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In order to further enhance liquidity and reduce volatility in fixed income funds, SEBI has allowed fund houses to sell their corporate debt securities to Corporate Debt Market Development Fund (CDMDF) during market dislocation.
However, fund houses can sell such securities to the extent of their proportion to the total exposure of such a security at an industry level.
SEBI said, “Access to the fund for selling securities during market dislocation shall be to specified mutual fund schemes in proportion to the contribution made to the Fund at a mutual fund level. The Board also approved the framework for triggering of CDMDF’s asset purchases during market dislocation.”
Further, SEBI clarified that debt funds can also contribute towards building initial corpus of the development fund.
CDMDF is an AIF that will buy investment grade corporate debt securities during the times of stress to instil confidence amongst the market participants and enhance liquidity. These funds can raise funds from National Credit Guarantee Trust Company, AMCs and debt funds.
Here are other key highlights of the SEBI board meeting:
- The market regulator also paved way for PE firms and self-sponsored AMCs to become sponsor of mutual funds
- SEBI has amended MF regulations to define roles and responsibilities of trustees and board of AMC
- SEBI will also set up a committee to protect interest of mutual fund investors
- AIFs will carry out valuation report of their investment portfolio
- Category III AIFs will have to carry a valuation report issued by independent valuer
