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CORPORATE DEBT MARKET DEVELOPMENT FUND |
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CORPORATE DEBT MARKET DEVELOPMENT FUND |
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Corporate Debt Market Development Fund The expression ‘corporate debt market development fund’ is defined under Regulation 2(1)(ga) of Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, (‘Regulation’ for short) as an Alternative Investment Fund set up and making investments in terms of Chapter III-C (from Regulations 19N to 19U) of these regulations. The market regulator has clarified that the Corporate Debt Market Development Fund has been classified as Category I Alternative Investment Fund. The fund was set up as a backstop facility to provide liquidity to debt funds when there is an event that causes a surge of redemptions. Applicability The provisions of Chapter III of these Regulations shall apply only to the corporate debt market development fund (‘Fund’ for short). The provisions of these regulations except the following provisions and the guidelines and circulars issued under these regulations, unless the context otherwise requires or is repugnant to the provisions of this Chapter, shall apply to the Corporate Debt Market Development Fund, its sponsor, manager, trustee and investors-
Features of this fund
Registration The Fund shall apply for registration as an Alternative Investment Fund in accordance with the provisions of Chapter II of these regulations. The placement memorandum of the Corporate Debt Market Development Fund shall be filed with the Board. The Board may communicate its comments, if any, to the Manager prior to the launch of the fund and the Manager shall incorporate the comments in the placement memorandum prior to the launch of the fund. Investment
Conditions for investment
Disclosures The portfolio of the Fund shall be disclosed to the unitholders on a fortnightly basis. The Net Asset Value of the Fund shall be disclosed to the unitholders on a daily basis. Governance The provisions relating to governance mechanism was inserted vide Notification dated 15.06.2023. Trustee Company The Fund shall appoint a trustee company. The Board of Directors of trustee company and the Manager of the Fund shall be appointed with the prior approval of the Board. The roles and responsibility of the trustee company shall be similar to that of the trustee appointed under Mutual Fund regulations. The trustee company shall not engage in any activity other than acting as a trustee of the Fund, except with the prior written consent of the Board. Two-thirds of the members of the board of directors of the trustee company shall be independent directors and shall not be associated with the Sponsor or the Manager in any manner whatsoever. No person shall initially or any time thereafter be appointed as a director of the trustee company of the Fund without the prior approval of the Board. Audit Committee An audit committee of the trustee company shall be constituted to review compliance with the provisions of placement memorandum as required under these regulations along with other responsibilities as may be specified by the Board from time to time. Governance Committee The manager of the Fund shall appoint a Governance Committee. The said committee shall comprise corporate bond market experts including academicians, fund managers or Chief Investment Officers, risk management professionals and independent market experts. This committee jointly with the board of the Manager and trustee company, shall approve the policies of the Fund. The Committee shall supervise the activities of the Fund, especially relating to management of conflict of interest, if any. It shall have oversight on management of asset liability mismatches during times of market dislocation. Listing The units of the Fund shall not be listed on any recognised stock exchange. Winding up These shall cease to exist upon the winding up of the Fund. Responsibility The Manager of Fund shall continue to be responsible for any liabilities, that may arise out of the mandate in relation to its investment management activities. Conclusion This fund will address the needs of the corporate debt market in India and it will be launched as a close-ended scheme. This fund serves as a backstop facility for investment-grade corporate debt securities, providing stability and enhancing investor confidence in the market. The Fund provides a backstop facility of Rs 33,000 crore has been established for Mutual Funds. It aims to enhance secondary market liquidity by creating a permanent institutional framework that can be activated during periods of market stress. The fund acts as a safety net for investors during times of market dislocation, providing support and stability to the corporate debt market.
By: Mr. M. GOVINDARAJAN - December 23, 2024
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