that may arise in the conduct of its business or where any conflict of interest arises, shall take reasonable steps to resolve the same in an equitable manner. A pension fund shall make appropriate disclosure to the Authority, the National Pension System Trust or subscribers of its possible source or potential areas of conflict of duties and interest while acting as a pension fund which would impair its ability to render fair, objective and unbiased services.
(b) A pension fund or any of its directors, or employee or an associate of the pension fund shall not, either through its account or their respective accounts or through their family members, relatives or friends indulge in any insider trading.
V. COMPLIANCE AND CORPORATE GOVERNANCE
5.1 A pension fund shall ensure that good corporate policies and corporate governance is in place. It shall not engage in fraudulent and manipulative transactions in the securities listed on any stock exchange in the country and shall not indulge in any unfair competition (including resorting to unfair means for inducing another intermediaries, the Authority or the National Pension System Trust) which is likely to harm the interests of other intermediaries or subscribers or is likely to place such other intermediaries in a disadvantageous position while competing for or executing any assignment.
5.2 A pension fund shall take adequate and necessary steps to ensure that continuity in data and record keeping is maintained and that the data or records are not lost or destroyed. It shall also ensure that for electronic records and data, up-to-date back up is always available with it.
5.3 A pension fund shall co-operate with the Authority, or any intermediary designated by the Authority, as and when required and shall not make any untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Authority or neglect or fail or refuse to submit to the Authority or other agencies with which it is registered, such books, documents, correspondence and papers or any part thereof as may be demanded/requested from time to time.
5.4 A pension fund shall ensure that any change in registration status or any penal action taken by Authority or any material change in financials which may adversely affect the interests of subscribers is promptly informed to the Authority, National Pension System Trust or and any business remaining outstanding is transferred in accordance with the instructions of the Authority and the provisions of the relevant regulations.
5.5 A pension fund shall maintain an appropriate level of knowledge and competency and abide by the provisions of any Act, regulations, circulars and guidelines of the Central Government, the Reserve Bank of India, Securities Exchange Board of India, the Authority, the stock exchange or any other applicable statutory or self-regulatory or other body, as the case may be, and as may be applicable to the Pension fund in respect of the business carried on by such pension fund. A pension fund shall also comply with the award of the Ombudsman passed under the Pension fund Regulatory and Development Authority (Redressal of Subscriber Grievance)Regulations, 2015.
5.6 A pension fund shall ensure that the Authority is promptly informed about any action, legal proceedings, initiated against it in respect of any material breach or non-compliance by it, of any law, rules, regulations, and directions of the Authority or of any other regulatory body.
VI. PENSION FUND INFRASTRUCTURE REQUIREMENTS
(a) A pension fund shall have internal control procedures and financial and operational capabilities which can be reasonably expected to protect its operations, the Authority, the National Pension System Trust or subscribers and other registered entities from financial loss arising from theft, fraud, and other dishonest acts, professional misconduct or omissions.
(b) A pension fund also registered with the Authority in any other capacity or category shall endeavor to ensure that arm’s length relationship is maintained in terms of both manpower and infrastructure between the activities carried out as a Pension fund and other permitted activities.
(c) A pension fund shall establish and maintain adequate infrastructural facility to be able to discharge its services as such Pension fund to the satisfaction of Authority, the National Pension System Trusts and the operating procedures and systems of the intermediaries shall be well documented and backed by operations manuals.
¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 63
(d) A pension fund shall create and maintain the records of all documents and data pertaining to its activities in such manner that the tracing of such document or data is facilitated in the event of loss of original records or documents for any reason.
(e) (a) A pension fund or any of his employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of his interest including long or short position in the said security has been made, while rendering such advice.
(b) in case an employee of the pension fund is rendering such advice, he shall also disclose the interest of his dependent family members and employer including their long or short position in the said security, while rendering such advice.
SCHEDULE VII PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulations 15,16,17,18 and 19 ] FINANCIAL STATEMENTS AND AUDIT REPORT ANNUAL REPORT I. Annual Report Each pension fund shall prepare a consolidated annual report comprising financial statements of all the schemes managed by them.
The annual report shall contain—
(i) Report on the operations of each scheme during the financial year and economic scenario;
(ii) Accounting Policies, Balance Sheet and Revenue Account in accordance with these regulations Paras II and III of this Schedule;
(iii) Auditor’s Report in accordance with Para IV of this Schedule;
(iv) Brief statement on the following aspects, namely :—
(a) Liabilities and responsibilities of the pension fund ;
(b) Investment objective of each scheme ;
(c) Basis and policy of investments underlying the scheme;
(d) If the scheme permits investments partly or wholly in shares, bonds, debentures and other scripts or securities whose value can fluctuate, a statement on the following lines:
“The price and redemption value of the units, and income from them, can go up as well as down with the fluctuations in the market value of its underlying investments”;
(e) Comments on the performance of the scheme, with full justification with possible comparison with other benchmark yields, if any, as specified by the Authority.
(f) Statement giving “key statistics” of schemes in accordance with ParaV of this Schedule;
(g) Abridged version of the Balance sheet as per Para VI of the Schedule.
(h) Abridged version Revenue account as per para VII of the Schedule.
(i) Notes to account as per Para VIII of the schedule.
II. Contents of Balance Sheet:
(i) The Balance Sheet shall give scheme wise particulars of its assets and liabilities. It shall also disclose, inter alia, accounting policies, valuation of investments and other important areas.
