Economics · Economy
Under the Securities and Exchange Board of India (Mutual Funds) Regulations, what is the precise regulatory requirement regarding the valuation of a segregated portfolio (side-pocketing) and transaction restrictions on its units?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The segregated portfolio is merged with the main portfolio once the credit rating of the underlying security improves to investment grade, without further regulatory approval.
- 2New units can be issued in the segregated portfolio to existing investors to maintain the total unit count, while redemptions are processed after a cooling period of thirty days.
- 3The AMC must ensure that the valuation of the segregated portfolio reflects the fair value as determined by valuation agencies, and no redemption or subscription is allowed in the segregated portfolio.✓
- 4The segregated portfolio must be valued at zero immediately, and no new units can be issued, but redemptions are allowed at the discretion of the AMC.
Correct answer
The AMC must ensure that the valuation of the segregated portfolio reflects the fair value as determined by valuation agencies, and no redemption or subscription is allowed in the segregated portfolio.
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