Circular on Mutual Funds
Summary
This circular mandates the use of closing Net Asset Value for mutual fund purchases to ensure uniformity across schemes. It requires Asset Management Companies to implement written policies governing trade execution, allocation, and compliance monitoring. The regulations aim to protect investor interests by ensuring fair treatment and transparent order management processes.
Text
closing NAV of the day shall be applicable on which the funds are available for utilization irrespective of the size and time of receipt of such application.
AMCs shall put in place a written down policy which inter-alia detail the specific activities, role and responsibilities of various teams engaged in fund management, dealing, compliance, risk management, back-office, etc., with regard to order placement, execution of order, trade allocation amongst various schemes and other related matters.
The aforesaid policy shall ensure that all the schemes and its investors are treated in a fair and equitable manner. Further, the policy shall be approved by the Board of AMC and the trustees and they shall ensure compliance with the following:
AMCs shall use an automated Order Management System (hereinafter referred to as ‘OMS’), wherein the orders for equity and equity related instruments of each scheme shall be placed by the fund manager(s) of the respective schemes.
In case a fund manager is managing multiple schemes, the fund manager shall necessarily place scheme wise order.
All regulatory limits and allocation limits as specified in SID shall be in-built in the OMS to ensure that orders in breach of such limits are not accepted by the OMS.
All orders of fund manager(s) shall be received by dedicated dealer(s) responsible for order placement and execution.
All conversations of the dealer shall be only through the dedicated recorded telephone lines.
No mobile phones or any other communication devices other than the recorded telephone lines shall be allowed inside the dealing room.
Restricted access to internet facilities on computers and other devices inside the dealing room. It shall be used for activities related to trade execution only.
The trade allocation policy of the AMCs shall inter-alia detail (i) specific situations (not generic) wherein the orders by dealers shall be placed for each scheme individually or pooled from multiple schemes, (ii) the timeline to be considered for pooling of orders in case of multiple schemes.
In case of pooled orders, post allocation of trades shall be on pro-rata basis as per the size of the order placed. The said allocation shall be based on weighted average price.
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Source: SecMarx — Circular on Mutual Funds. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.