(ii) The balance-sheet shall disclose under each type of investment, the aggregate carrying value and market value of non-performing investments
(iii) The Balance Sheet shall disclose the per unit Net Asset Value (NAV) as at the end of the accounting year.
(iv) The Balance Sheet shall give against each item, the corresponding figures as at the end of the preceding financial year.
(v) The notes to the Balance Sheet shall disclose the following information regarding investments:—
(a) all investments shall be grouped under the major classification given in the balance sheet;
(b) under each major classification, the total value of investments falling under each major industry group (which constitutes not less than 5 per cent of the total investment in the major classification) shall be disclosed together with the percentage thereof in relation to the total investment within the classification;
(c) a statement of investments showing the name of the companies in which investments have been made including the amount of investment in each company by each scheme and the aggregate investments made by all schemes in the associates and group companies of the pension fund, if any;
64 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4]
(d) if brokerage, custodial fees or any other charges for services are paid to or payable to any entity in which the PF or its major shareholders have a substantial interest (being not less than 10% of the equity capital), the amounts debited to the Revenue Account or amounts treated as cost of investments in respect of such services shall be separately disclosed together with details of the interest of the pension fund or its major shareholders;
(e) the basis on which fees have been paid to pension fund and the computation thereof;
(f) aggregate value of purchases and sales of investments during the year and expressed as a percentage of average daily net asset value;
(g) where the non-traded investments which have been valued “in good faith” exceed 5% of the Assets under management (AUM) at the end of the year, the aggregate value of such investments;
(h) movement in unit capital shall be stated;
(i) the total income of the scheme shall include unrealised depreciation or appreciation on investments.
(vi) Provisions for doubtful deposits, doubtful debts and for doubtful outstandings and accrued income shall not be included under provisions on the liability side of the balance sheet, but shall be shown as a deduction from the aggregate value of its relevant asset.
(vii) Disclosure shall be made of all contingent liabilities showing separately uncalled liability on partly paid shares and other commitments with specifying details.
(viii) The accounting policies shall be as per Para IX of the Schedule.
Major Headings of Balance Sheet ASSETS SIDE OF THE BALANCE SHEET:
I. The assets of the balance sheet shall be grouped into the following categories :
- Investments (Long term and short term) - Deposits - Other Current Assets II. INVESTMENTS (Long term and short term):
The following types of investments shall be separately disclosed (only those heads under which investments is permitted to be kept):
(i) Equity shares;
(ii) Preference shares;
(iii) Debentures and Bonds listed/awaiting listing on a recognized stock exchange;
(iv) Central and State Government Securities (including treasury bills);
(v) Commercial Paper;
(vi) Others- Mutual Funds etc.
III. DEPOSITS Distinguishing between :
- Deposits with scheduled banks;
- Others.
IV. OTHER CURRENT ASSETS Distinguishing between:
- Balances with banks in current/savings account;
- Cash on hand;
- Sundry Debtors;
- Contracts for sale of investments;
- Outstanding and accrued income;
- Advance, Deposits etc.;
- Shares/debentures/ others application money pending allotment (for this age wise disclosure is to be made along with security name);
- Others.
¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 65 LIABILITIES SIDE OF THE BALANCE SHEET I. Liabilities side of the balance sheet shall be divided into the following groups :
(i) Unit Capital;
(ii) Reserves & Surplus;
(iii) Current Liabilities and Provisions.
II. Unit Capital:
Distinguishing between:
- Initial capital;
- Unit capital (including number of units and face value per unit).
III. Reserves & surplus Distinguishing between:
- Unit Premium Reserve (Optional) - General reserve;
- Any other reserve (disclosing its nature);
- Appropriation account;
-Opening balance, transfer from/to reserve, closing balance shall be separately disclosed for each above type of reserve.
IV. Borrowings V. Current liabilities and provisions Distinguishing between the following current liabilities and provisions Current liabilities:
- Sundry creditors;
- Contract for purchase of investments;
- Unclaimed distributed income;
Provisions (Indicate nature):
VI. Contingent liabilities - Disclosure should be made of all contingent liabilities, showing separately:—
(i) Uncalled liability on partly paid shares;
(ii) Other commitments; and
(iii) Others (specifying details).
III. Contents of Revenue Account:
(i) The Revenue Account shall give scheme wise particulars of the income, expenditure and surplus of the pension fund.
(ii) If profit on sale of investments shown in the Revenue Account includes profit/loss on inter-scheme transfer of investments within the same pension fund the aggregate of such profit recognised as realised, shall be disclosed separately without being clubbed with the profit/loss on sale of investments to third parties.
(iii) The Revenue Account shall indicate the appropriation of surplus by way of transfer to reserves.
(iv) The following disclosures shall also be made in the Revenue Account:
(a) provision for aggregate value of doubtful deposits, debts and outstanding and accrued income;
(b) profit or loss on sale and redemption of investments may be shown on a net basis;
(c) custodian, Trustee Bank and central recordkeeping agency charges
(d) Total income and expenditure expressed as a percentage of average net assets, calculated on a daily basis.
Major Headings of Revenue Account Income:
- Dividend;
66 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4] - Interest;
- Profit on sale/redemption of investments (other than inter-scheme transfer/sale);
- Profit on inter-scheme transfer/sale of investments;
- Unrealized gain on appreciation in investments - Other income (indicating nature).
