TMI BlogCreation of segregated portfolio in mutual fund schemesX X X X Extracts X X X X X X X X Extracts X X X X ..... portfolio, comprising of debt or money market instrument affected by a credit event, that has been segregated in a mutual fund scheme. 2. The term main portfolio shall mean the scheme portfolio excluding the segregated portfolio. 3. The term total portfolio shall mean the scheme portfolio including the securities affected by the credit event. C. AMC may create segregated portfolio in a mutual fund scheme subject to the following: 1. Segregated portfolio may be created, in case of a credit event at issuer level i.e. downgrade in credit rating by a SEBI registered Credit Rating Agency (CRA), as under: a. Downgrade of a debt or money market instrument to below investment grade , or b. Subsequent downgrades of the said in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the scheme shall be suspended for processing with respect to creation of units and payment on redemptions. b. Once trustee approval is received by the AMC, i. Segregated portfolio shall be effective from the day of credit event ii. AMC shall issue a press release immediately with all relevant information pertaining to the segregated portfolio. The said information shall also be submitted to SEBI. iii. An e-mail or SMS should be sent to all unit holders of the concerned scheme. iv. The NAV of both segregated and main portfolio shall be disclosed from the day of the credit event. v. All existing investors in the scheme as on the day of the credit event shall be allotted equal number of units in the segregated portfoli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the main portfolio based on its NAV. ii. In case trustees do not approve the proposal of segregated portfolio, subscription and redemption applications will be processed based on the NAV of total portfolio. 7. Disclosure Requirements In order to enable the existing as well as the prospective investors to take informed decision, the following shall be adhered to: a. A statement of holding indicating the units held by the investors in the segregated portfolio along with the NAV of both segregated portfolio and main portfolio as on the day of the credit event shall be communicated to the investors within 5 working days of creation of the segregated portfolio. b. Adequate disclosure of the segregated portfolio shall appear i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , TER (excluding the investment and advisory fees) can be charged, on a pro-rata basis only upon recovery of the investments in segregated portfolio. b. The TER so levied shall not exceed the simple average of such expenses (excluding the investment and advisory fees) charged on daily basis on the main portfolio (in % terms) during the period for which the segregated portfolio was in existence. c. The legal charges related to recovery of the investments of the segregated portfolio may be charged to the segregated portfolio in proportion to the amount of recovery. However, the same shall be within the maximum TER limit as applicable to the main portfolio. The legal charges in excess of the TER limits, if any, shall be borne by the AMC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lio of the scheme. 10. AMCs desirous of having a provision of segregated portfolio in existing scheme shall ensure that all relevant disclosures are made in the SID of such schemes. The provision to enable creation of segregated portfolio in the existing scheme shall be subject to compliance with Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996. 11. The existence of the provisions for segregated portfolio should not encourage the AMCs to take undue credit risk in the scheme portfolio. Any mis-use of the provisions of segregated portfolio, would be considered serious and stringent action may be taken. D. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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