New Sebi norms will help debt mutual fund investors

The Securities and Exchange Board of India’s revised disclosure requirements for debt mutual funds will increase transparency and help investors to take better exit calls, say mutual fund advisors. They believe that the move will offer investors a real time understanding of the portfolio. The new regulation will be effective from October 01.
The regulator has asked mutual funds to disclose details of debt and money market securities transacted in their schemes’ portfolio, including inter-scheme transfers, on a daily basis with a time lag of 15 days in a prescribed format. At present, a time lag of 30 days has been been allowed.

“In order to further enhance transparency, it is now decided that the details of debt and money market securities transacted (including inter scheme transfers) in its schemes’ portfolio shall be disclosed on daily basis with a time lag of 15 days in a revised format as prescribed in Annexure A,” The Sebi circular said.

“Many schemes have lower grade or quality securities between second or third day of the month till 28-30th day and always have a cleaner portfolio during month beginning and end. For slightly higher return, clients are taking risk without being aware of quality of the portfolio because at the time of disclosure, the portfolios are clean. This new rule will make things tight and transparent,” says Santosh Joseph, CEO & Founder, Germinate Wealth Solutions, a wealth management firm based in Bengaluru.

The new regulation will also help investors to keep a tab on the inter-scheme transfers. Lately, a lot of rumours were doing the rounds that debt schemes are pushing low-rated securities to hybrid funds. However, investors could not decipher the data available with Sebi and find out the veracity of these rumours.

“This move may not stop the inter scheme transfer but will definitely help the advisors and investors to monitor the transactions better and will help in taking prudent exit or entry calls in the particular funds. I still feel SEBI should reduce the time lag further for investors interest,” says Rushabh Desai, a registered mutual fund distributor, based in Mumbai.

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