Sebi eases compliance norms for liquid funds

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Updated: Apr 30, 2020 6:44 PM

Sebi, in September last year, made it mandatory for liquid funds to hold at least 20 per cent of their net assets in liquid assets.

Sebi, in September last year, made it mandatory for liquid funds to hold at least 20 per cent of their net assets in liquid assets.The new rule, aimed at improving risk management and ensuring sufficient liquidity, was to become effective from April 1.

Markets regulator Sebi on Thursday gave three more months till June 30 for liquid funds to comply with the requirement of holding at least 20 per cent of their assets in liquid assets like cash and government securities.

Besides, the timelines for submission of cyber security audit reports as mandated by Sebi has been extended by two months till August 31, Securities and Exchange Board of India (Sebi) said in a circular.

Also, the timelines for filing scheme annual reports for 2019-20 has been extended by one month till August 31, it added.

Sebi, in September last year, made it mandatory for liquid funds to hold at least 20 per cent of their net assets in liquid assets.

The new rule, aimed at improving risk management and ensuring sufficient liquidity, was to become effective from April 1.

Now, the regulator has extended the deadline to comply with the new rule by June 30.

Sebi said that the existing open ended mutual fund schemes need to comply with the revised limits for sector exposure by June 30.

Further, the regulator has given more time till June 30 for complying with the norms pertaining to amortisation based valuation for money market and debt securities.

Under the norms, all money market and debt securities, including floating securities, with residual maturity of 30 days need to be valued at average of security level prices obtained from valuation agencies.

In case, security level prices given by valuation agencies are not available for a new security (which is currently not held by any mutual fund) then such security needs to be valued at purchase yield on the date of allotment.

A money market fund, in market parlance, is an open-ended mutual fund which invests in short-term debt securities like treasury bills and commercial papers. Debt securities funds invest in fixed income securities like bonds and treasury bills.

Earlier this week, Sebi had extended the deadline by six months for mutual funds to comply with the maximum limits of investment in unlisted Non-Convertible Debentures (NCDs).

At the same time, the regulator has eased compliance norms with regards to grandfathering of existing unlisted NCDs.

The move would give breather to the mutual funds as they will not be forced to stress sell these existing unlisted NCD.

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