Securities and Exchange Board of India (Sebi) issued a circular, which directed fund houses to use the polled spot price published by a recognised domestic exchange instead of the prices of the London Bullion Market Association.
“Pursuant to discussions in the Mutual Fund Advisory Committee (MFAC), followed by public consultation and engagement with stakeholders, it was deliberated that polled spot prices published by recognised stock exchanges may be used for valuing gold and silver held by mutual fund schemes. Since stock exchanges operate under regulatory oversight with transparency and compliance requirements, using their published spot prices would make valuations more reflective of domestic market conditions and bring greater uniformity to valuation practices,” the circular stated.
As per the extant regulatory framework, physical gold and silver held by Gold and Silver Exchange Traded Funds (ETFs) are valued using the AM fixing prices of the London Bullion Market Association (LBMA). The final valuation is arrived at after adjusting the LBMA prices for metric and currency conversions, transportation costs, customs duty, applicable taxes and levies, and factoring in any notional premium or discount to determine the domestic valuation.
Now, mutual funds shall value physical gold and silver using the polled spot prices published by recognised stock exchanges that are used for settlement of physically delivered gold and silver derivatives contracts.
The regulator also noted that it will consult with AMFI to prescribe a uniform policy in this regard. “The spot polling mechanism shall comply with the spot polling guidelines as specified by SEBI from time to time,” the note read.
