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AMCs of Mutual Funds to Set Up LPCC by Contributing Rs 150 Crore: SEBI

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Sebi-issues-directions-for-LPCC-by-asset-management-firmsOn 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  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  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  gilt  fund  with  10  year  constant  duration but  including  conservative  hybrid schemes) managed by them.

Basis of Calculation

Association of Mutual Funds in India (AMFI) will calculate contribution as per  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  21(f)  of SEBI (Mutual Funds) Regulations, 1996 is maintained over and above the contribution.

Background:

Recommendation of Working Group

The  Mutual  Fund  Advisory  Committee  (MFAC)  of SEBI constituted a working group consisting of representatives of various Mutual  Funds,  Clearing  Corporation  of  India  Limited  (CCIL)and  AMFI  for detailed  deliberation.

Among others, the working group has suggested setting up LPCC by AMCs of MFs.

Approval of SEBI Board

The SEBI board in  its  meeting  held  on  September  29,  2020 approved the proposal to set up LPCC.

Amendment

Consequently, Securities Contracts  (Regulation)   (Stock    Exchanges    and    Clearing    Corporations) Regulations,  2018(SECC  Regulations),  have  been  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 ‘Flexi Cap Fund’ as a New Category under Equity Schemes.