SEBI issues framework for liquid and overnight funds and norms governing investment in short term deposits

Sep 23, 2019 | by Avantis RegTech Legal Research Team


The Securities Exchange Board of India (SEBI) on September 20, 2019, has issued a Circular in order to provide the risk management framework for liquid and overnight funds and to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

SEBI has decided the followings:

1. Liquid funds shall hold at least 20% of its net assets in liquid assets. In case the liquid assets falls below 20% of net assets of the scheme, the AMC shall ensure compliance with the above requirement before making any further investments. It shall be effective from April 1, 2020.

2. Liquid Funds and Overnight Funds shall not park funds pending deployment in short term deposits of scheduled commercial banks and shall not invest in debt securities having structured obligations. It shall be effective for all fresh investments with immediate effect.

3. Mutual Fund shall levy exit load on investors who exit the Liquid Fund within 7 days of their investment. It will be effective for all fresh investments from 30th day from the date of this Circular.

4. The cut-off timings for applicability of Net Asset Value (NAV) in respect of purchase of units in liquid and overnight funds shall be 1:30 p.m. instead of 2:00 p.m.

5. Asset Management Company (AMC) shall not be permitted to charge investment management and advisory fees for parking of funds in short term deposits of scheduled commercial banks. It shall be effective from 30th day from the date of this Circular.

[SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/101]

 


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