SEBI's norms on timeline for deployment of NFO funds to kick in Apr 1
This story was originally published at 18:50 IST on 27 February 2025
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--SEBI: Norms on timeline for NFO fund deployment to be effective Apr 1
MUMBAI – The Securities and Exchange Board of India issued a circular Thursday making it mandatory for asset management companies to deploy the funds they collect from new fund offers within 30 business days from the date of allotment. The norms come into effect Apr. 1. The market regulator had issued a consultation paper in this regard Oct. 30.
Asset management companies are now also bound to specify achievable timelines in the scheme information document regarding the deployment of funds as per the specified asset allocation of the scheme and to garner funds during the new fund offers accordingly. The new norms aim to encourage mutual fund houses to collect only as many funds in new fund offers as can be deployed in a reasonable period of time and to curb mis-selling of new fund offers, SEBI said.
The new directives will apply to all new fund offers. In the consultation paper, SEBI had excluded index funds and exchange-traded funds from having to adhere to the time frame.
If an asset management company is unable to deploy the funds collected in 30 business days, it will not be permitted to receive fresh flows in the same scheme till the funds are deployed as per the specified asset allocation. Fund houses will also not be allowed to charge an exit load if they have not been able to deploy the funds even after 60 business days.
The regulator said trustees will be responsible to monitor the deployment of funds collected in fund offers and to take steps to ensure that these funds are deployed within the specified time frame. End
Reported by Christina Titus
Edited by Rajeev Pai
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