SEBI Amends MF Rules, Directs AMCs For NFO Fund Deployment Within Timeframe
SEBI Amends MF Rules, Directs AMCs For NFO Fund Deployment Within Timeframe
The norms will be effective from 1 April 2025
The Securities and Exchange Board of India (SEBI) has updated mutual fund (MF) rules mandating asset management companies (AMCs) to deploy funds from New Fund Offers (NFOs) within a specified period.
They must disclose stress testing to enhance operational flexibility and investor trust and invest a portion of employee remuneration in MF units.
SEBI’s notification read, "The scheme shall deploy the funds received in the new fund offer within the time period as may be specified by the Board from time to time."
In December last, the capital market regulator approved a proposal, asking fund managers to deploy funds collected during an NFO as per the specified asset allocation of the scheme, within 30 days.
However, if funds were not deployed within the timeframe, investors could exit the scheme without paying an exit load. This would discourage AMCs from collecting excess funds during NFOs, as investors can later invest in open-ended schemes at the prevailing Net Asset Value (NAV).
SEBI added, "The AMC shall invest a percentage of the remuneration of such employees as specified by the board in units of mutual fund scheme based on the designation or roles of the designated employees as may be specified by the Board."
