Backdated Segregation After a Debt Default

No. Segregation is an investor-protection mechanism for a credit event; it is not a retrospective loss-allocation tool. The credit event occurred on 12 March, the AMC knew by 15 March, trustee approval is not scheduled until 18 March, and the AMC's own policy requires prior trustee approval. Under the SEBI mutual fund framework, a segregated portfolio must be created on the date of the credit event and with the required trustee approval or authorisation. The AMC cannot backdate creation to 12 March to protect redeeming investors, because that would rewrite NAVs already used for redemptions and shift the loss to continuing investors. The CEO's claim that retroactive segregation is standard practice is not a defence. If the trustee approves on 18 March, segregation can be effective only from 18 March or the date approval is actually given, and the NCD must be valued correctly in the main scheme until then. Before 18 March, redeeming investors bear the loss through the NAV, which is permissible if the NAV was correctly calculated. The AMC must not issue segregated portfolio units to investors who have already redeemed.

Place the 12 March effective-date proposal on hold and document the chronology of 12, 15 and 18 March, preserving valuation committee records. Convene an urgent trustee meeting or valuation committee and ask the trustee to consider segregation only from the date it can validly approve it, after confirming the credit event and the valuation. Ensure the main scheme's NAV is marked down for the NCD from the date the credit event is known; do not use 92 unless that is the correct valuation. Issue an investor communication explaining the credit event, the NAV impact and any segregation decision. Report to SEBI if there is a violation, a NAV error, or a delay in reporting, and check the AMC's separate reporting obligations to trustees and SEBI. Do not allow the fund manager or CEO to pressure the valuation team. If redemptions were already processed at an incorrect NAV, quantify the error and apply the NAV-error rectification and compensation policy.

They should not receive segregated portfolio units because they were not unitholders on the date of segregation. If the NAV used for their redemptions was correct on those dates, no compensation is due merely because a later segregation would have been convenient. If the NAV was overstated because the AMC delayed marking down the NCD, then redeeming investors received too much and continuing investors were disadvantaged; the AMC must rectify the NAV error under its policy, which may require the AMC to compensate the scheme or continuing investors and may require recovery from redeeming investors where feasible. The compliance officer should not reverse the redemption or backdate segregation to achieve fairness; instead, quantify the NAV error, apply the scheme's error policy and report to the trustee. The guiding principle is equal treatment of unitholders based on the correct NAV on the date of their transaction, not retroactive reallocation of losses.