Sebi asks MFs to deploy NFO flows within 30 days

Mumbai: The Securities and Exchange Board of India (Sebi) on Thursday said asset management companies (AMC) should deploy the funds garnered from investors in a new fund offering (NFO) within 30 days form the date of allotment of units.

The move aims to encourage AMCs to collect only as much funds via NFOs as can be deployed in a reasonable time, and to discourage any mis-selling of NFOs of the mutual fund schemes. The new rule will come into effect from April 1.

The regulator said AMCs should specify achievable timelines in the scheme information document (SID) of a scheme regarding the deployment of the funds as per the specified asset allocation of the scheme and garner funds during the NFO accordingly.


In an exceptional case, if the AMC cannot deploy the funds in 30 days, it must give the reasons in writing, including details of efforts taken to deploy the funds to the investment committee of the AMC.

The committee may extend the timeline by 30 days, while also making recommendations on how to ensure deployment within 30 days going forward and monitor the same, it said in a circular.

In case the funds are not deployed as per the asset allocation mentioned in the SID along with the extended timelines, the fund house would not be allowed to receive fresh flows in the same scheme till the funds are deployed as per the asset allocation mentioned in the SID.

Besides, they will not be allowed to levy exit load, on the investors exiting such schemes after 60 business days of not complying with the asset allocation of the scheme. And would have to inform all investors of the NFO, about the option of an exit from the concerned scheme without exit load, via email, SMS or other similar mode of communication, Sebi said.

To effectively manage the fund flows in NFO, the fund manager may extend or shorten the NFO period except for equity linked saving schemes (ELSS) schemes), based on his view of the market dynamics, availability of assets and his ability to deploy funds collected in NFO, the regulator said.