Sebi may make MTM in liquid funds compulsory in a year

Documents released by the Securities and Exchange Board of India (Sebi) on Thursday show the mark-to-market (MTM) valuations norms for liquid mutual funds could be extended to all securities within one year.

The Mutual Funds Advisory Committee had recommended implementation of MTM valuation norms in three phases, the agenda papers of the board meeting held on January 28 showed. The papers were published by Sebi on Thursday.

The committee had suggested that MTM rules shall be extended to instruments with residual maturity of up to 30 days in the next six months and further to all securities in another six months. Sebi has already approved the first phase of this move at the above board meeting. The new MTM threshold of 60 days on debt and money market securities has already taken effect.

The papers also showed that Sebi's move to raise the minimum investment limit for portfolio management schemes (PMS) from Rs 5 lakh to Rs 25 lakh was to dissuade retail investors from investing in such schemes.

“Since minimum investment limit has not been revised after 2002, PMS have now become accessible to smaller retail investors, without the protection which is available to retail investors under the mutual fund framework. It is noteworthy that PMS are not meant for retails investors,” the agenda paper said.

Withdrawing the rights and bonus issue rights from optionally convertible securities and FCCB holders was following Sebi's Primary Market Advisory Committee (PMAC) recommendation that treating these instruments at par with compulsorily convertible debt securities was not appropriate.

Sebi's board at the meeting also conducted a mid-term review and also took stock of the various proposed initiatives for the year 2011-12.

According to the review, Sebi has implemented the first phase of its surveillance mechanism, which will help generate reports to identify and investigate aberrations and market abuses. “Phase I of Data Warehousing and Business Intelligence System (DWBIS) has been rolled out to users and Phases-II and III are likely to be completed by June 30,” said the agenda paper.