MFs allowed to invest in unlisted VCFs

By Our Special Correspondent

NEW DELHI, JULY 9. The Securities and Exchange Board of India (SEBI) today allowed mutual funds to invest in securities and units of unlisted venture capital funds (VCFs) up to a limit of 5 per cent of net assets in the case of open-ended mutual fund schemes and 10 per cent of the net assets in the case of close- ended schemes.

The SEBI Chairman, Mr. D. R. Mehta, told presspersons after a two hour board meeting that the market regulator had also decided to retain the ban on celebrities promoting mutual funds and initial public offerings (IPOs) by companies.

Elaborating on the mutual fund regulations, Mr. Mehta said earlier the rules did not specify whether the investment limits for VCFs were applicable for unlisted VCFs also.

In its earlier board meeting in September last, the SEBI had approved investment by mutual funds in venture capital funds up to 5 per cent of their corpus in the case of open-ended schemes and up to 10 per cent of the corpus in case of close-ended schemes.

``It was realised that the norms were slightly conflicting. Today, it was decided that mutual funds will be allowed to invest in both listed and unlisted companies,'' Mr. Mehta said.

The SEBI board meeting also decided to expand the definition of qualified institutional buyers (QIB) and include State industrial development corporations for the purpose of subscribing to an equity issue under the book building process.

On the decision to not to allow celebrities forming part of advertisement by mutual funds or corporates for the purpose of public issue or promotion of mutual funds, Mr. Mehta said it was felt that these issues should be based on their fundamentals rather than its promotions by celebrities.

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