Expenses and losses:
- Unrealized losses in value of investments - Provision for outstanding accrued income considered doubtful;
- Provision for doubtful deposits and current assets;
- Loss on sale/redemption of investments (other than inter-scheme transfer/sale);
- Loss on inter-scheme transfer/sale of investments;
- Management fees;
- Trusteeship/regulatory fees;
- Publicity expenses;
- Audit fees;
- Custodian fees;
- Trustee Bank fees - Central recordkeeping agency fees Less : Amount recovered on sale of units on account of central recordkeeping agency charges Note :
(i) Accounting policy in respect of recognition of revenue and income from investments (including dividend and interest) shall be disclosed by way of a note.
(ii) The total income and expenditure expressed as a percentage of average net assets, calculated on a daily basis should be indicated.
IV. Scheme Auditor’s Report
(i)The auditor shall state whether;-
1. he has obtained all information and explanations which, to the best of his knowledge and belief, were necessary for the purpose of his audit;
2. the Balance Sheet and the Revenue Account are in agreement with the books of account of the scheme;
3. whether proper books of accounts of each scheme have been maintained;
4. all transaction expenses in excess of the limits contractually agreed to/approved by Authority are borne by the pension fund and are not charged to the Net Asset Value;
5. the Balance Sheet and Revenue Account of the Scheme dealt with by this Report comply with these regulations and the Accounting Standards notified under the Companies Act, to the extent made applicable by the regulations.
(ii) The auditor shall give his opinion as to whether;-
1. the Balance Sheet gives a true and fair view of the scheme wise state of affairs of the fund as at the end of the financial year,
2. the Revenue Account gives a true and fair view of the scheme wise surplus/deficit of the fund for the financial year.
(iii) The Auditor shall further certify that;-
1. Investments have been valued in accordance with the guidelines issued by the Authority;
2. Transaction and claims/ fee raised by different entities are in accordance with the prescribed fee.
(iii) The Auditor shall also submit a separate report called as “NPS Scheme - Detailed Audit Report” (to be referred as NPS-DAR) along with the scheme audit report / scheme accounts for a particular financial year. A copy of the said Audit Report should be given to the Board of Pension Fund. The contents of the report would be based on the format prescribed by Authority/NPS Trust. The Board of Directors of Pension Fund should submit a Compliance Report within two months of the receipt of Detailed Audit Report. NPS-DAR will be a combined report for all the NPS Schemes. The Auditor will give a certificate in the following format;
¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 67 To The Board of Trustees National Pension System Trust 1st Floor, ICADR Building, 6, Vasant Kunj Institutional Area- Phase II, New Delhi 110 070 We have conducted the Detailed Audit of under mentioned schemes of National Pension System of …………………………………… (The ‘Pension Fund Manager’) for the Period/Year …. as per the check list provided to us by the NPS Trust and hereby submit the NPS-DAR for your perusal.
Schemes Year/Period Scheme Name From 1st April …to 31st March …… Scheme Name From 1st April …to 31st March …… Scheme Name From 1st April …to 31st March …… Scheme Name From 1st April …to 31st March …… Scheme Name From 1st April …to 31st March …… Scheme Name From 1st April …to 31st March …… Scheme Name From 1st April …to 31st March …… We report as under:
1. We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit,
2. In our opinion, proper books of accounts of each scheme have been maintained.
3. Our procedures covered all the areas listed in the recommended NPS-DAR Checklist (Enclosed, duly signed by us under reference to this certificate.)
4. Further, all deviations with regards to applicable accounting principles, regulations and guidelines for preparation of accounts are being disclosed in the attached report.
Based on our test checking of the records maintained by the pension fund, we certify as under:
1. The system, procedures and safeguards followed by the pension fund are adequate.
2. The terms and conditions of registration of these regulations, Investment Management Agreement signed with the National Pension System Trust are being complied with by the Pension Fund.
3. Directions issued by the Authority from time to time or any other statutory requirements have been followed.
4. Affairs of the pension fund are being conducted in a manner which is in the interest of the subscribers.
5. All transaction expenses in excess of the limits contractually agreed to / approve by Authority are borne by the pension fund and are not charged to NAV.
Yours truly For …… (Name of Firm) Chartered Accountants Firm Regn. No… …….. (Name of Partner) Partner Membership No:
Place:
Date:
68 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4] V. Key Statistics Name of the Pension Fund :
Key Statistics for the year / period ended _____________ Scheme A Scheme B As at As at As at As at Current Year Previous Year Current Year Previous Year
1. NAV per unit (Rs.):
Open High Low End
2. Closing Assets Under Management (Rs. in Lakhs) End Average (AAuM)
3.Gross income as % of AAuM
4. Expense Ratio:
a. Total Expense as % of AAuM (scheme wise) b. Management Fee as % of AAuM (Scheme wise)
5. Net Income as a percentage of AAuM
6. Portfolio turnover ratio
7. Total Dividend per unit distributed during the year / period (scheme wise)
8. Returns: (%) a. Last One Year Benchmark b. Since Inception Benchmark c. Compounded annualised yield (%) Last 1 year Last 3 years Last 5 years Since launch of the scheme (date of launch to be given)
