Sebi allows MFs to segregate debt and money market portfolios

The board of market regulator Securities and Exchange Board of India (Sebi) which met in Mumbai today approved a proposal by mutual funds for creation of segregated portfolios with respect to debt and money market instruments subject to various safeguards. 

This facility will be available to mutual funds based on credit events. Creating segregated portfolio may  be  optional  for  mutual  funds,  but  approval  of  trustees  is  necessary  for activating such a portfolio.
Creation of segregated portfolio is a mechanism to separate distressed, illiquid assets from other more liquid assets in a mutual fund portfolio to deal with a situation arising due to a credit event. With a segregated portfolio, investors who may take the hit when the credit event happens shall get the upside of future recovery, if any.
The Sebi board also took note of the proposal to review the valuation norms applicable to mutual fund schemes investing in debt and money market instruments.
The board has also, in principle, approved the proposals for amendments to the regulations pertaining to Institutional Trading Platform (ITP) in the Sebi (Issue of Capital and Disclosure Requirements) Regulations, 2018  (ICDR Regulations) .The board,  while  approving  the proposals,  considered  the  recommendations  of  the Primary  Market  Advisory  Committee  (PMAC)  and  the  public  comments  on  the consultation paper.
The key proposals approved by the board are: 
  • Platform to be renamed as Innovators Growth Platform (IGP);
  • In order to be eligible for listing on the IGP, the issuer shall be a company which is intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products, services or business platforms with substantial value.
  • 25 per cent of the pre-issue capital, of the Issuer company for at least a period of 2 years, should have been held by qualified institutional buyers, family trust with net-worth of more than Rs500 crore, category III foreign portfolio investor, a pooled investment fund with minimum assets under management of $150 million and registered with a financial sector regulator in the jurisdictions where it is resident.
  • The fund should be a resident of a country whose securities market regulator is a signatory to  IOSCO’s  MMOU or a signatory to bilateral MoU with Sebi and not a resident in a country identified in the public statement of Financial Action  Task Force as deficient in AML and combating financing of terrorism.
  • Accredited investors (AIs) for the purpose of IGP, to include any individual with total gross income of Rs50 lakh annually and who has minimum liquid net worth of Rs5 crore or any body corporate with net worth of Rs25 crore;
  • Not more than 10 per cent of the pre-issue capital may be held by accredited investors;
  • The  existing  requirement  of  cap  on  holding  not  more  than  25 per cent  of  the  post issue capital by any person individually or collectively with persons acting in concert to be deleted;
  • The minimum application size and minimum trading lot to be Rs2 lakh and in multiples of 2lakh thereof;
  • There would not be any requirement of minimum reservation of allocation to specific category of investors;
  • Minimum number of allottees to be 50;
  • Minimum  net  offer  to  public  should  be  in  compliance  with  Minimum  Public Shareholding (MPS) norms and minimum offer size to be Rs10 crore; and
  • IGP to be designated as a platform for start-ups with an option to trade under regular category after completion of one year of listing subject to compliance with exchange requirements