SEBI has advised Franklin Templeton mutual fund (FT) to focus on returning money to
investors, in the context of their winding up six of their debt schemes.
SEBI has also noted that a section of the media has reported quoting FT that tightening
of norms for investment in unlisted debt by SEBI was one of the factors that added to
pressure on their debt schemes which resulted in winding up of their schemes.
In this context, it may be noted that in light of credit events since September 2018, that
led to challenges in the corporate bond market, a need was felt to review the regulatory
framework for Mutual Funds and take necessary steps to safeguard the interest of
investors and maintain the orderliness and robustness of their investments.
It was observed that unlisted debt securities, particularly bespoke securities in which
only a single investor invested, suffered from both forms of opaqueness: opaqueness
of structure and true nature of risk on the one hand and lack of ongoing disclosure in
respect of financials of the issuer on the other
SEBI Board after deliberations in its meetings held in 2019, and taking into account the
recommendations of MFAC, inter-alia, approved the following prudential norms
for investment in listed debt securities:
“Mutual Fund schemes shall be mandated to invest only in listed non-convertible
debentures (NCDs) and the same would be implemented in a phased manner. All
fresh investments in Commercial Papers (CPs) shall be made only in listed CPs
pursuant to issuance of guidelines by SEBI in this regard.
However, the mutual funds to have flexibility to invest in unlisted NCDs up to a
maximum of 10% of the debt portfolio of the scheme subject to such investments in
unlisted NCDs having simple structures as may be specified from time to time, being
rated, secured and with monthly coupon payments. This shall be implemented in a
phased manner by June 2020.”
The details of the Board Memorandum and minutes are available on the website of SEBI