1. Gross income = amount against (A) in the Revenue account i.e. Income.
2. Net income = amount against (C) in the Revenue account i.e. NET REALISED GAINS / (LOSSES) FOR THE YEAR / PERIOD
3. Portfolio Turnover = Lower of sales or purchase divided by the Average AUM for the year/period.
4. AAUM=Average daily net assets 5 'Compounded annualised yield' is to be calculated based on the following formula:
`= (1 + cumulative return) i/n -1 (where n = 365/no. of days)
6. NAV= (Market value of Investment held by scheme + value of current assets- value of current liability and provisions , if any )/ (no. of units at the valuation date (before creation/ redemption of units) ¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 69 ABRIDGED BALANCE SHEET FORMAT Name of the Pension Fund :
Abridged Balance Sheet as at _____________ Scheme A Scheme B As at As at As at As at Current Year Previous Year Current Year Previous Year LIABILITIES 1 Unit Capital 2 Reserves & Surplus
2.1 Unit Premium Reserve
2.2 Unrealised Appreciation Reserve
2.3 Others 4 Current Liabilities & Provisions
4.1 Provision for doubtful Income/Deposits
4.2 Other Current Liabilities & Provisions TOTAL ASSETS 1 Investments Equity Debenture Bonds CG/ SDL Money Market Others Total Investments 3 Other Current Assets
3.1 Cash & Bank Balance
3.3 Others TOTAL 70 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4] ABRIDGED REVENUE ACCOUNT FORMAT Name of the Pension Fund :
Abridged Revenue Account For The Year / Period Ended ___________ Scheme A Scheme B As at As at As at As at Current Year Previous Year Current Year Previous Year 1 INCOME
1.1 Dividend
1.2 Interest
1.4 Realised Gains on Interscheme transfer
1.5 Realised Gains on sale / redemption of investments
1.7 Other Income ( A ) 2 EXPENSES
2.1 Realised Losses on Inter scheme transfer
2.2 Realised Losses on sale / redemption of investments
2.3 Investment Management fees
2.4 Custodian fees
2.5 Bank Charges
2.6 Other operating expenses ( B ) 3 NET REALISED GAINS / (LOSSES) FOR THE YEAR / PERIOD (A -B = C) 4 Net Change in Unrealised Depreciation/ appreciation in value of investments 7 NET SURPLUS / (DEFICIT) FOR THE YEAR / PERIOD Notes to Accounts as specified below Guidance Note 1 : Provide details of significant items indicating nature & corresponding amount in Notes to accounts
2. Unrealised Depreciation/Appreciation to be computed by each asset category and shown on an aggregated basis.
This should take into account change in unrealised depreciation/ appreciation for the year/period and write back of unrealised depreciation/ appreciation provided in the previous year end.
¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 71 NOTES TO ACCOUNTS - ANNEXURE TO THE ABRIDGED BALANCE SHEET AND REVENUE ACCOUNT Name of the scheme :
Notes to Accounts - Annexure to the Abridged Balance Sheet and Revenue Account for the Year / Period ended _____________ Sr.
No.
Particulars 1 Investments:-
1.1. Note confirming that Investments of the Schemes are in the name of the NPS Trust.
1.2. Open Position of derivatives (outstanding market value & % to Net Assets as of the Year end).
1.3. Investments in Associates and Group Companies: Provide details of issuer, nature of instruments, amount, aggregate investments by all schemes.
1.4. Open position of Securities Borrowed and / or Lend by the scheme.
1.5. Details of NPA: Aggregate market value and provision thereof.
1.6. Aggregate Unrealised Gain / Loss as at the end of the Financial Year / Period and percentage to net assets.
1.7. Aggregate Value of Purchase and Sale with Percentage to average assets.
1.8. Non-Traded securities in the portfolio: Provide Aggregate Value of Equity, Debt & Money Market Instruments and percentage to net assets.
2 Details of Transaction with Associates and Group Companies. Provide details of name of associate, nature of payment and amount 3 Unit Capital movement during the year ended / period ended. Scheme wise details of movement in units - opening, subscription, redemption, closing. Indicate scheme wise face value of units.
4 Prior Year Comparison - a suitable statement that prior year figures have been reclassified whenever necessary to conform to current years' presentation.
5 Contingent Liability. Provide details of nature and amount.
Guidance Note: Provide corresponding previous year/period figures for all the above disclosures.
IX. Accounting Policies The Accounting Policies related to schemes has to be complied by pension fund for preparation of financial statements and calculation of Net Assets Value:
1. The Pension Fund should maintain their scheme-wise books of account on an accrual basis. Investment should be stated as per the valuation guidelines issued by the Authority from time to time, at the Balance Sheet date or date of computation of asset value or Net Asset Value.
2. Investments should be tallied with the custodian records and units should be tallied with Central Recordkeeping Agency records on daily basis.
3. All allowable expenses and incomes accrued upto the valuation date, which are considered for computation of asset value/ NAV, major expenses like management fees and other allowable periodic expenses like custodian charges etc, should be accrued on a day-to-day basis. The period to be considered for accrual will be the financial year.
4. Dividend income earned by a scheme should be recognised, not on the date the dividend is declared, but on the date the share is quoted on an ex-dividend basis.
72 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4]
5. In respect of all interest-bearing investments, income must be accrued on a day to day basis. Therefore, when such investments are purchased, interest paid for the period from the last interest due date upto the date of purchase must not be treated as a cost of purchase but must be debited to Interest Recoverable Account. Similarly interest received at the time of sale for the period from the last interest due date upto the date of sale must not be treated as an addition to sale value but must be credited to Interest Recoverable Account.
6. In determining the holding cost of investments and the gains or loss on sale of investments, the “weighted average cost” method must be followed.
