SEC extends lock-in period for MF share placement

FE Team | Published: March 18, 2010 00:00:00 | Updated: February 01, 2018 00:00:00

Mohammad Mufazzal
The Securities and Exchange Commission (SEC) has extended the lock-in period for placement shares of mutual funds (MFs) from the current six months to one year, officials said.
An SEC member said the SEC would approve at least two mutual funds every month. Currently, 52 mutual funds are awaiting the SEC nod. The move came after a recent decision taken by the SEC.
"Issuer companies will be informed about the extension of lock-in period through letters," an SEC official said.
The SEC also finalised a standard trust deed of mutual funds, which has been sent to sponsors, asset management companies, trustees and custodians of mutual funds.
According to the standard trust deed, mutual funds are not allowed to invest or lend to any scheme as long as it is not permissible under the rules.
However, Green Delta Financial Services Limited Managing Director Waqar A Choudhury said one-year lock in period could create share scarcity in the market.
"I think the new criteria set for mutual funds to invest or lend to any scheme will serve as a cushion for placement shareholders. But the rise in lock-in period can create share scarcity in the market," Waqar A Choudhary said.
SEC member Muhammad Yasin Ali said new provision of lock-in would not create any share scarcity in the market.
“According to the revised Initial Public Offering (IPO) guideline, any mutual fund will offload at least 50 per cent of the fund size, which is more than two times the amount an MF was earlier required to offload. That’s why the extension of the lock-in period will not create any share scarcity,” Muhammad Yasin Ali said.