Sebi modifies NAV rules for mutual funds

Currently, mutual fund investors with cheque values of less than Rs 2 lakh per application get the NAV of the product on the same day of deposit. Those who invest more than Rs 2 lakh get the NAV of the day the fund house realised the cheque. This ...

Agencies
The regulator said fund managers of respective schemes should place orders for equity and equity related instruments of each scheme.
Mumbai: The Securities and Exchange Board of India (Sebi) has asked mutual funds to uniformly apply net asset value (NAV) across schemes upon realisation of funds. The capital markets regulator also tightened rules on the processes that fund managers follow to buy shares. The new rules will become effective from January 1.

Currently, mutual fund investors with cheque values of less than Rs 2 lakh per application get the NAV of the product on the same day of deposit. Those who invest more than Rs 2 lakh get the NAV of the day the fund house realised the cheque. This could be up to three days after the cheque is submitted.

With the new rule, the capital markets regulator has now created a level playing field for all investors.


“This will create a level playing field for all investors across all mutual fund products. This will also increase payments using digitisation,” said Amol Joshi, founder, Plan Rupee.

In its circular, Sebi said mutual fund schemes — except liquid and overnight — shall allot the units and the NAVs on the basis of when the funds have realised the cheques rather than the size or time of the investments.

“There were many investors who put in multiple cheques of Rs 1.99 lakh (per application) to take advantage of this loophole in a rising market,” said the CEO of a bank fund house. “In a falling market, some would dishonour the cheque, thereby hurting existing investors in the scheme.”

Sebi said mutual funds should put in place a written policy that provides details on specific activities, role and responsibilities of various teams engaged in fund management, dealing, compliance, risk management and back-office with regard to order placement, execution of order and trade allocation amongst various schemes.

The regulator said fund managers of respective schemes should place orders for equity and equity related instruments of each scheme.
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