SEBI has taken certain decisions with regard to valuation of securities having multiple time back sell rights and where the right to sell or put option has been adjusted in the valuation of the securities based on the recommendations of the Mutual Fund Advisory Committee.
Under the new regime, if the mutual fund does not exercise the right of sale, which would have been in favor of the scheme, the fund house will have to explain to the valuation agencies, the board of AMCs and trustees the reasons for not exercising the option. .
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According to SEBI, the clarification has to be given on or before the last date of expiry of the notice period. As such, the Valuation Agency will not consider the remaining sale option for the purpose of valuation of the security. According to the regulator, if the valuation price is 0.3 per cent more than the contractual yield or coupon rate than the selling right under valuation, then the put option will be considered in favor of the scheme.
According to Sandeep Bagla, CEO, Trust AMC, this step will ensure that the fund manager will use the idea in a proper way and fund management will be done in a proper manner.