SEBI – LPCC or, Limited Purpose Clearing Corporation

SEBI – LPCC or, Limited Purpose Clearing Corporation

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April 20, 2023

To address disagreements and complaints resulting from transactions, the Securities and Exchange Board of India (SEBI) established a dispute resolution process known as LPCC or, the Limited Purpose Clearing Corporation.

LPCC - It is a legal body designed to handle the clearing and settlement of repo transactions. The mechanism will be used to handle disputes between clearing members, disagreements between clearing members and their customers, disagreements between the LPCC and its vendors, and disagreements between clearing members or their clients and the LPCC.

Disputes between LPCC clearing members shall be resolved by conciliation and/or arbitration by a panel of three clearing members other than the clearing members involved in the issue. The arbitration panel's ruling would be final and binding on the parties. If a clearing member or the LPCC is not satisfied, the issue will be addressed in accordance with the Payment and Settlement Systems Act of 2007.

It was mandated that such contributions from AMCs be proportional to the average assets under management (AUM) of open-ended debt oriented mutual fund schemes managed by them for the fiscal year 2019-20 (with the exception of overnight, gilt fund, and gilt fund with 10-year unchanged duration however involving conservative hybrid initiatives).

According to the most recent circular from Sebi, the contribution of AMCs would be based on the average AUM of debt-oriented schemes for the fiscal year 2020-21 This follows representation from the Association of Mutual Funds in India (Amfi), an industry organisation. The LPCC is a company that was formed to handle the clearing and settlement of repo transactions. The decision to enable the MF sector to establish LPCC was made based on the recommendations of a working group formed by the mutual fund advisory committee. According to market analysts, LPCC would assist fund houses in dealing with redemption pressure and settling transactions in corporate bond markets.

Source - NSE