Sebi caps publicity to single-issuer debt securities for lively mutual funds

Actively-managed mutual fund (MF) schemes will now need to observe the securities market regulator, Securities and Exchange Board of India’s (Sebi) credit score risk-based single issuer limits for funding in cash market and debt devices.

Sebi had launched such limits for debt ETFs and index funds through its May 23, 2022 round on ‘Development of Passive Funds’. Following the round dated November 29, this has now been prolonged to cowl actively-managed MF schemes too. The objective of those limits is to cap any issuer-related focus threat for buyers in any scheme.

An MF scheme (excluding credit score threat schemes) should abide by the next three limits. That is, it should not make investments greater than 10% of its NAV in cash market and debt devices which are rated AAA, no more than 8% of its NAV in these rated AA, and no more than 6% of its NAV in these rated A and under. Credit threat funds by their very mandate should make investments at the very least 65% of their corpus in under the highest-rated devices (sometimes AAA and AA+ rated) and are subsequently, not certain by these limits.

Furthermore, presently, at an general degree, an MF scheme can not make investments greater than 10% of its NAV in funding grade or above rated devices. Following the newest round, this 10% restrict could be raised to 12% of the scheme NAV with prior approval of the Board of Trustees and Board of Directors of the mutual fund home. Also, the three particular person limits of 10%, 8% and 6% respectively on AAA, AA, and A and under rated devices too could also be prolonged by as much as 2% with prior approval of the requisite fund home authorities topic to not breaching the general 12% restrict.

The new laws will apply to all newly launched schemes with instant impact. Existing schemes can be grandfathered from the laws till the underlying debt and cash market devices held by these schemes mature.

Catch all of the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
Download The Mint News App to get Daily Market Updates.

More
Less