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Informist, Wednesday, Dec. 18, 2024

MUMBAI – The board of Securities and Exchange Board of India Wednesday approved amendments to specify timelines for deployment of funds collected by mutual funds in new fund offers, as per the specified asset allocation of a scheme, it said in a press release today.

"The objective of the framework is to provide a timeline within which the fund manager would be required to deploy the funds garnered in an NFO as per the required asset allocation of the scheme. The new framework is aimed at encouraging AMCs (asset management companies) to collect only as much funds in NFOs as can be deployed in a reasonable period of time (i.e. ordinarily 30 days), since in the open-ended funds investors always have the option to enter the scheme ata later date at the prevailing NAV (net asset value)," the release said.

The framework also provides an option to investors to exit the scheme without paying an exit load in case the fund manager is unable to deploy the fund within the specified timeline, the release said. It also said that to address the issues of possible mis-selling in these new schemes, for switch transactions, the distributor will be entitled to the lower of the two commissions offered under the two schemes of the switch transaction.  End

Reported by Kshipra Petkar

Edited by Akul Nishant Akhoury

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