NFOs: SEBI wants mutual fund houses to deploy new fund offer proceeds within 30 days

The Securities and Exchange Board of India (SEBI), in a new consultation paper, has proposed enhancing the deployment of funds collected by Asset Management Companies (AMCs) after floating New Fund Offers (NFOs) in the market. The capital markets regulator has sought public comments on proposed timelines for how quickly these funds should be allocated according to a scheme’s asset allocation.

According to SEBI, Asset Management Companies (AMCs) are expected to invest New Fund Offers (NFO) funds within 30 business days from the date of allotment. If this timeline cannot be met, AMCs must provide a detailed explanation and present it to their Investment Committee for review. The Investment Committee has the authority to extend the deadline by an additional 30 business days if deemed necessary.

The proposed change to the regulatory filing process for NFOs includes adjusting the requirement for AMCs to upload the draft Scheme Information Document (SID) before the NFO launch. The SID is a document that contains all the necessary information about the new fund.

In the consultation paper released on Wednesday, Sebi suggested that Asset Management Companies (AMCs) send the initial draft of Scheme Information Documents (SIDs) exclusively to Sebi. The SIDs will be accessible to the public only five working days before the scheme is launched. These recommendations strive to ensure a balance between public transparency and safeguarding original concepts in the Rs 67-trillion domestic mutual fund sector.