The Securities and Exchange Board of India (SEBI) said mutual funds should disclose the rationale while exercising their voting rights in investee companies.

"Asset Management Companies (AMCs) shall be required to record and disclose specific rationale supporting their voting decision (for, against or abstain) with respect to each vote proposal," SEBI said.

AMCs would be required to make disclosure of votes cast on their website on a quarterly basis, within 10 working days from the end of the quarter. Further, they would need to continue disclosing voting details in their annual report.

On an annual basis, AMCs would be required to obtain auditor's certification on the voting reports being disclosed by them. Such auditor's certification would be submitted to trustees and also disclosed in the relevant portion of the MFs' annual report and website.

SEBI said that board of AMCs as well as trustees of mutual funds would be required to review and ensure that these players have voted on important decisions that may affect the interest of investors and the rationale recorded for vote decision is 'prudent and adequate'.

The confirmation to the same, along with any adverse comments made by auditors, would have to be reported to SEBI in the half yearly trustee reports.

With an aim to increase penetration of mutual fund products and to energise the distribution network, SEBI has allowed additional expense ratio of 30 basis points for garnering funds from B-15 cities.

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