India Orders Mutual Funds Not to Shield Stressed Companies
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India’s market regulator prohibited mutual funds from signing pacts with stressed companies that delay margin calls, because such deals hurt investors.
The Securities & Exchange Board of India’s ban comes after companies such as Essel Group reached so-called standstill agreements with money managers. Under such deals, fund managers agree not to sell shares pledged by the founders as collateral for loans even if the stock tumbles. India’s biggest money manager earlier this month said it will spend 5 billion rupees ($72 million) to shield investors in some of its funds that own debt issued by the Essel Group.