SEBI Paper Seeks Deployment Of NFO Funds By AMCs Within 30 Days

The Securities and Exchange Board of India on Wednesday proposed that asset management companies should specify timelines for deployment of funds collected under new fund offers. The funds should be deployed within 30 days, with an extendable period of another 30 days, the proposal stated.

"AMCs should specify achievable timelines in the scheme information document regarding the deployment of the funds as per the specified asset allocation of the scheme and should garner funds during the NFO accordingly," the markets regulator proposed in a consultation paper.

"AMCs may be mandated to deploy the funds garnered in NFO, within 30 business days from the date of allotment of units," the paper stated.

In exceptional cases, where the AMC is not able to deploy the funds in 30 business days, the reasons for the delay should be submitted in writing, SEBI said.

After analysing the reason for delay, the investment committee may extend the timeline by 30 more days, the proposal added.

If the AMCs fail to adhere to the timeline, they may not be permitted to launch any new scheme "till the time the funds are deployed as per the asset allocation mentioned in the scheme information document", it further said.

Also, the AMCs will not be permitted to levy exit load, if any, on the investors exiting such schemes "after 60 business days of not complying with the asset allocation of the scheme", the paper added.

Public comments on the proposals are invited till Nov. 20, SEBI said.

The regulator, in its paper, said it analysed a total of 647 schemes launched by AMCs in the last three fiscals. Among them, funds in 603 schemes were deployed in 30 or less days. In 30 other schemes, the deployment took 30 to 60 days. The period extended up to 90 days in nine schemes and more than 90 days in five schemes.

According to SEBI, the matter related to the timely deployment of funds was raised by the regulator with the Association of Mutual Funds in India, "wherein it was suggested that the timeline for deployment of funds should be within 90 days".

The matter was also raised with the Mutual Funds Advisory Committee, which suggested that the AMCs may be mandated to deploy the NFO funds within 60 business days from the date of allotment, SEBI further noted.