Mumbai, December 12: In order to tighten the disclosure norms further by the Mutual Funds (MFs) investing in debt and money market instruments issued by their group companies or sponsor, the Securities and Exchange Board of India (Sebi) has decided to give grandfather treatment to such investments.
Sebi in a recently issued circular said, “The investments of mutual fund schemes in debt and money market instruments of group companies of both the sponsor and the asset management company of the mutual fund in excess of the limits specified therein, made on or before October 1, 2019 may be grandfathered till maturity date of such instruments. The maturity date of such instruments shall be as applicable on October 1, 2019”.
Following the controversy broke out in September 2019 with respect to MFs investing in unlisted debt papers issued by the companies and subsequently hurting the interest of the investors Sebi had tightened the norms for MFs in October 2019 with respect to investments in debt and money market instruments issued by the group companies of MFs. Sebi had also set group level exposure limits.
Sebi in its October 10, 2019 circular said, “The investments by debt MF schemes in debt and money market instruments of group companies of both the sponsor and the Asset Management Company (AMC) shall not exceed 10 per cent of the net assets of the scheme. Such investment limit may be extended to 15 per cent of the net assets of the scheme with the prior approval of the board of trustees”.
Sebi has now made mandatory for all AMCs to publish on their respective website, a list of their group companies and those of their sponsor(s). The regulator has also asked Association of Mutual Funds in India (Amfi), a Self Regulatory Organisation (SRO), for the Indian MF sector, to publish on its website
a list of all group companies along with names and identifier of the respective group that are considered for calculation of group exposure by mutual fund schemes and also the sector to which each company belongs.
These disclosures should be made on first working day of each calendar quarter starting from January 1, 2020, Sebi said.