The Securities and Exchange Board of India (SEBI) has ordered mutual funds to apply the Net Asset Value (NAV) rules consistently across all schemes upon the realisation of funds. The Capital market regulator has also stiffened rules on the processes that fund managers will be required to follow by buying shares. Such rules shall be effective from Jan1, 2021.

Mutual fund orders will soon get the option to get the NAV of the day when funds reach the asset managers and not of the day of application. Mutual fund orders will soon get the NAV of the day on which the funds reach the asset managers and not of the day of application in agreement with the provisions of SEBI.

Multi Colored Pen written MUTUAL FUNDS

At present, mutual fund investors with cheque values of less than Rupees 2 lakh per application are eligible to get the NAV of the product on the same day of deposit. However, those who invest a sum more than rupees 2 lakh will get the NAV of the day the fund house realized the cheque, which could be up to three days after the submission of the cheque.

Affirming the same SEBI stated in a circular quoted “For the purposes of NAV in respect of the MF unit purchases, the closing NAV of the day shall be applicable on which the funds are available for utilization, regardless of the size and time of receipt of such application. The market regulator also provided that the current provisions on NAV applicability for the liquid and overnight funds and their cut-off timings for all schemes shall remain unaffected.

Formerly, retail investors had the benefit of getting the NAV applicable of the same day despite the fund transfer taking a few days, however, now everyone will be at parity as the condition has been changed.

The market regulator also mandated the need of the AMC entities to write down and follow a detailed written-down policy. Such policies are expected to include details of the specific activities along with the roles and responsibilities of various teams engaged in roles like fund management, dealing, compliance, risk management, back-office, etc. in accordance with the order placement, execution, and trade allocation.

The capital market regulator has also provided for the AMC to compulsorily use an automated Order Management System, as per which the orders for equity and equity-related instruments for each scheme will be engaged by the fund manager in relation to such MF schemes.

Here’s the NAV that for the funds to be received by the investor/Unit-holder-

1. Equity Funds-

i. For Investments up to Rs. 2 lakh: At present, investment up to Rs. 2 lakh gets the NAV on the same day if the application is submitted before 1 p.m., regardless of realization of funds. However, if the investment application is made after the cut-off time, the investor will get the NAV value applicable the next day.

ii. Investments above rupees Rs.2 lakh: Investors will be eligible to get the NAV of the day when the funds reach the AMC.

iii. However, From January 1, all investments will realise the NAV of the day when the funds reach the AMC, irrespective of the size of the investment.

2. Debt funds-

i. Investment up to Rs. 2 lakh in debt funds other than liquid and overnight schemes: At present, if an application is submitted before 1 p.m., the investor will get the NAV applicable on the same day, regardless of realization of funds.

ii. New Rule for debt funds other than liquid and overnight schemes: Investors will get the NAV, subject to realization of funds. Thus, an investor will be eligible to receive the NAV applicable for the day on which the funds extent the mutual fund house regardless of the investment size.

3. Liquid funds and Overnight funds-

At present, the decision time for these for debt schemes is 12:30 p.m. which means that the investor will get the NAV applicable for the day on which the funds are realized or, where the funds reach the AMC.

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