SEBI allows listing of MF schemes in process of winding up

Markets Regulator Securities and Exchange Board of India (SEBI) has on May 20 allowed the listing of mutual fund schemes which are in the process of winding up.

In a circular, the securities market regulator noted that as per mutual fund regulations, there are several steps with respect to winding up of mutual fund schemes before the scheme ceases to exist. During this process, such units can be listed and traded on a recognised stock exchange, which may provide an exit to investors, it said.

“The units of Mutual Fund (MF) schemes can be listed in the recognised stock exchange. Accordingly, the units of Mutual Fund schemes which are in the process of winding up in terms of Regulation 39(2)(a) of Mutual Fund Regulations, shall be listed on recognised stock exchange, subject to compliance with listing formalities as stipulated by the stock exchange,” it said.

However, the SEBI said that pursuant to listing, trading on stock exchange mechanism will not be mandatory for investors, and rather, if they so desire, they may avail an optional channel to exit provided to them.

Initially, trading in units of such a listed scheme that is under the process of winding up, shall be in dematerialised form.

Asset management companies shall enable transfer of such units which are held in form of Statement of Account (SoA) or unit certificates.

The stock exchange shall develop a mechanism along with registrar and transfer agent (RTA) for trading and settlement of such units held in the form of SoA or unit certificate.

The AMC, its sponsor, employees of AMC and trustees shall not be permitted to transact -- buy or sell -- in the units of such schemes that are under the process of being wound up. The compliance of the same shall be monitored both by the Board of AMC and Trustees.

“The Circular has been issued in exercise of powers conferred under Section11 (1) of the Securities  and  Exchange  Board  of  India  Act,  1992,  read  with  the  provisions  of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities  and  to  promote  the  development  of,  and  to  regulate  the securities market,” the circular read. The circular shall come into force with immediate effect and stock exchanges desirous of offering this facility, will have to submit the detailed operational modalities to SEBI, within next seven days.