Existing grandfathered unlisted NCDs - SEBI Extends Compliance Timelines

“SEBI RELAXED COMPLIANCE NORMS RELATED TO INVESTMENT LIMITS IN UNLISTED NCDS”

“SEBI relaxed Compliance Norms  related to Investment Limits in Unlisted NCDS

  • Existing grandfathered unlisted NCDs

  • Overview

Securities and Exchange Board of India (SEBI) vide Circular No. SEBI/HO/IMD/DF2/CIR/P/2020/75 has issued Notification related to Existing grandfathered unlisted NCDsdated 28th April, 2020 in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of regulations 77 of SEBI (Mutual Funds) Regulations, 1996.

  • The Circular issued to:

  • All Mutual Funds (MFs)/
  • Asset Management Companies (AMCs)/
  • Trustee Companies/ Board of Trustees of Mutual Funds
  • Why this Circular Issued:

To protect the interest of investors in securities and to promote the development of, and to regulate the securities market.

  • Key Highlights

  • This circular is also related to SEBI vide Circular SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 01, 2019

Available at: https://www.sebi.gov.in/legal/circulars/oct-2019/review-of-investment-norms-for-mutual-funds-for-investment-in-debt-and-money-market-instruments_44556.html

  • In previous Circular as mentioned above SEBI has allowed the existing unlisted NCDs to be grandfathered till maturity, such NCDS are herein referred to as “identified NCDs”.
  • Applicable to MF: grandfathering of the identified NCDs is applicable across the mutual fund industry.
  • mutual funds can transact in such identified NCDs and the criteria as specified in para B (1) of SEBI Circular dated October 1, 2019 is not applicable.

As per Para (B) (1):

Mutual fund scheme shall not invest in unlisted debt instruments including commercial papers (CPs), other than (a) government securities, (b) other money market instruments and (c) derivative products such as Interest Rate Swaps (IRS), Interest Rate Futures (IRF), etc. which are used by mutual funds for hedging.

  • Compliance Particulars:

  • Investments in such identified NCDs shall continue to be subject to compliance with investment due diligence
  • All other applicable investment restrictions.
  • Relaxation Provided:

Compliance Particulars

Due Date Extended to

1. investment in unlisted NCDs (as issued vide SEBI Circulars dated October 01, 2019 and March 23, 2020) as 15%  of the debt portfolio of the scheme

September 30, 2020

2. investment in unlisted NCDs (as issued vide SEBI Circulars dated October 01, 2019 and March 23, 2020) as 10%  of the debt portfolio of the scheme

December 31, 2020

Source: https://www.sebi.gov.in/legal/circulars/apr-2020/existing-grandfathered-unlisted-ncds_46593.html

Disclaimer:

IN NO EVENT THE AUTHOR SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM OR ARISING OUT OF OR IN CONNECTION WITH THE USE OF THIS INFORMATION.

About Author:

CS Lalit Rajput

Partner, Xcede Consultech LLP

Email id: lalitrajput537@gmail.com / +91 8802581290

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