7. Transactions for purchase or sale of investments should be recognised as of the trade date and not as of the settlement date, so that the effect of all investments traded during a financial year are recorded and reflected in the financial statements for that year. Where investment transactions take place outside the stock market, for example, acquisitions through private placement or purchases or sales through private treaty, the transaction should be recorded in the event of a purchase, as of the date on which the scheme obtains in enforceable obligation to pay the price or, in the event of a sale, when the scheme obtains an enforceable right to collect the proceeds of sale or an enforceable obligation to deliver the instruments sold.
8. Bonus shares to which the scheme becomes entitled should be recognised only when the original shares on which the bonus entitlement accrues are traded on the stock exchange on an ex-bonus basis. Similarly, rights entitlements should be recognized only when the original shares on which the right entitlement accrues are traded on the stock exchange on an ex-rights basis.
9. The cost of investments acquired or purchased will include applicable taxes and stamp charges but exclude brokerage, applicable taxes on brokerage and other transactional charges. In respect of privately placed debt instruments any front-end discount offered should be reduced from the cost of the investment.
10. All taxes which are leviable and actually paid shall be charged to the NAV of the Fund and be borne by the Subscriber. Any subsequent refund on this account, if any, should be added to the scheme/fund as income.
11. The Investment Management Fee is inclusive of all transaction related charges such as brokerage, transaction cost etc. except custodian charges and applicable taxes. The Investment Management Fee is calculated on the daily assets managed by the pension fund. The fees to be paid to the Authority will not be charged to the scheme.
12. In respect of non-performing assets, recognition, classification and provisioning should be in compliance with the guidelines issued by the Authority.
SCHEDULE VIII PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulation 10(1)(c)] BANKING AND CENTRAL RECORDKEEPING AGREEMENTS Before obtaining the certificate of commencement of business, the pension fund shall undertake to enter into a banking agreement with Trustee Bank and central recordkeeping agency as per details given below:
1. The pension fund shall provide electronic interconnectivity to the central recordkeeping agency and Trustee bank. The pension fund shall need to be able to adapt to future changes including changes on account of technology advancements, changes in system specifications including number of subscribers, number of schemes, and services and functional obligations specified by the Authority.
2. Funds for investment purposes as referred to hereinabove, would comprise past, present and future investment and periodical income, redemption and sale proceeds actually received there from and transferred to the credit of the National Pension System Trust, National Pension System Trust A/c at a designated branch of the Trustee Bank with which the investment account of the Pension Fund is held and specifically earmarked for investment purposes as above.
3. The details of the designated branch and the Trustee Bank would be as per arrangements made and approved by the Authority and notified from time to time.
4. Where and as applicable, the central recordkeeping agency shall cause to transfer the netted fund to the designated branch of the Trustee Bank.
5. The funds accepted under this Agreement shall be credited to be held in a separate investment account in the name of the National Pension System Trust with the designated branch with due notice to the National Pension System Trust. All receipts, payments, income, expenses, sale proceeds, purchase, cost of transactions of investments shall be debited or credited, as the case may be, to this account.
6. For the removal of doubts, while the account of the pension fund with the Trustee Bank where from the investments are to be made and the expenses to be incurred in connection with the investment thereof by ¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 73 pension fund on behalf of the National Pension System Trust shall be maintained by the pension fund, the National Pension System Trust shall maintain the account as per the agreement with the Trustee Bank.
7. The pension fund shall maintain scheme wise bank account with the Trustee Bank to receive funds from the National Pension System Trust account maintained with the Trustee bank and remit funds into the same National Pension System Trust account as per instructions of the central recordkeeping agency from time to time.
8. Where and as applicable, the pension fund shall cause to transfer the withdrawal amount to the subscribers Bank account or in any other manner that is prescribed by the Authority/ National Pension System trust from time to time.
SCHEDULE IX PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulation 10(1)(c)] CUSTODIAL AGREEMENTS Before obtaining the certificate of commencement of business, the pension fund shall undertake to enter into a custodian agreement with the National Pension System custodian to carry out the custodial services for the schemes of the fund with the prior approval of the National Pension System Trust as detailed below.
1. Securities shall be purchased by the pension fund on behalf of, and in the name of the National Pension System Trust. The National Pension System Trust shall be the registered owners of these securities and funds. However, individual National Pension System subscribers' shall remain beneficial owners of these assets and funds.
2. The pension fund shall interface with the National Pension System custodian to receive detailed information and reports from the custodian. Accordingly, the pension fund shall provide electronic interconnectivity to custodian.
3. The pension fund shall ensure Scheme wise segregation of securities account.
4. The pension fund shall not hypothecate, pledge and lend any assets or property of the Fund without the approval of the National Pension System Trust.
5. The pension fund shall enter into transactions relating to securities only in dematerialised form. The pension fund shall, for securities purchased in physical form get the securities transferred in the name of the National Pension System Trust on account of the scheme in dematerialised form except for authorised investments that are available only in physical form.
6. The pension fund shall obtain from the custodian of the scheme, from time to time, such financial reports, proxy statements and other information relating to the business and affairs of the scheme as the Investment Manager may reasonably require in order to discharge its duties and obligations, or to comply with the Authority’s guidelines or directions, or any applicable law, rules and regulations.
SCHEDULE X PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulation 22 (9)] INVESTMENT AND RISK MANAGEMENT COMMITTEE I INVESTMENT COMMITTEE
1. Pension fund shall constitute an Investment Committee consisting of two directors, the Chief Executive Officer and the Chief Investment Officer or Fund Manager in case CEO and CIO are the same official.
