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No early exit for investors in close-ended mutual fund schemes

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FOCUSSING ON DEBT SCHEMES: C. B. Bhave (right), Chairman, SEBI, with M. S. Sahoo, Whole Time Member, at a press conference in Mumbai on Thursday.
FOCUSSING ON DEBT SCHEMES: C. B. Bhave (right), Chairman, SEBI, with M. S. Sahoo, Whole Time Member, at a press conference in Mumbai on Thursday.

Special Correspondent

All such schemes must be listed on the stock exchanges, says SEBI Chairman

MUMBAI: The Securities and Exchange Board of India (SEBI), announcing a new set of measures aimed at the mutual funds industry, on Thursday said that all close-ended mutual fund schemes must be listed and that investors would not be allowed to exit from close-ended mutual fund schemes before their maturity.

“SEBI has decided that all close-ended mutual fund schemes must get listed. Besides, no early exit will be allowed in any scheme of mutual fund in the nature of a close-ended scheme,” SEBI Chairman C. B. Bhave told reporters here after the board meeting.

The schemes, which have been approved earlier but not yet launched, will also have to be amended accordingly.

“It will be obligatory for the asset management company to list the close-ended schemes,” Mr. Bhave said.

The board also decided that for such close-ended schemes, the underlying assets will not have a maturity beyond the date on which the scheme expires. All such funds must invest in instruments in line with their maturity profile, he said.

Commenting on the overall mutual fund regulations, Mr. Bhave said that, “from the October experience, we didn’t face any difficulty with regard to equity schemes even though the market had come off so much. We wouldn’t want to tinker unnecessarily with something unless an issue comes up. So just now the focus is more on what happens with debt schemes,” he said. In October, the mutual funds industry faced a severe liquidity crisis following redemption pressure.

The board has approved extension of validity of observation letter issued for public or rights issues from the present three months to one year, subject to filing of updated document where there are material changes. Mr. Bhave said that many issuers requested SEBI to extend the present time limit of three months as they were unable to come out with their issues, which are already approved by SEBI.

“So we decided to extend this timeframe to one year considering the present market conditions.”

The SEBI board has approved certain policy measures pertaining to rights issue process, which includes enabling electronic rights entitlement, which can be traded electronically in stock exchanges; introducing alternative mode for making applications in rights issues, namely, applications supported by blocked amount (ASBA) mode; and mandating that the issuer can get access to rights issue proceeds only after the allotment is finalised.

The SEBI board has decided to give a facelift to it by adopting a code for the board members to avoid conflict of interest . “It was further decided that this code will be put up in the public domain by publishing it on the SEBI website before December 12,” said Mr. Bhave.

In order to bring in more transparency in the working of the board, it was decided that the agenda papers submitted to the board on all policy issues will be made available in the public domain by putting them up on the SEBI website after the board has taken a decision on the issue.

The minutes of the meeting relating to such items will also be made available on the SEBI website after the board has approved the minutes.

“Accordingly the agenda papers for today’s board meeting will be made available on the SEBI website by December 15,” Mr. Bhave added.


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