SEBI issues pre-IPO placement clarification for mutual funds | Check details
&imwidth=600&imheight=450&format=webp&quality=medium "SEBI issues pre-IPO placement clarification for mutual funds | Check details")
SEBI Chairman Tuhin Kanta Pandey Photograph: (ANI file photo)
Securities and Exchange Board of India's mutual fund move: In a letter to the Association of Mutual Funds in India (AMFI), SEBI, citing rules, said that all investments by mutual fund schemes in equity shares and equity-related instruments must be made only in listed securities.
The Securities and Exchange Board of India (SEBI), the country's markets regulator, has banned mutual funds from participating in pre-IPO placements of equity shares and related instruments. The market regulator has only allowed them to invest in the Anchor investor portion or the publicissue of an IPO.
In a letter to the Association of Mutual Funds in India (AMFI), SEBI, citing rules, said that all investments by mutual fund schemes in equity shares and equity-related instruments must be made only in listed securities. The rules extend to securities that are scheduled to be listed, reported Money Control.
The clarification came in response to queries as to can mutual funds can participate in pre-IPO placements. The market regulator warned that participating in pre-IPO placements can lead to mutual funds holding unlisted shares in case the IPO is delayed or cancelled. It said such a situation would breach regulatory norms for mutual funds.
“If the schemes of the Mutual Funds are allowed to participate in pre-IPO placements, they may end up holding unlisted equity shares in case the issue or listing cannot be concluded for any reason, which would not comply with the said clause,” SEBI said.
It said that IPOs of equity shares and equity-related instruments, schemes of Mutual Funds, can only participate in the Anchor Investor portion or in the public issue.
This move could rattle some mutual funds as pre-IPO positions get them stocks at good prices. SEBI is concerned that in case the money is locked in, it could create liquidity issues for mutual funds. However, mutual funds argue that disclosure norms can be used as a stress test for liquidity.
Trending Stories
)
&im=FitAndFill=(700,400))
)
)
)
)
)
)
)
)
&im=FitAndFill=(700,400))
)
)
&im=FitAndFill=(700,400))
)
)
&im=FitAndFill=(700,400))
&im=FitAndFill=(700,400))
&im=FitAndFill=(700,400))
)
)
&im=FitAndFill=(700,400))
)
)
)
)
)
)
)
)
)
)
A senior official told MC that mutual funds investing in pre-IPO placements can pose a risk.
"Imagine a fund manager invests trusting a promoter who promises a listing that later doesn’t happen — how will those unlisted shares be treated in the scheme?” the officer told the website.
A market manager told MC that keeping mutual funds out of the pre-IPO placements is not ideal, as other well-regulated institutional investors are allowed to participate.