2. Pension fund shall draw up an investment policy and place the same before the board of directors for its approval. In framing such a policy, the board will be guided by issues relating to liquidity, prudential norms, exposure limits, stop loss limits in securities trading, management of all investment and market risks, management of assets liabilities mismatch, investment audits and investment statistics and the provisions of the Authority’s guidelines or directions.
3. The investment policy as approved by the board will be implemented by the Investment Committee, which shall keep the board informed periodically about its activities.
74 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4]
4. The board shall review its investment policy and its implementation on an half- yearly basis or at such short intervals as it may decide and make such modifications in its existing investment policy as are necessary to bring them in tune with the requirements of law and regulations in regard to protection of subscribers' interest and pattern of investment laid down by the Authority.
5. The details of the investment policy or its review as periodically decided by the board shall be submitted to the National Pension System Trust within thirty days of its decision thereto. The National Pension System Trust may call for further information from time to time from the pension fund as it deems necessary and in the interest of the subscribers.
6. The Investment Committee shall also review the changes, if any, in its team and any other matter relating to investments and forward its recommendation to the Board of Directors of Pension Fund.
7. The Investment Committee may engage services of investment professionals, as may be required.
II RISK MANAGEMENT COMMITTEE
1. Pension fund shall constitute a Risk Management Committee which shall consist of at least one independent director, the Chief Executive Officer, Chief Investment Officer or fund manager in case CEO and CIO are the same official and the Risk or Compliance Officer. The director should not be the same as the one on the Investment Committee.
2. The pension fund shall draw up a Risk Policy and place the same before its board of directors for its approval. In framing such a policy, the Board shall be guided by:
(a) Risk management functions
(b) Disaster recovery and business contingency plans
(c) Insurance cover against risks
(d) Ensuring a risk adjusted return to subscribers consistent with the protection, safety and liquidity of such funds.
3. The Risk policy as approved by the Board will be implemented by the Risk Management Committee, which shall keep the Board informed periodically about its activities.
4. The Board shall review the Risk policy on a half-yearly basis or at such intervals as it may be decided and make such modifications in its existing risk policy as are necessary to bring them in tune with the requirements of law and regulations. The Board shall periodically update the National Pension System Trust on the same.
5. The Risk Management Committee may engage services of risk management professionals, as may be required.
SCHEDULE XI PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY (PENSION FUND) REGULATIONS, 2015 [See regulation 10(1)(a)] INVESTMENT MANAGEMENT AGREEEMNT (Format) Before obtaining the certificate of commencement of business, the pension fund shall enter an agreement with the National Pension System Trust inter alia containing the following clauses:
1. The pension fund shall act as the Investment Manager of the schemes with respect to the investment and reinvestment of the investible funds including cash, securities and other properties comprising the assets of each scheme in accordance with the investment policies, guidelines or directions issued by the Authority from time to time.
2. The pension Fund shall assume day to day investment management of the Schemes and, in that capacity, make investment decisions and manage the Scheme in accordance with the provisions of the Act , rules, guidelines, directions, notifications, circulars or regulations thereunder.
3. The pension fund shall invest funds made available to it by the Trustee Bank within the time lines specified by the Authority or the National Pension System Trust from time to time.
4. The pension fund shall exercise all due diligence, prudence, promptness and vigilance in carrying out its duties and in protecting the rights and interests of the subscribers.
5. The pension fund shall avoid all nature of speculative transactions or dealing in investments..
6. The pension fund shall be responsible for the acts of omissions or commissions, if any, by its employees or the persons whose services have been procured by the pension fund and shall remain liable to compensate for the same at all times.
7. The pension fund shall deploy well qualified professionals/officers with track record of integrity to manage the funds.
8. The pension fund shall manage the Fund schemes independently of other activities and take adequate steps to ensure that the interests of the subscribers are not being compromised in any manner.
¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 75
9. The pension fund shall (i) not undertake any other business activities except activities relating to pension fund for schemes regulated by the Authority or any other activity as permitted by the Authority and (ii) not be entitled to charge any fees on investment of its own assets in its schemes.
10. The pension fund shall maintain books and records and comply with the disclosure requirements specified by the Authority or National Pension System Trust from time to time and as detailed in Schedule Ill.
11. The valuation of the schemes would be done in accordance with the regulations, guidelines or directions issued by the Authority from time to time.
12. The pension fund shall submit a periodical report on the functioning of the fund to the National Pension System Trust or at such intervals and in such manner as may be required or called for by the National Pension System Trust or the Authority. Pension fund shall also send any additional reports, information or data, without fail as may be required or called for by the Pension System Trust or Authority from time to time. Besides the above pension fund shall submit to the National Pension System Trust, reports on quarterly basis or at such intervals in specified formats of its activities and the compliances with the guidelines.
13. The pension fund shall provide electronic interconnectivity to the Authority, National Pension System Trust, central recordkeeping agency, custodian, Trustee Bank and other service providers as advised or specified by the Authority or National Pension System Trust from time to time. The pension fund will need to be able to adapt to future changes including changes on account of technology advancements, changes in system specifications including number of subscribers, number of schemes, and services and functional obligations prescribed by the Authority.
14. The pension fund shall not give any undue or unfair advantage to any associates or deal with any of the associates of the pension fund in any manner detrimental to interest of the subscribers.
