MFs barred from offering indicative yields

Written by Markets Bureau | Mumbai | Updated: Jan 21 2009, 05:02am hrs
The Securities and Exchange Board of India (Sebi) prohibited mutual fund (MF) houses from offering any indicative portfolios and yield for debt and fixed income schemes because it may mislead the investors. The regulator has also reduced the tenure of the securities held in the portfolio of liquid schemes from the current requirement of one year, and asked the MF house to discontinue the nomenclature liquid plus scheme. Sebi said that the advisory committee of MFs discussed the practice of MFs offering indicative portfolio and yields in their debt and fixed income schemes. Sebi has defined liquid fund schemes and plans shall mean the schemes and plans of a mutual fund as specified in the guidelines issued by Sebi. The regulator said that the MF houses, from February 1, 2009 will make investment in or purchase debt and money market securities with maturity of upto 182 days only. With effect from May 1, 2009, make investment in or purchase debt and money market securities with maturity of upto 91 days only, the regulator said. Sebi said that in case of securities where the principal is to be repaid in a single payout the maturity of the securities shall mean residual maturity.

Sebi said that the nomenclature of Liquid Plus Scheme shall be discontinued since it gives a wrong impression of added liquidity. This is to be done in the next 30 days. Meanwhile, it is learnt that the Sebi, Primary Markets Advisory commitee has discussed the issue of pledging of shares by promoters and has recomemnded that such practices should be disclosed mandatorily.