The Securities and Exchange Board of India (SEBI) on July 27, 2023, issued a circular regarding the Investment by Mutual Fund Schemes and AMCs in units of the Corporate Debt Market Development Fund.
The following has been decided:
• The units of CDMDF shall be subscribed by AMCS of Mutual Funds and "specified debt-oriented MF Schemes" (i.e., Open-ended Debt oriented Mutual Fund schemes excluding Overnight funds and Gilt funds and including Conservative Hybrid funds) Contribution from specified debt-oriented MF schemes and AMCs, including the appreciations on the same, if any, shall be locked-in till winding up of the Fund. However, in case of winding up of contributing MF Schemes, inter-scheme transfers within the same Mutual Fund or across Mutual Funds may be undertaken.
Clarification: Specified debt-oriented MF schemes exclude Index funds and ETFs Further, the Gilt funds as mentioned above shall mean both Gilt Fund and Gilt Fund with 10-year constant maturity.
• Specified debt-oriented MF Schemes shall invest 25 bps of their Assets Under Management (AUM) in the units of CDMDF. The specified MF schemes shall provide additional incremental contributions to CDMDF as their AUM increases, every six months to ensure 25 bps of scheme AUM is invested in units of CDMDF. However, if AUM decreases there shall be no return or redemption from CDMDF New schemes from existing MFs under the specified categories or such schemes of new MFs shall also contribute 25 bps of their respective AUM and make incremental contributions.
• AMCS shall make a one-time contribution equivalent to 2 bps of the AUM of specified debt-oriented MF Schemes managed by them. Further, AMCS of new Mutual Funds shall also make a one-time contribution equivalent to 2 bps of their specified debt-oriented MF schemes, based on the AUM at the end of the financial year following the one in which the specified scheme(s) are launched.
• The initial contribution, as mandated above shall be based on AUM of the specified MF schemes as on December 31, 2022.
The following has been decided with respect to the investment of Mutual Fund Schemes in CDMDF:
• Corporate debt securities sold by MF schemes to CDMDF during market dislocation shall be treated as trade executed on the Request for Quote (RFQ) platform.
• In case the Net Asset Value of CDMDF units is not available by 9:30 PM, NAV declaration timing for Mutual Fund Schemes holding units of CDMDF shall be 10 am on the next business day instead of 11 pm on the same day.
• It is clarified that the CDMDF shall not be considered as an "associate" of any Mutual Fund and investment made in units of CDMDF in accordance with this circular shall not be considered as an investment in associate or group company of any Mutual Fund.
• AMCs shall ensure that the net worth as prescribed under Regulation 21(1)(f) of SEBI (Mutual Funds) Regulations, 1996 shall be maintained over and above the contribution made towards CDMDF.
The provisions of this circular shall come into force with immediate effect.
[Circular No. SEBI/HO/IMD/PoD2/P/CIR/2023/129]
