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The asset management companies (AMC) shall deploy the funds garnered in an NFO within 30 business days from the date of allotment of units, and in an exceptional case, if the AMC is not able to deploy the funds in 30 business days, reasons in writing, including details of efforts taken to deploy the funds, shall be placed before the Investment Committee of the AMC.
The regulator also mentioned that the investment committee may extend the timeline by 30 business days, while also making recommendations on how to ensure deployment within 30 business days going forward and monitoring the same.
The investment committee shall examine the root cause for delay in deployment before granting approval for part or full extension and the Investment Committee shall not ordinarily give part or full extension where the assets for any scheme are liquid and readily available, sai Sebi.Trustees shall monitor the deployment of funds collected in NFO and take steps, as may be required, to ensure that the funds are deployed within a reasonable timeframe.In case the funds are not deployed as per the asset allocation mentioned in the SID as per the aforesaid mandated plus extended timelines, AMC shall not be permitted to receive fresh flows in the same scheme till the time the funds are deployed as per the asset allocation mentioned in the SID.
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In addition to this, the AMC shall not be permitted to levy exit load, if any, on the investors exiting such scheme(s) after 60 business days of not complying with the asset allocation of the scheme and shall inform all investors of the NFO, about the option of an exit from the concerned scheme without exit load, via email, SMS or other similar mode of communication.
AMC shall report to Trustees at each of the stages in case there is any deviation.
The market regulator further mentioned that to effectively manage the fund flows in NFO, the fund manager may extend or shorten the NFO period (except for Equity Linked Savings Scheme (ELSS) schemes), based on his view of the market dynamics, availability of assets and his ability to deploy funds collected in NFO.
Further, in order to discourage mis-selling of mutual funds schemes by mutual fund distributors, in terms of Regulation 52 (4A) of the MF Regulations, in case of switch transaction to NFO of a regular plan of mutual fund scheme from an existing scheme managed by the same AMC, the AMC shall ensure that the distribution commission paid is lower of the commissions offered under the two schemes of switch transaction.
