SEBI has taken action for not fulfiling the investor protection norms by delaying the payments due on fixed maturity plan and for giving loan against shares.
The Securities and Exchange Board of India has sent notices to mutual fund companies that defaulted on Fixed Maturity Plan payments. SEBI has taken action for not fulfiling the investor protection norms by delaying the payments due on fixed maturity plan and for giving loan against shares.
A source close to the development told Moneycontrol, “SEBI has taken action on mutual fund on several issues that occurred in the recent past. SEBI action is on those mutual funds which defaulted on fixed maturity plan scheme on the due date. Subsequently, they increased the timeline of payment of fixed maturity plan with the consent of unitholders. However, the regulator has asked mutual fund companies the format of taking consent of unitholders in increasing timeline of fixed maturity plan."
Another violation of SEBI norms is said to have taken place in the case of some FMPs that just matured. As per SEBI rules, an FMP must invest in debt securities that mature in line with the FMP. But by giving an extension to a troubled corporate house a few months ago, the FMPs had invariably increased the tenure of those instruments.
FMPs of six fund houses holding the said paper had matured during April-May 2019.
Another source close to the development told Moneycontrol, “SEBI may have concerns with investment in terms of loan against shares.”
Along with that, MFs which were supposed to sell the equity at the time of default have given a moratorium in private treaty and extended the timeline until September 2019. This is also under the scanner of SEBI.
SEBI has not responded to a mail sent by Moneycontrol.
A source in mutual fund industry told Moneycontrol, “SEBI has sought data for the last ten years from asset management companies that invested in loan against shares."
Later on Monday, HDFC said it received two show-cause notices from SEBI, in relation to an investment of its FMP in a particular debt instrument.Kotak Mutual Fund has also received the show-cause notice from SEBI.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.