SEBI creates backstop fund for corporate debt securities

Backstop for corporate debt market

The regulator approved setting up of a Corporate Debt Market Development Fund (CDMDF.) This will be structured as an alternative investment fund. This fund will act as a backstop for investment grade corporate bonds. It will help provide liquidity to investment grade corporate bonds during times of market stress. The CDMDF will be provided a guarantee by the National Credit Guarantee Trust Company and help to raise funds for purchase of corporate debt securities during market dislocation. The board also approved the framework for triggering. 

PE funds can become sponsors/promoters of MFs

SEBI’s board approved a proposal that will allow private equity funds to become sponsors or promoters of asset management companies. Till now, private equity funds were not allowed to become sponsors. But the regulator also has made the requisite safeguards while allowing PE funds to become sponsors of MF AMCs or asset management companies.

This change will allow self-sponsored AMCs to start the MF business and exit the business without having to induct a new and eligible sponsor.

Roles of Trustee and Board of AMCs

SEBI’s board also approved amendments to its regulations that explicitly state that the board of directors of an AMC is responsible for protecting the interests of unitholders. This is in addition to the AMC stakeholders’ interests. The regulator’s board also approved amendments that identify specific areas as the core responsibilities of the trustees of an AMC, which will require independent evaluation and due diligence by the trustees.