Tuesday April 14, 03:10 AM Source: Indian Express Finance
As a part of a derisking exercise, the market regulator Securities and Exchange Board of India (Sebi) in its board meeting held on Monday has decided not to allow a mutual fund scheme to invest more than 30% of its net assets in money market instruments of an issuer.
For this the Sebi board has decided to amend the Seventh Schedule of Sebi (Mutual Funds) regulations. But the schemes will be allowed to continue to invest up to 15% or 20% of their net assets in other investment grade debt instruments of an issuer as already provided in the regulation.
However, these limits will not cover investments in government securities, T-Bills and Collateralized Borrowing and Lending Obligations (CBLO).
The board also approved the proposals to enable mutual funds and Foreign Institutional Investors (FII)s to invest in Indian Depository Receipts (IDR's) subject to FEMA, demat holdings of IDRs and issue of depository receipts by custodians on behalf of issuers.
On putting restrictions on the mutual funds schemes to invest in money market instruments of an issuer, Jayesh Shroff, fund manager-equity, SBI (SBIN.NS : 1217.9 +77.6) Mutual Fund, said, "This is primarily a de-risking exercise targeted mainly at debt funds. It will not have any major implications on the mutual fund industry as already 99% of the mutual funds schemes are well diversified".
According to sources, Sebi's latest move is following few instances where two to three small fixed maturities plan (FMP) schemes of fund houses had exposed more than 30% of their net assets to the money market instrument of an issuer putting investor's money at risk.
On the proceedings against the NSDL on the IPO demat scam; the Sebi board has decided to seek the opinion of an eminent legal counsel on the issue whether the Sebi board has the legal authority to examine whether the committee appointed by the board to deal with the matter involving a conflict of interest of the current Chairman in relation to NSDL has acted within the framework and terms of reference established by the board resolution. Pending that, with one member dissenting, the board has decided to withhold the orders of the committee.
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