Securities and Exchange Board of India (“SEBI”) through a circular dated 7th November, 2019 brings in changes to its circular dated 28th December, 2019 regarding creation of segregated portfolio in mutual fund schemes. Creation of segregated portfolio now becomes optional and at the discretion of the Asset Management Companies (“AMC”) which was earlier made mandatory by SEBI under the circular dated 28th December, 2019. It has been further clarified by SEBI that it is needed to be created only in such situations where the Scheme Information Document (“SID”) of the any scheme has provisions for segregated portfolio with adequate disclosures. Going forward all new schemes to be launched need to have the enabling provisions included in the SID for creation of segregated portfolio.
Background:
SEBI through a circular dated 28th December, 2018, in order to ensure fair treatment to all investors in case of a credit event and to deal with liquidity risk, decided to permit creation of segregated portfolio of debt and money market instruments by mutual funds schemes. SEBI further defined three different types of portfolios for the purpose of said circular;
- Segregated portfolio – portfolio comprising of debt or money market instrument affected by a credit event that has been segregated in a mutual fund scheme.
- Main portfolio – scheme portfolio excluding the segregated portfolio.
- Total portfolio – scheme portfolio including the securities affected by the credit event.
Source: Securities and Exchange Board of India
