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What are you making of Sebi’s new guideline that MFs cannot have standstill pact with borrowes, particularly in the context of recent cases for example what we are seeing with Zee?
I have a contrarian view on this, which is, it is easy to have a fatwa or you would you you cannot take a call. But ultimately the job of the fund manager is to take calls and fund manager has to decide whether he is willing to sell today and if the stock falls by 50% or 70% in one day, would the fund manager be willing to take that risk versus have a stencilled agreement for three months and again have a 80% probability that in six months the money would come back 100%?
What happens in retrospective cases? Very recently, the Essel Group had an agreement with a few of the mutual funds wherein they had extended their timeline to repay their outstanding balance. What happens in cases like that?
Again my guess is they will apply prospectively. In the past, there was no law against doing this and also it was prudent to do it. So, I do not see any consequence for past actions because the common law principle is that everything is permitted unless prohibited. So it will almost certainly be prospective.
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