SEBI has asked mutual funds to disclose details of debt and money market securities transactions, including inter-scheme transfers, on a daily basis with a time lag of 15 days.
Earlier, fund houses were required to disclose such transactions with a time lag of 30 days.
Further, SEBI has prescribed a new format for such disclosures. In this format, fund houses will have to mention the name of the security, type of security, most conservative rating of security at the time of transaction, name of the rating agency and transaction type.
Moreover, the listed status of security, scheme name, type of scheme, residual days to final maturity, deemed maturity date, quantity traded, face value per unit and value of such trade are among the details that need to be disclosed by fund houses.
Debt expert Joydeep Sen feels that revised disclosure requirements pertaining to debt and money market securities transactions in MFs is another measure by SEBI to further enhance transparency in debt funds. He pointed out that the circular mentions inter scheme transfer transactions, which were much talked about a couple of months back.
Sen said that even as these transactions were based on market prices provided by valuation agencies and within the investment mandates of the purchasing schemes, many have argued that mutual funds were doing something seriously wrong. The current disclosure norms will be helpful in putting to rest such speculations.
After the Franklin Templeton episode, many fund houses faced redemption pressure in their credit risk funds. In such a situation, some fund houses identified and transferred some of the illiquid debt paper from credit risk funds to other funds within the same asset management company (AMC).
Rahul Jain, Senior VP Research at International Money Matters explains that with the current disclosure norms, investors will be able to get to know these details in advance and can assess if they are holding higher risk than they desire.
The new framework will come into effect from October 1.
