Capital market surveillance sebi Friday came up with a regulatory framework for private equity funds for mutual fund houses as well as self-sponsored asset management companies (AMCs).
Under the framework of private equity (PE) funds, SEBI has said that the applicant should have fund manager capacity and a minimum of five years of investment experience in the financial sector. It should have managed, committed and drawn-down capital of at least Rs 5,000 crore.
A mutual fund sponsored by a PE shall not participate as an anchor investor in a public issue of an investee company, in which any scheme and fund managed by the sponsoring PE has 10 per cent or more investment or board representation.
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“The fit and proper criteria of any applicant PE for sponsoring a mutual fund shall be ascertained by its conduct in the home jurisdiction concerned, experience, track record and qualification,” Sebi said in a circular.
To increase industry penetration and facilitate new types of players to act as sponsors of mutual funds, an alternative set of eligibility criteria has been introduced.
It is to facilitate the flow of capital into the industry, encourage innovation, encourage competition, and provide ease of consolidation and exit for existing sponsors.
Currently, any entity owning 40 per cent or more shares in a mutual fund is considered a sponsor and has to meet the eligibility criteria.
Also, SEBI said “self-sponsored AMC” mutual funds can continue to do business. It is subject to fulfillment of certain conditions of AMC. This move will give the original sponsor the flexibility to disassociate itself from the MF voluntarily without the need to include new and eligible sponsors.
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According to SEBI, an AMC can become self-sponsored subject to certain conditions – the AMC should have been in business in financial services for at least 5 years, have a positive net worth in the immediately preceding five years and net profits of Rs 10 crore in each of the immediately preceding five years. .
Any sponsor proposed to divest should be a sponsor of the respective mutual fund for at least five years and the shareholding proposed to be divested by the sponsor should not be under any pressure or lock-in.
Any sponsor can reduce its shareholding below 10 per cent within 5 years in case of listed AMCs, as against three years in case of unlisted AMCs.
After divestiture of a sponsor from an AMC, all shareholders of such AMC will be classified as financial investors and the upper limit of shareholding for such financial investors will be below 10 percent.
A self-sponsored AMC must continuously maintain the minimum net worth requirement.
However, SEBI has said that a spin-off sponsor or a new entity can become a mutual fund sponsor under certain conditions—if the AMC fails to meet the criteria of a self-sponsored AMC.
Further, a one-year cure period will be provided during which, the AMC will have to fulfill the criteria of a self-sponsored AMC.
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Also, SEBI came up with guidelines for establishing liquid net worth by AMCs.
AMCs will have to establish minimum net worth in cash, money market instruments, government securities, treasury bills, repos of government securities or listed AAA-rated debt securities without bespoke structure, credit enhancement or embedded options, Sebi said. .
In case of change in control of an existing AMC due to acquisition of shares, the sponsor must ensure that the positive liquid net worth of the sponsor is to the extent of the aggregate par value or market value of the shares offered. earned, whichever is higher.
The Securities and Exchange Board of India (Sebi) said the new rules will come into effect from August 1, while those relating to liquidation net worth by AMCs will be applicable from January 1, 2024.
(This story has not been edited by News18 staff and appears from a syndicated news agency feed – PTI)
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