Sebi modifies NAV rules for mutual fund schemes: All you need to know – Times of India

NEW DELHI: The Securities and Exchange Board of India (Sebi) on Thursday modified certain rules related to mutual fund (MF) schemes. It said that the closing net asset value (NAV) of the day shall be applicable during purchase of MF units, irrespective of the size or time of receipt.
The new rules will come into effect from January 1, 2021.
In a circular, Sebi said: “It has been decided that in respect of purchase of units of mutual fund schemes (except liquid and overnight schemes), 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.”
Here are some key points from the circular:
* The existing provision on NAV applicability for liquid and overnight funds and cut-off timings for all schemes will remain same.
* AMCs (asset management comapnies) have been asked to put in place a written down policy which inter-alia detail the specific activities, roles 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. It shall also be approved by the Board of AMC and the trustees.
* AMCs are required to use an automated Order Management System (OMS), wherein the orders for equity and equity related instruments of each scheme shall be placed by the fund manager of the respective schemes.
* 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.
* AMCs may place soft limits for internal control and risk management based on its internal policy. Further, any change in limits specified in OMS shall be subject to the approval of compliance and risk officer.
* AMCs shall ensure that the dealing desk is suitably staffed and 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.
* Orders by dealer can be placed either for each scheme individually or pooled on the basis of orders from multiple schemes.
* In case of scenarios, wherein, the mutual funds are required to place certain margins / collaterals in order to execute certain transactions, the policy shall include details on how such margins / collaterals shall be segregated / placed from amongst various schemes, without affecting the interest of investors of any scheme.
* Audit trail of activities related to order placement, trade execution and allocation shall be available in the system. Further, there should be time stamping with respect to order placed by fund manager, order placed by dealer, order execution and trade allocation.