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DEPUTY GENERAL MANAGER
INVESTMENT MANAGEMENT DEPARTMENT
SEBI / IMD / CIR No. 2/166256/ 2009
June 12, 2009
To:
All Mutual Funds, Asset Management Companies (AMCs)
and Association of Mutual Funds in India (AMFI)
Sir / Madam,
Sub: Valuation of debt securities by Mutual Funds
Please refer to SEBI Circulars No. MFD/CIR/8/92/2000 dated September 18, 2000 , MFD/CIR No. 14/442/2002 dated February 20, 2002 and SEBI/IMD/CIR No. 9/08 dated October 18, 2008 .
With a view to ensure that the value of debt securities reflects the current market scenario in calculation of net asset value, it has been decided that discretionary mark up and mark down shall be brought to the level as detailed in SEBI Circulars No. MFD/CIR/8/92/2000 dated September 18, 2000 and MFD/CIR No. 14/442/2002 dated February 20, 2002 .
Accordingly, the discretionary mark up and mark down will be as under:
a. In case of rated debt securities
|
Category |
Current (as per Circular dated October 18, 2008 ) |
Proposed |
|
|
+ |
- |
+ |
- |
|
Rated instruments with duration upto 2 years |
500 bps |
150 bps |
100 bps |
50 bps |
|
Rated instruments with duration over 2 years |
400 bps |
100 bps |
75 bps |
25 bps |
b. In case of unrated debt securities
|
Category |
Current (as per Circular dated October 18,2008 ) |
Proposed
|
|
Unrated instruments with duration upto 2 years |
Discretionary discount of upto +450 bps over and above mandatory discount of +50 bps |
Discretionary discount of upto +50 bps over and above mandatory discount of +50 bps |
|
Unrated instruments with duration over 2 years |
Discretionary discount of upto +375 bps over and above mandatory discount of +25 bps |
Discretionary discount of upto +50 bps over and above mandatory discount of +25 bps |
Further, it has been decided that
Ø For valuation of securities purchased after the issuance of circular, the discretionary mark up or down limit, as detailed above, should be applied.
Ø For cases where on the date of this circular, the increased discretionary mark up or down limit is being used, it should be brought back to the proposed levels as detailed above within a period of two months.
Ø Chief Executive Officer (whatever his designation may be) of the Asset Management Company shall give prior approval to the use of discretionary mark up or down limit.
This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Yours faithfully,
Ruchi Chojer
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