The Securities and Exchange Board of India (“SEBI”) issued a Circular on 2nd February, 2021 regarding setting up of Limited Purpose Clearing Corporation (LPCC) by Asset Management Companies (AMCs) of Mutual Funds.
In view to develop the corporate bond market from the perspective of mutual funds the Mutual Fund Advisory Committee (MFAC) of SEBI had constituted a Working Group and recommended that AMCs of Mutual Funds should set up a Limited Purpose Clearing Corporation (LPCC) for clearing and settling repo transactions in corporate debt securities by contributing an amount of INR 150 Crore. This was recommended as it was felt that mutual funds would be natural beneficiaries of such a clearing corporation. The recommendation of setting up LPCC was also deliberated with various issuers of corporate bonds and in Corporate Bonds and Securitization Advisory Committee (CoBoSAC).
Now, it has been decided that AMCs will contribute INR 150 Cr. towards share capital of LPCC in proportion to the Asset Under Management (AUM) of open ended debt oriented mutual fund schemes (excluding overnight, gilt fund and gilt fund with 10 year constant duration but including conservative hybrid schemes) managed by them. The contribution will be based on Average AUM of debt oriented schemes for the Financial Year (FY) 2019-20.
AMFI will calculate contribution per AMC based on the Average AUM of aforementioned schemes for the FY 2019-20 and inform all AMCs. Accordingly, it will be obligatory on the part of AMC(s) to contribute towards the share capital of LPCC. The setting up of LPCC will be in compliance with networth requirements as per SECC Regulations and circulars issued from time to time.
Further, AMCs will ensure that the networth as prescribed under the SEBI (Mutual Funds) Regulations, 1996 will be maintained over and above the contribution made towards setting up of the LPCC.
Source : Securities and Exchange Board of India
