SEBI imposes new restrictions on Mutual Funds

SEBI vide circulars SEBI/IMD/CIR No. 14/151044/09 dated January 19, 2009 and SEBI/IMD/CIR No.13/150975 / 09 dated January 19, 2009 have effected the following changes in Mutual Fund rules.
• An investment made by liquid fund schemes and plans is subject to the following conditions. Earlier definitions are withdrawn.
(1) With effect from February 01, 2009, funds should make investment in /purchase debt and money market securities with maturity of upto182 days only.
(2) With effect from May 01, 2009, funds should make investment in /purchase debt and money market securities with maturity of upto 91 days only.
(3) Inter-scheme transfers of securities having maturity upto 365 days and held in other schemes as on February 01, 2009 shall be permitted till October 31, 2009. From November 1, 2009 the new requirements shall apply to such inter-se scheme transfers also.
• SEBI also discontinued the use of the term “Liquid plus Scheme” as it gives a wrong impression to the investors about an added liquidity. Mutual funds should carry out this change and confirm the compliance to SEBI within 30 days from the date of this circular.
• SEBI prohibited the practice of Mutual Funds offering indicative portfolios and indicative yields in their debt /fixed income products as it may be misleading to investors. This is applicable to any communication in any manner issued by (1) any Mutual Fund or (2) distributors of its products. Compliance shall be monitored by the AMC and Trustees and reported in their respective reports to SEBI.
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