Mutual Funds to List Schemes to be Closed

The Securities and Exchange Board of India has allowed mutual funds to list mutual funds scheme units that are in the process of winding up on the stocks exchange.

This move will give investors a window to exit from such products, which are illiquid today. Once it is implemented, this will apply to Franklin Templeton’s six shut debt schemes too.

Sebi has made it compulsory for all mutual funds that are in the process of winding up with a guideline that all sponsors,  trustees, and employees in the AMC will not be allowed to transit in such units.

Listing Of Winding Up Schemes

Sebi said in a circular on Wednesday,” According to mutual funds regulations, there are several steps anticipated to mutual funds schemes winding up. Such winded mutual fund schemes can be listed and traded on a recognized stocks exchange, which may give an option to investors to exit from the same”.

Trading in these schemes after the listing of shutting up schemes on the stock exchange will be in dematerialized form just like shares. The stock exchange will finalize the steps with the consultation of SEBI regarding the trading and settlement of such units.

Expert’s Point Of View

Sumit Agrawal, founder, Regstreet Law Advisors said,” Although the trading of mutual fund schemes in the unit will work as an early exit option for the investors; but it also means investors have to take a haircut.

Last month, the announcement of the closure of 6 Debt Schemes with total assets of over Rs 26000 crore by Franklin Templeton provoked investors. As Franklin blocked redemptions for an undefined period of time.

We believe this move by SEBI is a positive one as it will provide liquidity to investors. We are keen to implement this as early as possible,” said a spokesperson of Franklin Templeton.

Industry officials said this attempt will create opportunities for existing investors to exit along with the possibility of getting buyers for such units in the informed section of the market.

If investors get the units at a good price and they have a vision that funds might recover, it will be a great exit opportunity to investors which they are lacking now.

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