Sebi seeks to make mutual funds’ valuation process fair

Sebi’s board recently approved changes in its norms for open offer exemptions for corporates facing debt restructuring as also for debt instrument valuation by mutual funds to make these processes fairer.

The Sebi board, at the same time, approved easing of norms for raising of funds through instruments like real estate and infrastructure investment trusts. The regulator will amend its norms for valuation of money market and debt securities by mutual funds to make the process fairer and uniform across the industry to safeguard investors from default like scenarios as witnessed recently in the wake of IL&FS crisis and other defaults.

The proposal seeks to make the valuation practices more reflective of the realizable value of money market and debt securities with residual maturity up to 60 days. Accordingly, the residual maturity limit for amortisation based valuation by mutual funds will be reduced from 60 days to 30 days. The threshold maintained between reference price and valuation price would be plus or minus 0.025 per cent, while the reference price will be taken as security level price given by the valuation agencies.