Securities and Exchange Broad of India
EXECUTIVE DIRECTOR
INVESTMENT MANAGEMENT DEPARTMENT
SEBI/IMD/CIR No.11/78450/06
October 11, 2006
All Mutual Funds Registered with SEBI
Association of Mutual Funds in India (AMFI)
Dear Sirs,
Re.: Uniform cut-off timings for applicability of Net Asset Value (NAV) of Mutual Fund scheme(s)/plan(s).
1. Please refer to SEBI Circular SEBI/ IMD/CIR No. 10/77780/ 2006 dated September 28, 2006 on the captioned subject. AMFI has approached SEBI seeking some modifications to the aforesaid circular. The proposal of AMFI was considered and accordingly the following guidelines are being issued:
2. Definitions
(1) In these Guidelines, unless the context otherwise required:
a. ‘Act’ means the Securities and Exchange Board of India Act, 1992;
b. ‘Board’ means the Securities and Exchange Board of India;
c. ‘cut-off timing’, in relation to an investor making an application to a mutual fund for purchase or sale of units, shall mean the outer limits of timings within a particular day which are relevant for determination of the NAV that is to be applied for his transaction;
d. ‘international scheme’ means a scheme of a mutual fund which has substantial investments in foreign securities that are valued as per time zones other than Indian standard time zone;
e. ‘liquid fund schemes and plans’ shall mean the schemes and plans of a mutual fund which have the characteristics mentioned in Schedule I;
f. ‘regulations’ mean the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996;
(2) Word and expressions used and not defined in these Guidelines shall have the meanings, if any, respectively assigned to them in the Act or in the regulations, unless the context otherwise requires.
3. Applicability
(1) These Guidelines shall be applicable to all schemes and plans of mutual funds except international schemes.
(2) These Guidelines shall not apply to transactions in mutual fund units which are undertaken on a recognised stock exchange.
4. Fixation of uniform cut-off timings
(1) Every mutual fund shall reckon the cut-off timings for its schemes and plans in compliance with these Guidelines and such cut-off timings shall be uniformly implemented for all its investors.
(2) Every mutual fund shall ensure that each payment instrument for subscription or purchase of units is deposited by it in the bank with utmost expedition prudently utilizing the appropriate banking facility, so as to comply with sub-paragraph (1).
(3) Any loss occasioned to any investor or to the scheme or plan on account of non-compliance with sub-paragraph (2) shall be made good by the asset management company.
5. Cut-off timings for liquid fund schemes and plans
(1) The following cut-off timings shall be observed by a mutual fund in respect of purchase of units in liquid fund schemes and their plans, and the following NAVs shall be applied for such purchase:
a. where the application is received upto 12.00 noon on a day and funds are available for utilization on the same day – the closing NAV of the day immediately preceding the day of receipt of application;
b. where the application is received after 12.00 noon on a day and funds are available for utilization on the same day – the closing NAV of the day immediately preceding the next business day ; and
c. irrespective of the time of receipt of application, where the funds are not available for utilization on the day of the application – the closing NAV of the day immediately preceding the day on which the funds are available for utilization.
(2) The following cut-off timings shall be observed by a mutual fund in respect of repurchase of units in liquid fund schemes and their plans, and the following NAVs shall be applied for such repurchase:
a. where the application is received upto 3.00 pm – the closing NAV of the day immediately preceding the next business day ; and
b. where the application is received after 3.00 pm – the closing NAV of the next business day.
(3) A mutual fund shall calculate NAV for each calendar day in respect of its liquid fund schemes and their plans.
Explanation: ‘Business day’ does not include a day on which the money markets are closed or otherwise not accessible.
6. Cut-off timings for other schemes and plans
(1) A mutual fund shall reckon only prospective NAV in accordance with this clause, in respect of all their schemes and plans other than liquid fund schemes and plans.
(2) The following cut-off timings shall be observed by a mutual fund in respect of purchase of units in its other schemes and their plans, and the following NAVs shall be applied for such purchase:
a. where the application is received upto 3.00 pm with a local cheque or demand draft payable at par at the place where it is received – closing NAV of the day of receipt of application;
b. where the application is received after 3.00 pm with a local cheque or demand draft payable at par at the place where it is received – closing NAV of the next business day ; and
c. where the application is received with an outstation cheque or demand draft which is not payable on par at the place where it is received – closing NAV of day on which the cheque or demand draft is credited.
(3) The following cut-off timings shall be observed by a mutual fund in respect of repurchase of units in its other schemes and their plans, and the following NAVs shall be applied for such repurchase:
a. where the application received upto 3.00 pm – closing NAV of the day of receipt of application; and
b. an application received after 3.00 pm – closing NAV of the next business day.
7. Switch and sweep transactions
1) Clauses 5 and 6 shall apply to ‘switch in’ transactions as if they were purchase transactions and to ‘switch out’ transactions as if they were repurchase transactions.
2) In case of ‘switch’ transactions from one scheme to another the allocation shall be in line with redemption payouts.
3) Clauses 5 and 6 shall apply to ‘sweep’ transactions as if they were purchase transactions and to ‘reverse sweep’ transactions as if they were repurchase transactions.
8. Time stamping
1) Every mutual fund shall disclose the location of its official points of acceptance in its offer documents and websites and shall receive the applications made by investors only at such official points.
2) Clauses 5 and 6 shall apply with reference to the point of time at which the applications are received at such official points of acceptance.
3) All official points of acceptance shall have time stamping machines which are in compliance with the requirements mentioned in Schedule II.
9. Compliance reporting and disclosures
1) The status of compliance with these Guidelines shall be reported to the Board in all the bi-monthly compliance reports of the asset management company and the half-yearly trustee reports.
2) The trustees’ reports shall contain a declaration on whether the trustees are satisfied with the systems and procedures of the mutual fund designed for the purpose of compliance with these Guidelines.
3) The substance of these Guidelines shall be disclosed to investors in the offer document or in any addendum thereto.
10. SEBI Circulars SEBI/ IMD/CIR No. 8/5611/ 2004 dated March 19, 2004, SEBI/ IMD/CIR No. 9/6016/2004 dated March 25, 2004 and SEBI/ IMD/CIR No. 10/77780/ 2006 dated September 28, 2006 stand withdrawn.
11. These guidelines effective from October 16, 2006 are 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,
R. K. Nair
