Market regulator SEBI today extended the deadline for mutual funds to implement the ASBA facility for new fund offers to October 1.  Under ASBA–Application Supported by Blocked Amount– deposits of applicants remain in their accounts till the shares are alloted.

“It has been decided that Mutual Funds/AMCs shall provide ASBA facility to investors for all NFOs launched on or after October 1, 2010,” the Securities and Exchange Board of India (Sebi) said in a circular.

Earlier in March Sebi had made it compulsory for MFs to extend ASBA facility for all NFOs from July 1.

ASBA is currently in place for all participants in the Indian capital market.

The move would help investors save interest cost on borrowing and help companies get rid of the hassles associated with refunds.

However, some experts feel that the said move will not have much implication for the market, since mutual funds get most subscription in last days of its closing.

Sebi said the move would “protect the interest of investors in securities and promote the development and better regulation of the securities market.”

In March the market regulator had also reduced the period between the opening and closing of issues from the present 30-45 days to 15 days to ensure that investors’ money is not blocked for longer period.

RELEVANT SEBI CIRCULAR IS AS FOLLOWS:-

CIRCULAR

Cir / IMD / DF / 6 / 2010                                                                                           July 28, 2010

All Mutual Funds, Asset Management Companies (AMCs)

Sir/Madam,

Sub: Additional mode of payment through Applications Supported by Blocked Amount (hereinafter referred to as “ASBA”) in Mutual Funds

  1. Please refer to circular SEBI / IMD / Cir / No 18 / 198647 / 2010 dated March 15, 2010 regarding additional mode of payments through ASBA in Mutual Funds. The circular indicated that the Mutual Funds/AMCs have to compulsorily provide ASBA facility to the investors for all NFOs launched on or after July 01, 2010.
  2. In partial modification of the above circular, it has been decided that Mutual Funds / AMCs shall provide ASBA facility to investors for all NFOs launched on or after October 1, 2010.
  3. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

Asha Shetty
Deputy General Manager
Tel no. 022-26449258
Email-ashas@sebi.gov.in

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