SEBI proposes to tighten valuations norms for mutual funds. Among its key proposals, SEBI has asked fund houses to use market value of securities while executing inter-scheme transfers (ISTs).
By using IST, a mutual fund scheme can sell securities to another scheme of the same fund house. SEBI said that some fund houses have misused IST to increase NAVs of their schemes artificially.
The market regulator said that it would soon come up with a circular, which would ensure that while using IST fund houses sell securities at market price. This would help investors get a fair NAV on their investment.
Further, SEBI has asked fund houses to bring uniformity and consistency in valuation process of non-traded debt instruments like unlisted NCDs and CPs. SEBI said that valuations agencies like CRISIL and ICRA would have to ensure fair pricing of such securities in line with other listed debt securities.
However, AMCs are responsible for ensuring fairness of valuation of such instruments. AMCs can deviate from the valuation guidelines only after appropriate documentation and disclosure, said SEBI.
