Management of Mutual Fund
19. Procedure for dissolution of mutual fund
19.1 Causes for dissolution of mutual funds
19.1.1 Closed-end mutual fund
(1) In the case that the number of unitholders of an institutional fund is less than 10 on any business day, except for the mutual fund of which the investment units are sold exclusively to the Government Pension Fund or Social Security Fund.
(2) In the case that the number of unitholders of a retail fund is less than 35 on any business day.
19.1.2 Open-end mutual fund
(1) The number of the unitholders is less than the specified limit as in the same case of the closed-end funds.
(2) The investment units are redeemed in either one of the following circumstances except for a money market fund (MMF), fund of funds (FoFs), feeder fund, an index fund, and exchange traded fund (ETF) :
(2.1) The number of investment units redeemed exceeds two-thirds of the outstanding units in one trading day;
(2.2) The total number of investment units redeemed within 5 consecutive business days exceeds two-thirds of the outstanding units. (calculated by the total number of investment units redeemed in the previous five days)
In cases where the mutual fund management company, upon consideration, honestly and reasonably believes that the dissolution of the mutual fund will not benefit the remaining unitholders, the mutual fund management company should exercise its discretion in deciding whether to dissolve the fund.
The calculation method in the case of investment units redeemed over two-thirds of the outstanding units in five consecutive business days
Addition of all redeemed units in the previous five days is divided by the number of outstanding units at the starting date of the five business days.
Example The calculation is done on day T+1
| Day T-4
| Day T-3
| Day T-2
| Day T-1
| Day T
| Day T+1
|
Net trading value
| X1
| X2
| X3
| X4
| X5
| X6
|
Total outstanding units
| Y1
| Y2
| Y3
| Y4
| Y5
| Y6
|
Hence : (X1 + X2 + X3 + X4 + X5)
Y1
19.1.3 Actions required upon the specified causes for the dissolution of funds:
(1) Cease to accept purchase or redemption orders;
(2) Notify the unitholders and the SEC within three business days;
(3) Dispose of the remaining securities or assets within five business days to obtain as much money as possible for payment;
(4) Pay unitholders for the redemption of investment units within ten business days. Then the fund is deemed dissolved upon the payment for the redeemed units.
19.2 In the case of fund of funds (FoFs) with investments in the underlying fund ≥ 5%
of the underlying fund NAV. Where the NAV of the underlying funds on any days or in five consecutive business days decrease more than two-thirds of the NAV of the underlying fund, the mutual fund management company shall take the following actions:
(1) Notify the SEC and the unitholders about the cause of the decrease in the asset values within three business days and about action plans to be taken at the discretion of the mutual fund management company in the best interest of the unitholders. The remedial measures should be performed and completed within 60 days, for which the mutual fund management company may request the SEC's approval for extending the time for completing the corrective action according to (1). In submitting the request, the mutual fund management company shall obtain approval of the mutual fund supervisor for consideration by the SEC.
(2) Report the results of the action to the SEC and the unitholders within three business days from the day the corrective action is completed.
(3) While carrying out the corrective action, the mutual fund management company shall disclose the information about the action to prospective investors for their investment decisions. In additions, the investment consultants/investment planners shall ensure that the potential clients are informed of the action taken before accepting purchasing orders of the investment units.
19.3 The case of a mutual fund with investment units as securities listed in the Stock Exchange:
(1) Closing the registrar of unitholders at a minimum of once a year;
(2) Where the number of unitholders at the closing of the registrar is less than 35 and the mutual fund management company does not want to dissolve the fund, the company is allowed to amend the situation within 30 days. At the end of the period, the mutual fund management company shall close the registrar of unitholders again, and if the number of unitholders is still below 35, the mutual fund management company shall dissolve the fund according to the rules.