SEBI valuates money market and debt securities

Mar 25, 2019 | by Avantis RegTech Legal Research Team


The Securities Exchange Board of India (SEBI) on March 22, 2019, vide Circular dated February 02, 2010 and Circular dated February 28, 2012, has issued a Notification for valuation of money market and debt securities of short term maturity, in order to make the existing valuation practices for securities more reflective of realizable value. It will be applicable within 90 days from the date of issuance of the Circular.

SEBI has decided that:

•The residual maturity for amortization based valuation referred under Circular February 28, 2012 shall be reduced from sixty days to thirty days.

•The amortized price shall be used for valuation only if it is within a threshold of ±0.025% of the reference price and if beyond this threshold, the price shall be adjusted to bring it within the threshold of ±0.025% of the reference price.

In order to have uniformity and consistency across the Mutual fund industry on valuation of money market and debt securities rated below investment grade, SEBI has decided that:

•It should be valued at the price provided by valuation agencies.

•The debt securities should be valued on the basis of indicative provided by these agencies.

•The traded price will be considered for valuation till the valuation price is determined by the valuation agencies. In case the traded price is lower than computed price, it shall be considered for the purpose of valuation and the valuation price may be revised accordingly.

•Assets Management Companies (AMCs) may deviate from the indicative haircuts and valuation price for money market and debt securities.

It will be applicable within 90 days from the date of issuance of the Circular.

[Circular No. SEBI/HO/IMD/DF4/CIR/P/2019/41]

Click here to download the Circular.


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