The Securities and Exchange Board of India (SEBI) Board met on January 28, 2012 and took the following decisions pertaining to Mutual Funds (MFs) and Portfolio Management Services (PMS):
Amends ‘SEBI (Mutual Fund) Regulations, 1996’
The capital market regulator made changes to two aspects of the regulations:
(1) Relating to investment valuation norms: The regulator has mandated that if debt and money market securities are not traded on a particular valuation day then valuation through amortization basis will be restricted to securities having residual maturity of upto 60 days (which currently stands at 91 days), given that such valuation is reflective of the realizable / fair value of the securities.
SEBI has also said that the AMC will need to ensure fair treatment to all investors seeking to purchase or redeem units of MFs at all point of time in all schemes.
(2) Relating to advertisement code: SEBI will amend the Sixth Schedule of the regulations along with other circulars issued on Advertisement Code and will make it ‘principle based as far as possible’ so that Asset Management Companies (AMCs) can have flexibility in issuing ‘true and fair’ advertisements with ‘meaningful disclosure’. The regulator will also broaden the definition of advertisement to include all forms of communication that may influence investment decisions.
Waives some requirements pertaining to preferential allotment to insurance companies and MFs
SEBI has exempted insurance companies and mutual funds from the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations relating to sale and lock-in of their pre-preferential shareholding in the issuer company. Till now, these regulations barred companies from issuing preferential allotment to entities who have sold any of their holdings during the 6 month period prior to relevant date; also, allottees had to lock-in their entire pre-preferential holdings for a period of 6 months from date of preferential allotment. However, it needs to be noted that the lock-in on shares allotted in preferential issue per se would remain unchanged.
Amends ‘SEBI (Portfolio Managers) Regulations, 1993’
SEBI has enhanced the minimum investment amount per client from Rs 5 lakh to Rs 25 lakh and asked entities to ensure separation of holdings in individual demat accounts in respect of unlisted securities also. These amendments would be applicable on prospective basis for new clients and for fresh investments by existing clients.