Investment Valuation Policy
SEBI vide its notification dated February 21, 2012 amended Regulation 47 and the Eighth Schedule of SEBI (Mutual Fund) Regulations, 1996 and introduced overarching Principles of Fair Valuation to ensure fair treatment to all investors including existing investors as well as investors seeking to purchase or redeem units of mutual funds in all schemes at all points of time.
It further prescribed that the valuation shall be reflective of the realizable value of securities and shall be done in good faith and in true and fair manner through appropriate valuation policies and procedures approved by the Board of the Asset Management Company.
The amendment also states that in case of any conflict between the principles of fair valuation and valuation guidelines prescribed in Eighth Schedule and circulars issued by SEBI, the Principles of Fair Valuation shall prevail.
Based on the said amendment, the Board of Director of HSBC Asset Management (India) Private Limited (AMIN) and the Trustees of HSBC Mutual Fund (Trustees) have adopted the following revised Valuation Policy and Procedure:
- The appended table (refer Annexure A) describes the methodologies for valuing all types of securities held by the schemes
- Investment in any new type of securities/assets by the mutual fund scheme shall be made only after establishment of the valuation methodologies for such securities with the approval of the Board of the asset management company
- Inter-scheme transfers, if any, will be executed as per Regulations at fair value thereby ensuring fair treatment to all the investors in accordance with the guidelines in appended table (refer Annexure A)
- Deviations from the valuation policy and principles, if any, will be communicated to the Board of AMIN, Trustees through periodical reporting and to the Unit holders/Investors through suitable disclosures on the mutual fund's website
- Documentation of rationale for fair valuation including inter-scheme transfers, if any, shall be maintained and preserved for such period of time as prescribed under the regulations to enable audit trail
- Valuation agencies shall follow a waterfall approach for valuation of debt and money market securities. AMFI in consultation with SEBI has issued (vide AMFI Best Practice Guidelines Circular No. 83/2019-20 dated November 18, 2019) the waterfall approach to be followed by the valuation agencies, details of which are provided in Annexure B. The said guidelines are effective within 90 days from the date of the AMFI circular
- The Board of AMIN has constituted a Valuation Committee (Committee) comprising of senior officials of AMIN
- The Committee shall be responsible for implementation and oversight of the valuation methodologies, policies and procedures and update the Board of AMIN and Trustees on the effectiveness of methodologies adopted and deviations, if any, on periodic basis
- The Committee shall ensure that the valuation policies and procedures are regularly reviewed (at least once in a financial year) by an independent auditor to seek to ensure their continued appropriateness
- The Committee shall ensure that the valuation policies and procedures adopted by AMIN shall seek to address conflict of interest
- The Committee shall be responsible for monitoring of exceptional events* where market quotations may not be available/reliable/sufficient for valuation of a particular security and to decide on its valuation based on the fair valuation principles as per the Regulations
*Exceptional events are those events where current market information may not be available/ sufficient/reliable for valuation of securities. For example, events like - major policy announcements by the Central Bank, the Government or the Regulator; ii) natural disasters or public disturbances that force the markets to close unexpectedly; iii) significant volatility in capital markets and; iv) any other significant events considered as abnormal event for the purpose of fair valuation.