Restrictions on investments, Financial Management

Restrictions on Investments:

A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company, provided that such limit shall not be applicable for investments in government securities and money market instruments. Provided further that investment within such limit can be made in mortgaged backed securitised debt, which are rated not below investment grade by a credit rating agency, registered with the Board.

A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of Asset Management Company.

No mutual fund under any scheme should own more than 10% of any company's paid up capital carrying voting rights. Transfers of investments from one scheme to another scheme in the same mutual fund shall be allowed only if, -

Such transfers are done at the prevailing market price for quoted instruments on spot basis.

Explanation - "spot basis" shall have same meaning as specified by stock exchange for spot transactions.

The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made.

A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate interscheme investment made by all schemes under the same management or in schemes under the management of any other Asset Management Company shall not exceed 5% of the net asset value of the mutual fund.

The initial issue expenses in respect of any scheme may not exceed six percent of the funds raised under that scheme.

Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position, whereby it has to make short sale or carry forward transaction or engage in badla finance. Provided that Mutual Funds shall enter into derivatives transactions in a recognized stock exchange for the purpose of hedging and portfolio balancing, in accordance with the guidelines issued by the Board.

Every mutual fund shall, get the securities purchased or transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature.

Pending deployment of funds, a mutual fund can invest the same in short-term deposits of scheduled commercial bank's.

No mutual fund scheme shall make any investment in:

  • Any unlisted security of an associate or group company of the sponsor; or
  • Any security issued by way of private placement by an associate or group company of the sponsor; or
  • The listed securities of group companies of the sponsor which are in excess of 25% of the net assets.

No mutual fund scheme shall invest more than 10 percent of its NAV in the equity shares or equity related instruments of any company provided that, the limit of 10 percent shall not be applicable for investments in case of index fund or sector or industry specific scheme.

A mutual fund scheme shall not invest more than 5% of its NAV in the unlisted equity shares or equity related instruments in case of open ended scheme and 10% of its NAV in case of close ended scheme.

 

 

Posted Date: 9/11/2012 1:23:26 AM | Location : United States







Related Discussions:- Restrictions on investments, Assignment Help, Ask Question on Restrictions on investments, Get Answer, Expert's Help, Restrictions on investments Discussions

Write discussion on Restrictions on investments
Your posts are moderated
Related Questions
Workers interest in participation is also influenced by certain personnel or group characteristics. For example several research studies have shown that both very low and very high

What are multinational corporations (MNCs) and what economic roles do they play? A multinational corporation (MNC) can be described as a business firm incorporated in one count

Inventory is sometimes thought of as a necessary evil.  Explain. Inventory ties up funds and these funds aren't earning an unambiguous return.  Some inventory is habitually nec

In convertible bonds, bondholders get a right to convert their bonds for a specific number of shares of the bond issuer. This privilege allows bondholders to take

What are the Market conditions of cost of capital Security may not be readily marketable when investor wants to sell; or even if a continuous demand for security does exist, p

Liquidity risk tends to change as and when there exists a change in the spread between the bid and the ask price. Market liquidity change is a matter of concern f

Define the Explicit cost of capital Explicit cost of retained earnings that involve no future flows to or from firm is minus 100 per cent. This must not tempt one to infer that

Working capital cycle (operating/trading/cash cycle) It is the time between paying for goods supplied and final receipt of cash from their sale. It is desirable to keep cycle a

Global Sector Indixes Morgan Stanley Capital International (MSCI) measures the International and National performance. It launched All Country Sectors on January 30, 2001. MSCI

How can a price ceiling make consumers better off?  Under what conditions might it make them worse off? If the supply curve is completely inelastic a price ceiling will raise c