15. The pension fund shall not utilise the services of the sponsor or any of its associates, employees or their relatives, for the purpose of any securities transaction
16. The pension fund must take prior approval of National Pension System Trust for any proposed transactions or engagement of a related party and must provide reasons for the proposed transactions or engagement except investments of National Pension System Trust funds within the specified threshold limit. It shall make disclosure of such transactions undertaken to the National Pension System Trust in its periodic reports.
17. The pension fund shall not purchase or sell securities through any broker which is average of 5 per cent or more of the aggregate purchases and sale of securities under all schemes made by the pension fund unless the pension fund has recorded in writing the justification for exceeding the limit of 5 per cent and reports of all such investments are sent to the Authority the National Pension System Trust on a quarterly basis:
18. Provided that the aforesaid limit of 5 per cent shall apply for a annually .
19. Pension fund shall enter into such agreements with the permission of the Authority as is necessary for effective discharge of its responsibilities.
20. Pension fund shall provide information regarding performance, NAV history, portfolio composition under its schemes, scheme financials. to subscribers on a periodic basis as specified by the Authority, the National Pension System Trust from time to time including uploading of such information in electronic form on the website of the pension fund.
21. Pension fund shall ensure that the pension fund complies with all the provisions of the guidelines and that the investments made by the fund managers are in the interest of subscribers.
22. The pension fund shall not invest any part of the pension fund outside the territory of India either directly or indirectly.
23. The pension fund shall constitute an Investment Committee and a Risk Committee. The constitution and functions of the Investment / Monitoring Committee are as set forth in Schedule VI
24. The pension fund shall provide the National Pension System Trust with the reports specified in Schedule VII and must take reasonable steps to ensure that these reports are complete and accurate in all material respects to the extent the necessary information is within the reasonable control of the Pension Fund.
25. The pension fund shall discharge its duties with adequate care, caution, prudence, promptness and due diligence and shall be liable to indemnify the National Pension System Trust for any loss or damages caused to the National Pension System Trust out of bad faith, negligence, fraud, misconduct and or misdemeanor, improper or unethical practices, infringement of intellectual property rights, breach of fiduciary duty, breach of trust, breach of confidentiality, breach of contract, inaction, or any breach of applicable law, guidelines, rules, regulations or directions issued by the Authority or of the provisions of the Act, regulations or guidelines on the part of pension fund or its employees, agents or subagents.
26. The pension fund is authorised and responsible to collect interest on maturity, redemption and sale proceeds relating to the investments, on due dates and credit them to the appropriate accounts of the National Pension System Trust in time. While doing so, it shall be the duty of the pension fund to inform the relevant institutions and authorities that the interest received by the National Pension System Trust is not liable for deduction of tax at source under the Income-tax Act.
27. Despite the above, if any tax is deducted at source (TDS) on such investments, it shall be the entire responsibility of the pension fund to obtain the refund of such tax within the financial year on behalf of the National Pension System Trust, at its own cost and expense, failing which the pension fund shall reimburse the 76 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4] National Pension System Trust, of the said amounts, being deducted as tax, upon being notified by the National Pension System Trust.
28. The pension fund is authorised to execute on behalf of the National Pension System Trust all writings, forms, returns, applications, documents, as may be necessary to be filed with a company, organisation, institution, authority, government body or department, etc. in any manner relating to the management of the National Pension System Trust investments in such manner as the pension fund may deem fit in accordance with the applicable law and for the benefit of subscribers' only and to protect their interest.
29. The pension fund shall exercise the voting rights on behalf of the National Pension System Trust as per the voting policy of the Authority in co-ordination with the National Pension System Trust.
30. The funds shall be credited to a separate investment account in the name of the National Pension System Trust with the designated branch of the Trustee Bank. All receipts, payments, income, expenses and cost of transactions of investments shall be debited or credited to this account. The pension fund shall not be entitled to recovery of its remuneration/fee/charges, if any, from this account.
31. The Investment account of the pension fund with the designated branch of the Trustee Bank shall be operated by the pension fund, whereas the National Pension System Trust shall maintain the account as per the agreement with Trustee Bank.
32. Without prejudice to any other clauses of the agreement all/any securities and other assets acquired by pension fund on behalf of the National Pension System Trust be kept at custodian facilities as detailed in the Schedule IX.
33. The pension fund is authorised to take such legal proceedings on behalf of the National Pension System Trust as may be necessary for the protection of the National Pension System Trust's investments including interest income and to engage advocates, counsel or other representatives for the effective execution of the claims on behalf of the National Pension System Trust as per the National Pension System Trust guidelines. If the National Pension System Trust requires the pension fund To undertake any proceedings with respect to securities or investments which involve payment of money or render the pension fund materially liable for the payment of money or incurring liability of some form, the National Pension System Trust shall provide indemnity to the pension fund mutually agreed by the parties. However, no such indemnity will be provided to the pension fund if the reasons for payment of money by the pension fund were on account of any failure, inaction, delay, error, omission or commission on the part of pension fund.
34. The National Pension System Trust may authorise the pension fund to engage the services of independent legal and/or tax consultants and any other consultants, as may be required for the fund management or any allied activity excluding core functions of pension fund, as may be specified by the Authority, the National Pension System Trust from time to time:
Provided that the National Pension System Trust may specify from time to time the limit on the expense that may be incurred towards such external consultants.
35. Upon request by the pension fund, the National Pension System Trust shall deliver to it such proxies, power of attorney or other instruments as may be necessary in connection with the performance by the pension fund or it's sub-agent, custodian their respective obligations under this agreement or for the operation of the bank account.
