SEBI Amends Mutual Fund Regulations For NFO Funds Deployment

Timely Deployment of NFO Funds

The Securities and Exchange Board of India (SEBI) has set a clear timeline for deploying funds raised through NFOs. According to a notification issued on February 14, mutual fund schemes must utilise the collected funds within a period specified by SEBI. 

This decision follows an earlier board resolution in December, which required fund managers to allocate NFO funds according to the scheme’s asset allocation plan, typically within 30 days.

If the funds are not deployed within the prescribed timeframe, investors will be allowed to exit the scheme without incurring an exit load. This measure discourages AMCs from collecting excessive funds during NFOs, as investors can always opt for open-ended schemes at the prevailing Net Asset Value (NAV).

Stress Testing and Employee Investment in Mutual Funds

In a move to enhance transparency, SEBI has mandated the disclosure of stress testing for mutual fund schemes. This requirement ensures that investors have clearer insights into a scheme’s ability to withstand market fluctuations.

Additionally, SEBI has introduced a provision requiring AMCs to invest a portion of their employees’ remuneration in mutual fund schemes. The percentage of investment will depend on the employee’s designation and role within the AMC, reinforcing accountability within the industry.

Conclusion

The revised mutual fund regulations reflect SEBI’s commitment to fostering greater trust and transparency in the industry. By enforcing stricter deployment timelines and mandating stress testing disclosures, these measures seek to protect investor interests while promoting efficiency in fund management.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments in the securities market are subject to market risks, read all the related documents carefully before investing.