SEBI notifies New Provisions of Trigger date for the purpose of Creation of Segregated Portfolio [Read Circular]

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The Securities Exchange Board of India (SEBI) has notified on provisions regarding the segregation of portfolios due to the  COVID -19 pandemic.

It has notified the date of the proposal for restructuring of debt received by AMCs shall be treated as the trigger date for the purpose of creation of a segregated portfolio and that such proposal of restructuring of debt received by AMCs shall be immediately reported to the Valuation Agencies, Credit Rating Agencies, Debenture Trustees and AMFI.  AMFI, on receipt of such information, is to immediately disseminate it to its members.

SEBI, in a  circular dated  December 28, 2018, has mentioned that segregated portfolio can be created in a Mutual Fund scheme by AMC in case of a credit event, which includes downgrade to below investment grade and subsequent downgrades in credit rating by the SEBI registered Credit Rating Agency.

Following this, RBI released a circular dated August 06, 2020, permitting the lending institutions to extend the resolution facility under ‘Prudential  Framework for  Resolution of  Stressed  Assets’  dated  June  7,  2019, to borrowers having stress on account of Covid19.  RBI has also allowed all lenders of the borrower to sign the Inter Creditor Agreement (“ICA”)for resolving the stressed assets.

Further, SEBI, vide circular dated August 31, 2020, has provided that if the CRA is of the view that the restructuring by the lenders/ investors is solely due to  COVID-19  related stress or under the aforementioned  RBI framework, CRAs may not consider the same as a  default event and/or recognize default.

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