In a recent consultation paper, the Securities and Exchange Board of India (SEBI) suggested expanding the use of money gathered by Asset Management Companies (AMCs) following the float of New Fund Offers (NFOs) on the market. The capital markets watchdog has asked the public for feedback on suggested schedules for the speed at which these funds ought to be distributed in accordance with the asset allocation of a plan.
Asset Management Companies (AMCs) are required by SEBI to invest money from New Fund Offers (NFOs) within 30 business days after the allocation date. AMCs are required to give a thorough explanation and submit it to their Investment Committee for consideration if this deadline cannot be fulfilled. If it is thought essential, the Investment Committee may decide to extend the deadline by an extra thirty working days.
Addressing the problem of fund distribution delays that have been found in specific NFOs is SEBI’s main goal. Prior analyses have shown that variables including fund size and market volatility frequently result in delays. Regulations already in place specify how long non-profit organisations may operate, but there are no explicit rules mandating that money be promptly invested in accordance with the scheme’s stated goals. According to statistics from the last three fiscal years, several schemes went over the statutory 90-day investment period, even though the bulk of NFOs successfully deployed funds. 603 of the 647 NFOs that were examined were able to successfully allocate their assets in 30 days or fewer.
The need for AMCs to upload the draft Scheme Information Document (SID) prior to the NFO launch is another modification to the planned regulatory filing procedure for NFOs. All of the information required regarding the new fund is contained in the SID.
Sebi recommended in the consultation document published on Wednesday that Asset Management Companies (AMCs) submit the first draft of Scheme Information Documents (SIDs) to Sebi alone. The public will only be able to obtain the SIDs five working days prior to the scheme’s start. In the Rs 67 trillion domestic mutual fund industry, these suggestions aim to strike a balance between preserving unique ideas and ensuring public openness.