36. Conflicts of Interest- The pension fund must pro-actively identify and disclose any conflicts of interest that arise or may arise. These may relate to the pension fund itself or to service providers engaged by the pension fund.
The pension fund must promptly advise the National Pension System Trust as to how these conflicts of interest are to be managed prior to taking any action affected by these conflicts of interest.
37. The pension fund shall ensure, at all times, separation between its staff responsible for investments, settlement and book-keeping, distribution and sales, if any. The pension fund shall ensure, at all times, adequate firewalling between the investments of the sponsor and the pension fund. Notwithstanding the above, the National Pension System Trust or the Authority shall be fully empowered to give directions to the pension fund to forthwith remove such issue or /instances of conflict of interest without causing any prejudice to the investments in any manner.
38. The pension fund shall provide information on outsourcing arrangements, if any, to the National Pension System Trust, provided that core functions of the pension fund shall not be outsourced in any manner. The pension fund shall not absolve itself of any responsibility for the outsourced activities and shall be liable for the same.
39. The pension fund shall ensure access to all records, data or any other relevant material to the National Pension System Trust or to the representatives of the Authority for ensuring necessary supervision (both on-site and offsite) at all times including inspection of records.
40. Confidentiality -Except as required by law or regulation , the pension fund may not directly or indirectly disclose to any other person, or use or permit to be disclosed without the prior written consent of the other party and each party must keep all such information confidential, except where publicly available . The confidentiality shall also extend to such other information as may be provided to the pension fund by other intermediaries like Trustee Bank, central recordkeeping agency in relation to National Pension System. The pension fund shall also execute a separate non-disclosure agreement to give further effect to this clause.
This obligation on the part of the pension fund shall survive till ten years after the termination/expiry of this registration certificate.
¹Hkkx IIIµ[k.M 4º Hkkjr dk jkti=k % vlk/kj.k 77
41. The National Pension System Trust or the Authority may use the information, correspondence and documentation, facts, figures, data and deliverables provided by the pension fund , in any appropriate manner as deemed fit, for its own purposes. Nothing in this clause shall prevent the pension fund from disclosure of pertinent information to subscribers particularly the NAV value and composition of portfolio under the schemes.
42. Privacy-The pension fund must comply with all applicable privacy laws or data protection laws in force from time to time, including the privacy code and any guidelines issued by Government of India, and agree to cooperate in the resolution of any complaint under or relating to any of those laws, codes or guidelines.
43. Security-The pension fund must have appropriate security policy and standards to protect information within its control from unauthorised access and will ensure that its officers or supervised agents comply with those policies and standards.
44. Non- exercise of any of the rights, available to the National Pension System Trust or the Authority under this regulation shall not be construed as waiver by the Authority or National Pension System Trust of such rights and pension fund shall remain liable for non-performance or breach of this agreement to National Pension System Trust.
45. Proper Instructions The National Pension System Trust shall certify to the pension fund the names and signatures and scope of authority of all persons authorised to give proper instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the National Pension System Trust. Such certificate may be accepted and relied upon by the pension fund as conclusive evidence of the facts set forth therein and may be considered in full force and effect until receipt of similar certificate to the contrary.
46. The pension fund shall certify to the National Pension System Trust the names and signatures and scope of authority of all persons authorised to receive proper instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the pension fund . The service of any notice, request, direction, instruction, certificate or instrument on such authorised persons shall be deemed to be effective notice or service to the pension fund .
47. The National Pension System Trust and pension fund may vary their respective authorized persons by notice to the other.
48. The pension funds shall submit to the exclusive jurisdiction of the Securities Appellate Tribunal at New Delhi only.
49. Exclusivity-The key personnel of the pension fund shall exclusively service only the pension fund company and the schemes managed by them under the agreement. Any change in the key personnel shall be duly intimated to the National Pension System Trust or the Authority. Key personnel shall include the Chief Executive Officer, CEO cum Chief Investment Officer, Chief Investment Officer/Fund Manager, Compliance Officer and Operations Manager within 15 days of change.
50. Where the pension fund or any its nominees, officers, servants have by any acts of omission or commission on its/their part, committed any breach of the Act , regulations or guidelines or have failed to discharge its duty with due care and diligence or have failed to observe or perform any representation, warranty or undertaking given under the agreement, thereby causing any loss to the fund, in any manner, either directly or indirectly, then besides any liability as provided elsewhere under this agreement, the pension fund shall be liable in terms of the provisions of the Act and the regulations.
51. Ownership and Intellectual Property rights -The ownership rights, intellectual property rights and all other rights relating to ownership of all the record, data, statistical returns and information whether in electronic form, or physical form or in any other form obtained collected and/or required to be maintained by the pension fund and relating to the schemes managed by the pension fund shall vest in the Authority.
No person other than the Authority shall have any ownership rights or any other rights over any data or information in the possession of the pension fund. The pension fund will not, without the prior permission of Authority, produce / share such data or information as evidence or for any other purpose except as required by the due process of law. It shall be the responsibility and duty of the pension fund to maintain absolute confidentiality of such records/data/information and to produce these as and when called for by the Authority.
HEMANT G. CONTRACTOR, Chairperson [ADVT-III/4/Exty./203/15/(52)] Printed by the Manager, Government of India Press, Ring Road, Mayapuri, New Delhi-110064 and Published by the Controller of Publications, Delhi-110054.