On February2, 2021 Securities and Exchange Board of India (SEBI) has released the guidelines to set up Limited Purpose Clearing Corporation (LPCC) by Asset Management Companies (AMCs) of Mutual┬а Funds(MFs). As per the guidelines, AMCs needs to contribute Rs 150 crore towards share capital of LPCC.
Purpose of LPCC– To clear and settle the repo transactions┬а in corporate debt securities.
Highlights about the Contribution:
Proportion to AUM
The contribution of AMCs is to be in proportion to the Asset Under Management (AUM)of open ended debt oriented mutual fund schemes (excluding overnight,gilt fund and┬а gilt┬а fund┬а with┬а 10┬а year┬а constant┬а duration but┬а including┬а conservative┬а hybrid schemes) managed by them.
Basis of Calculation
Association of Mutual Funds in India (AMFI) will calculate contribution as per┬а Average AUM of debt oriented schemes as mentioned above for Financial Year (FY) 2019-20
Networth to be Maintained
AMCs has to ensure that the net worth as prescribed under Regulation┬а 21(f)┬а of SEBI (Mutual Funds) Regulations, 1996 is maintained over and above the contribution.
Background:
Recommendation of Working Group
The┬а Mutual┬а Fund┬а Advisory┬а Committee┬а (MFAC)┬а of SEBI constituted a working group consisting of representatives of various Mutual┬а Funds,┬а Clearing┬а Corporation┬а of┬а India┬а Limited┬а (CCIL)and┬а AMFI┬а for detailed┬а deliberation.
Among others, the working group has suggested setting up LPCC by AMCs of MFs.
Approval of SEBI Board
The SEBI board in┬а its┬а meeting┬а held┬а on┬а September┬а 29,┬а 2020 approved the proposal to set up LPCC.
Amendment
Consequently, Securities Contracts┬а (Regulation) ┬а (Stock┬а ┬а Exchanges┬а ┬а and┬а ┬а Clearing┬а ┬а Corporations) Regulations,┬а 2018(SECC┬а Regulations),┬а have┬а been┬а amended on October 08, 2020
What are the Basic Functions of SEBI?
The basic functions of SEBI is to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto.
Recent Related News:
On November 6, 2020 In order to give more flexibility to the mutual funds, Securities and Exchange Board of India (SEBI) introduced тАШFlexi Cap FundтАЩ as a New Category under Equity Schemes.
