SEBI permits the creation of segregated portfolio in mutual fund schemes

Nov 08, 2019 | by Avantis RegTech Legal Research Team


The Securities Exchange Board of India (SEBI) on November 07, 2019, issues Circular to partially modify its Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/160 dated December 28, 2018 on ‘Creation of segregated portfolio in mutual fund schemes’. SEBI permits the creation of segregated portfolio of unrated debt or money market instruments by mutual fund schemes of an issuer that does not have any outstanding rated debt or money market instruments subject to certain conditions.

The followings are the conditions:

1. Segregated portfolio of such unrated debt or money market instruments may be created only in case of actual default of either the interest or principal amount. The actual default by the issuer of such instruments shall be considered for creation of segregated portfolio.

2. AMCs shall inform AMFI immediately about the actual default by the issuer and the same will be informed to all AMCs. The AMCs may segregate the of debt or money market instruments pursuant to dissemination of information by AMFI about actual default by the issuer.

3. The creation of segregated portfolio shall be optional and at the discretion of the AMC. It should be created only if the Scheme Information Document (SID) of the scheme has provisions for segregated portfolio with adequate disclosures. All new schemes to be launched after the date of this circular shall have the enabling provisions included in the SID for creation of segregated portfolio.

The provisions of this Circular shall be effective from the date of this Circular that is November 07, 2019.

[SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/127]


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