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CS Executive · Capital Market and Securities Laws · Mutual Funds

Ganga Mutual Fund, registered with SEBI, collects Rs 50 crore from investors but fails to invest it in the manner or within the period specified in the regulations. Which statement about the consequence under the SEBI Act, 1992 is correct?

This is a default under Section 15D(f). A registered mutual fund that fails to invest money collected in the manner or within the period specified in the regulations is liable to a penalty of at least one lakh rupees, up to one lakh rupees per day, capped at one crore rupees.

  1. AIt is a default under Section 15D(f), attracting a penalty of not less than one lakh rupees, up to one lakh rupees per day of failure, capped at one crore rupeesCorrect
  2. BIt is no default, because subscriptions to a mutual fund are never regulated
  3. CIt attracts a penalty only if the fund is unregistered
  4. DIt attracts a penalty of exactly one thousand rupees per day with no cap

Explanation

Section 15D(f) penalises a registered scheme, including a mutual fund, that fails to invest collected money in the manner or within the period specified in the regulations. The penalty is not less than one lakh rupees, up to one lakh rupees per day, capped at one crore rupees. One thousand per day was the pre-2002 amount, and registration status is not a precondition for this clause.

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