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Wednesday, January 21, 2009

Sebi restricts liquid funds from investing in papers of maximum maturities

Liquid funds to hold papers of only 3 months

Securities and Exchange Board of India (Sebi) has issued a circular dated 19 January 2009 regarding portfolio of “Liquid Schemes” and nomenclature of “Liquid Plus” schemes.

Liquid fund schemes and plans shall make investment in /purchase debt and money market securities with maturity of upto182 days only with effect from 1 February 2009 & with effect from 1 May 2009, make investment in /purchase debt and money market securities with maturity of up to 91 days only.

Inter-scheme transfers of securities having maturity up to 365 days and held in other schemes as on February 01, 2009 shall be permitted till October 31, 2009. With effect from November 1, 2009 the requirements stated above as make investment in /purchase debt and money market securities with maturity of up to 91 days only shall apply to such inter-se scheme transfers also.

Liquid plus schemes

The Advisory Committee of Mutual Funds also recommended that the nomenclature of “Liquid Plus Scheme” should be discontinued since it gives a wrong impression of additional liquidity. It has been decided to accept the aforesaid recommendation of the Advisory Committee and accordingly, MFs are advised to carry out the change in the nomenclature of “Liquid Plus Scheme” and confirm compliance to Sebi within 30 days from 19 January 2009.

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