Sebi Proposes Timelines for Fund Deployment in NFOs

New Delhi, Oct 30 (PTI) Markets regulator Sebi on Wednesday proposed specifying timelines for deployment of funds collected by Asset Management Companies (AMCs) in New Fund Offers (NFO), as per asset allocation of a scheme.

Separately, Sebi proposed to reduce the number of days from 21 working days to 5 working days for which the draft Scheme Information Documents (SIDs) submitted AMCs are to be made available on its website.

In separate consultation papers, the regulator said that AMCs should be mandated to deploy the funds garnered in NFO within 30 business days from the date of allotment of units.

In exceptional cases where 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, should be placed before the investment committee.

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 committee should examine the root cause before approving part or full extension where the assets for such schemes are liquid and readily available. In case the funds are not deployed as per the asset allocation mentioned in the SID in mandated plus extended timelines, AMC should not be permitted to launch any new scheme till the time the funds are deployed as per the asset allocation mentioned in the SID.

Besides, AMCs should 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 are required to report the deviation to Trustees at each of the above stages.

The provisions may be made applicable to all NFOs other than for Index Fund and Exchange Traded Funds.

The proposal came as Sebi, during examination of the periodic submissions made by AMCs and observed that in a certain instance there was a considerable delay in deployment of the funds collected through NFO.

The delay was attributed to the size of the funds collected as well as the volatility in the market.

In its consultation paper, Sebi suggested that certain modifications should be made with respect to the stage at which SIDs are to be uploaded on its website and the time period for which they are to be made available on the website.

The proposal is aimed at striking an optimum balance between the time available for public to comments and to address the industry concern of losing the first mover advantage.

Under the proposal, Sebi suggested for uploading of SID on its website at the initial draft filing stage should be done away with. Instead SIDs on which Sebi observations have been issued may be uploaded on the website.

The SIDs should be made available on Sebi's website for at least 5 working days prior to launch of the scheme for public comments.

On closure of the period, AMC may file final offer documents (final SID and final KIM) which should be at least two working days prior to the launch of the scheme.

The Securities and Exchange Board of India (Sebi) has sought public comments till November 20 on the proposals.