Timelines for deployment of funds collected by Asset Management Companies (AMCs) in New Fund Offer (NFO)
Summary
This circular mandates that Asset Management Companies deploy funds collected in New Fund Offerings within 30 business days from the date of allotment. It establishes a procedure for extending this timeline by an additional 30 business days only under exceptional circumstances and upon Investment Committee approval. Additionally, it imposes restrictions on receiving fresh flows and levying exit loads if deployment timelines are not met, while also regulating distribution commissions for switch transactions to discourage mis-selling.
Text
Amendments to MF Regulations notified on February 14, 2025, shall be applicable from April 01, 2025, to encourage timely deployment and discourage mis-selling.
The AMC shall specify achievable timelines in the Scheme Information Document (SID) regarding the deployment of funds as per the specified asset allocation.
The AMC shall deploy the funds garnered in an NFO within 30 business days from the date of allotment of units.
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, shall be placed before the Investment Committee.
The Investment Committee may extend the timeline by 30 business days after examining the root cause for delay, but shall not ordinarily grant extension where assets are liquid and readily available.
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.
If funds are not deployed as per asset allocation within mandated plus extended timelines, the AMC shall not be permitted to receive fresh flows in the same scheme till the time the funds are deployed.
The AMC shall not be permitted to levy exit load, if any, on investors exiting such scheme(s) after 60 business days of not complying with the asset allocation of the scheme.
The AMC 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.
The AMC shall report deviation, if any, to Trustees at each of the above stages.
The above provisions shall be applicable to all NFOs.
The fund manager may extend or shorten the NFO period based on market dynamics and ability to deploy funds, except for ELSS schemes, subject to compliance with Master Circular clauses 1.10.1 and 1.10.1A.
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Source: SecMarx — Timelines for deployment of funds collected by Asset Management Companies (AMCs) in New Fund Offer (NFO). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.