Investment conditions for the Corporate Debt Market Development Fund

19Q. (1) During periods of market dislocation, the Corporate Debt Market Development Fund shall purchase corporate debt securities from the specified debt-oriented schemes of mutual funds which meet the following eligibility criteria:

(a) corporate debt securities shall be listed and have an investment grade rating;

(b) the residual maturity of such securities shall not exceed five years on the date of purchase;

(c) securities where there is no material possibility of default or adverse credit news or views.

Explanation: For the purpose of sub regulation (1) of this regulation, the Board shall decide the trigger of market dislocation and its reversal based on the parameters as may be specified by the Board.

(2) The Corporate Debt Market Development Fund shall purchase corporate debt securities in proportion to the contribution made in it at a mutual fund level and in accordance with detailed guidelines as may be approved by the Board.

(3) The Corporate Debt Market Development Fund shall hold eligible securities as mentioned in sub regulation (1) of this regulation, till maturity or sell the same in the secondary market upon reversal of market dislocation, in the manner as specified by the Board from time to time.

(4) Other than market dislocation period, the Corporate Debt Market Development Fund shall invest in liquid and low-risk debt instruments and undertake any other activity related to corporate debt market, as may be specified by the Board from time to time.

(5) The Corporate Debt Market Development Fund shall buy corporate debt securities at fair price adjusted for liquidity risk, interest rate risk and credit risk but not at distress prices.

(6) The sharing of loss by the sellers of corporate debt securities to the Corporate Debt Market Development Fund during periods of market dislocation may be higher than their pro rata holding in the Alternative Investment Fund vis-à-vis other unit holders.

(7) The Corporate Debt Market Development Fund shall not invest in the securities of companies incorporated outside India.

(8) Investment by the Corporate Debt Market Development Fund in any one investee company shall not exceed five percent of its fund capital at the time of investment:

Provided that the combined investment in the corporate debt securities of an issuer group as specified under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 shall not exceed seven and half percent of its fund capital at the time of investment.

Explanation: For the purpose of this sub-regulation, ‘fund capital’ shall be the aggregate of the corpus of the fund and maximum permissible borrowing as per sub-regulation (9) of this regulation.

(9) The Corporate Debt Market Development Fund may borrow funds up to ten times its corpus, subject to such conditions as may be specified by the Board in consultation with the Government of India.

(10) The valuation procedure and methodology for valuing assets of the Corporate Debt Market Development Fund shall be governed by the norms applicable to Mutual Fund schemes under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

(11) In-specie distribution of assets of the Corporate Debt Market Development Fund may be made to the unit holders, only at the time of winding up subject to the consent of seventy-five percent of the unit holders by value of their investment in such fund.

(12) Any material alteration to the investment strategy of the Corporate Debt Market Development Fund shall be with the prior approval of the Board.