SEBI has asked Franklin Templeton Mutual Fund to focus on returning money to investors of closed debt schemes as early as possible.
This has come in the wake of media report which claims that tightening of norms for investment in unlisted debt securities by SEBI was one of the factors that added to pressure on their debt schemes which resulted in winding up of their schemes.
SEBI said, “In this context, it may be noted that in light of credit events since September 2018 that led to challenges in the corporate bond market, a need was felt to review the regulatory framework for mutual funds and take necessary steps to safeguard the interest of investors and maintain the orderliness and robustness of their investments. It was observed that unlisted debt securities, particularly bespoke securities in which only a single investor invested, suffered from both forms of opaqueness: opaqueness of structure and true nature of risk on the one hand and lack of ongoing disclosure in respect of financials of the issuer on the other. ”
In order to address these issues, the market regulator had asked fund houses to invest only in listed NCDs and reduce exposure to unlisted NCDs to 10% in timely manner.
SEBI said that despite the well-defined regulations in this regard, some mutual fund schemes have chosen to have high concentrations to high risk, unlisted, opaque, bespoke, structured debt securities with low credit ratings and have chosen not to rebalance their portfolio even during the almost 12 months available to them.
In a separate press release, NS Venkatesh, Chief Executive, AMFI said, ''All these steps were taken to ensure that every market participant had access to relevant information which will enable fair price discovery and improve secondary market liquidity. Measures taken by SEBI over the years including one in October 19 have deepened the debt markets.”
