MF debt holdings: Sebi gives valuers more leeway on MFs’ debt holdings


Mumbai: The Securities and Exchange Board of India (Sebi) has allowed valuation agencies to use their discretion while valuing securities held by mutual funds in case the company that has issued the securities is undergoing restructuring of debt due to Covid-19 related stress.

The regulator said, any proposal of restructuring received by debenture trustees should be communicated to investors immediately. Besides, any proposal received by mutual funds from lenders, issuers or debenture trustees should be reported immediately to the valuation agencies, credit rating agencies and industry body AMFI, along with the other material information required for the purpose of valuation.

Sebi said, if the valuation agency, based on its assessment of the proposal, is of the view that the proposed restructuring is due to the fallout of the pandemic then it can consider the restructuring or non- receipt of the dues as a default for the purpose of valuation of money market or debt securities held by mutual funds.

“Further, valuation agencies shall ensure that change in terms of investment, financial stress of the issuer and the capability of the issuer to repay the dues/borrowings on the extended dates are reflected in the valuation of the securities,” Sebi said in a circular.

The regulator said, if there is any difference in the valuation of securities provided by two valuation agencies, the conservative valuation should be accepted.

In April this year, Sebi had eased valuation norms till the period of moratorium allowed by the Reserve Bank of India.

The revised rules will come into effect immediately and remain in force till the end of this year.





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