Sebi sets NAV cut-off timing for MFs

MUMBAI: In a move that could protect the interest of small investors and discourage the discriminatory practices benefitting corporate and institutional investors, the market regulator Sebi on Wednesday issued guidelines on uniform cut-off timing for net asset values of the mutual funds.

According to the latest guidelines issued by Sebi today, every mutual fund should reckon the cut-off timings for all its schemes and plans and these should be uniformly implemented for all its investors.

In addition, all the MFs have been asked to ensure that each payment instrument for subscription or purchase of units is deposited by it in the bank, the regulator said.

The industry experts said the guidelines should discourage the discriminatory practice of corporate and institutional investors taking advantage of the absence of strict cut-off timing of net asset value of mutual funds.

Sebi said Association of Mutual Funds in India (AMFI) had approached it seeking some modifications to the previous circular on uniform cut-off timings for applicability of Net Asset Value of MF schemes/plans and the proposal of AMFI was considered and accordingly the following guidelines are being issued.

The new guidelines are effective from October 16 and are aimed at protecting the interests of investors in securities and to promote the development of and to regulate the securities market, Sebi said.

"The substance of these guidelines should also be disclosed to investors in the offer document or in any addendum thereto," it added.

It added that the status of compliance with these guidelines should be reported to it in all the bi-monthly compliance reports of the asset management company and the half-yearly trustee reports.

According to the guidelines specifying the cut-off timings for purchase of units in liquid fund schemes, the closing NAV of the day immediately preceding the day of receipt of application should be applicable for those received upto 12.00 noon.

For application received after 12.00 noon, the closing NAV of the day immediately preceding the next business day would be applicable.

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 would be applicable, the guidelines added.

For repurchase of units in liquid fund schemes, the closing NAV of the day immediately preceding the next business day would be applicable when application is received upto 3.00 pm, while the closing NAV of the next business day would be applicable where the application is received after 3.00 pm.

A mutual fund should calculate NAV for each calendar day in respect of its liquid fund schemes and their plans, it added.

"Business day" does not include a day, on which the money markets are closed or otherwise not accessible, Sebi said.
Setting guidelines for cut-off timings for other schemes and plans, Sebisaid when application is received upto 3.00 pm with a local cheque or demand draft payable at par at the place where it is received, the NAV of the day of receipt of application would be applicable, while the closing NAV of the next business day would be available where the application is received after 3.00 pm in this case.

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, the closing NAV of day on which the cheque or demand draft is credited would be applicable.

The guidelines further added that every mutual fund should 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.

The guidelines are applicable for "sweep" and "switch" transactions as well.