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Framework for Corporate Debt Market Development Fund (CDMDF)- (Securities and Exchange Board of India) (27 Jul 2023)

MANU/SMFD/0014/2023

Capital Market

1. Chapter III-C has been inserted vide amendments to SEBI (Alternative Investment Funds) Regulations, 2012 vide Gazette notification no. SEBI/LAD- NRO/GN/2023/132 dated June 15, 2023 in order to facilitate constitution of an Alternative Investment Fund namely, Corporate Debt Market Development Fund ("CDMDF" or "the Fund"), to act as a Backstop Facility for purchase of investment grade corporate debt securities, to instil confidence amongst the participants in the Corporate Debt Market during times of stress and to generally enhance secondary market liquidity by creating a permanent institutional framework for activation in times of market stress.

2. CDMDF shall comply with the Guarantee Scheme for Corporate Debt (GSCD) as notified by Ministry of Finance vide notification no. G.S.R. 559(E) dated July 26, 2023, which includes the Framework for Corporate Debt Market Development Fund.

3. In addition to the abovementioned scheme as mentioned at para 2 above, CDMDF shall comply with following:

3.1 The fund shall deal only in following securities during normal times:

• Low duration Government Securities

• Treasury bills

• Tri-party Repo on G-sec

• Guaranteed corporate bond repo with maturity not exceeding 7 days.

3.2 The fees and expenses of the Fund shall be as follows:

• During Normal times: (0.15% + tax) of the Portfolio Value charged on daily pro-rata basis.

• During Market stress: (0.20% + tax) of the Portfolio Value charged on daily pro-rata basis.

• "Portfolio Value" means the aggregate amount of portfolio of investments including cash balance without netting off of leverage undertaken by the Fund.

Clarification:

i. The taxes as mentioned above shall include all kinds of taxes.

ii. Transaction costs on securities such as brokerage, clearing charges etc. shall be charged within the limit of fees and expenses.

iii. Financing charges pertaining to borrowings made by CDMDF (such as interest, guarantee fees, other fees like bank charges, processing fees etc.) may be separate from fees and expenses of the fund as provided above.

3.3 Corporate debt securities to be bought by CDMDF during market dislocation include listed money market instruments. The long term rating of issuers shall be considered for the money market instruments. However, if there is no long term rating available for the same issuer, then based on credit rating mapping of CRAs between short term and long term ratings, the most conservative long term rating shall be taken for a given short term rating.

3.4 CDMDF shall follow the Fair Pricing document as placed at Annexure A while purchase of corporate debt securities during market dislocation.

3.5 CDMDF shall follow the loss waterfall accounting, as prescribed at Annexure B.

3.6 CDMDF shall disclose Net Asset Value (NAV) of the fund by 9:30 PM on all business days on website of its Investment Manager and AMFI. For times when CDMDF would have exposure to corporate debt, such NAV shall be disclosed by 11 PM on all business days.

3.7 Purchase allocation and trade settlement of corporate debt securities bought by CDMDF during market dislocation:

• Keeping in view the prudential limits and various other guidelines as prescribed in scheme as mentioned at para 2 above, AMFI shall specify the detailed guidelines for purchase of securities by CDMDF in consultation with SEBI. Stock exchanges shall provide a separate window on the existing Request for Quote (RFQ) platform to facilitate the purchase as per AMFI issued guidelines, within 3 months of issuance of this circular.

• Clearing Corporations shall provide required infrastructure to facilitate the trade settlement of corporate debt trades by CDMDF during market dislocation, within 3 months of issuance of this circular.

4. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of regulations 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.

Tags : FRAMEWORK   CDMDF   FACILITY  

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