**Summary:**
This circular, issued by the Securities and Exchange Board of India (SEBI) on April 28, 2020, clarifies and amends previous regulations concerning unlisted Non-Convertible Debentures (NCDs) held by Mutual Funds (MFs) and Asset Management Companies (AMCs).
The circular confirms that the grandfathering provision for existing unlisted NCDs, as outlined in SEBI Circular SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 1, 2019, applies across the entire mutual fund industry. This means that mutual funds can transact in these identified NCDs without being subject to the criteria specified in paragraph B.1 of the October 1, 2019 circular.
However, investments in these grandfathered NCDs remain subject to investment due diligence and all other applicable investment restrictions.
Furthermore, the circular extends the deadlines for compliance with the maximum investment limits in unlisted NCDs, as stipulated in the SEBI Circulars dated October 1, 2019, and March 23, 2020. The deadline for adhering to the 15% limit of the debt portfolio is extended to September 30, 2020, and the 10% limit is extended to December 31, 2020.
This circular is issued under the authority of Section 11(1) of the Securities and Exchange Board of India Act, 1992, and regulation 77 of the SEBI Mutual Funds Regulations, 1996, to protect investor interests and promote the development and regulation of the securities market.
For further information, contact Hruda Ranjan Sahoo, Deputy General Manager, at 022-26449586 or hrsahoo@sebi.gov.in.
Key Entities Referenced
Securities and Exchange Board of India: Regulatory body for securities market in India, also referred to as SEBI.
Mutual Funds: Refers to all mutual funds operating under SEBI regulations.
Asset Management Companies: Refers to all Asset Management Companies operating under SEBI regulations.
Board of Trustees of Mutual Funds: Governing body overseeing the operations of mutual funds.
SEBI Circular SEBIHOIMDDF2CIRP2019104: A specific circular issued by SEBI on October 01, 2019, related to unlisted NCDs.
Unlisted NCDs: Non-Convertible Debentures that are not listed on a stock exchange.
Securities and Exchange Board of India Act, 1992: The act of parliament that established the Securities and Exchange Board of India.
SEBI Mutual Funds Regulations, 1996: Regulations governing the operation and management of mutual funds in India.
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Securities and Exchange Board of India
SEBI/HO/IMD/DF2/CIR/P/2020/75. April 28, 2020
All Mutual Funds (MFs)/
Asset Management Companies (AMCs)/
Trustee Companies/ Board of Trustees of Mutual Funds/
Sir / Madam,
Subject: Existing grandfathered unlisted NCDs
1. SEBI vide Circular SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 01, 2019
has allowed the existing unlisted NCDs to be grandfathered till maturity, such
NCDS are herein referred to as “identified NCDs”.
2. It is hereby clarified that the grandfathering of the identified NCDs is applicable
across the mutual fund industry. Accordingly, mutual funds can transact in such
identified NCDs and the criteria as specified in para B (1) of SEBI Circular
dated October 1, 2019 is not applicable.
3. However, investments in such identified NCDs shall continue to be subject to
compliance with investment due diligence and all other applicable investment
restrictions.
4. Based on the request received, the timeline for compliance with the maximum
limits for investment in unlisted NCDs (as issued vide SEBI Circulars dated
October 01, 2019 and March 23, 2020) as 15% and 10% of the debt portfolio of
the scheme is extended to September 30, 2020 and December 31, 2020
respectively.
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Securities and Exchange Board of India
5. 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 regulations 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the
interest of investors in securities and to promote the development of, and to
regulate the securities market.
Yours faithfully,
Hruda Ranjan Sahoo
Deputy General Manager
Tel no.: 022-26449586
Email: hrsahoo@sebi.gov.in
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