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CS Executive · Capital Market and Securities Laws · Mutual Funds

Before SEBI suspends or cancels the certificate of registration of a registered mutual fund under Section 12(3) of the SEBI Act, which safeguard must be observed?

SEBI must give the person concerned a reasonable opportunity of being heard before suspending or cancelling the registration certificate. This is the proviso to Section 12(3); no Central Government approval, unit holder resolution or prior court conviction is needed.

  1. AThe person concerned must be given a reasonable opportunity of being heardCorrect
  2. BThe Central Government must approve the order
  3. CThe unit holders must pass a resolution by majority
  4. DA court must first convict the sponsor

Explanation

Section 12(3) lets the Board suspend or cancel registration by order in the manner determined by regulations, with the proviso that no order be made unless the person concerned has been given a reasonable opportunity of being heard. Government approval, unit holder resolutions or conviction are not required.

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