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SEBI Rule Clamps Down on JM MF

The fund house has been forced to close down one of its schemes

JM Financial’s G-Sec Fund - PF Plus Plan has become the first to feel the pain of not being able to meet the stricter rules imposed by market regulator Securities and Exchange Board of India’s (SEBI).

JM Financial Mutual Fund has announced the withdrawal of the fund with immediate effect. The reasons attributed were not having a minimum of 20 investors subscribed to the fund.

The PF Plan, launched in January 2004, was exclusively for PFs, pension or superannuation funds.

The fund house has stopped creating, cancelling or issuing units, and carrying on business activities under the scheme's plan.

According to SEBI regulations, all funds are required to have a minimum of 20 investors and no single investor should account for more than 25 per cent of the corpus of a scheme.

Although interval funds have already borne the brunt of the SEBI blow quite some time back, it is the turn of the gilt funds to come on the radar now. However, the scheme will continue to offer its regular plan.

The fund is among the smallest of the medium-term gilt funds, and has been managing a small asset base of less than Rs 5 crore since January 2009. During the past three months, for which the fund's portfolio data is available, the fund has kept all its assets in short-term money market instruments (CBLOs).

As of July 6, 2009, the fund has been the worst-performer in its category.Although this is the first medium-term gilt fund to have closed, SEBI’s norms have forced quite a few interval funds to take a similar route.Altogether 33 interval funds have closed down since October 2008, of these, 23 funds have closed down in this calendar year.