SEBI issues norms for valuation of Securities of Multiple Put Options.

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The Securities and Exchange Board of India on 9th July 2021 has issued a framework for the valuation of securities, having multiple put options, held by mutual funds. The Framework shall be effective from 1st October 2021.

In  respect  of valuation  of  securities  with  multiple  put  options present ab-initio wherein  put option  is  factored  into the valuation  of  the  security by  the  valuation  agency, the following  is decided based on the recommendation of Mutual Fund Advisory Committee

If the put option is not exercised by a  Mutual  Fund while exercising the put option would have been in favour of the scheme.

Further, the put option shall be considered as ‘in favour of the scheme’ if the yield of the valuation price ignoring the put option under evaluation is more than the contractual yield/coupon rate by 30 basis points.

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