SEBI Announced New Rules for NFOs From April 1, 2025
The Securities and Exchange Board of India (SEBI) has introduced a few changes in the mutual fund industry, which are effective on April 1, 2025. These changes are made to increase accountability and transparency and to protect the interests of investors.
As per SEBI Circular, the Asset Management Companies (AMCs) are required to deploy the money raised by new fund offers (NFOs) within 30 days from the date of allotment of units.
It is mandatory for the AMCs to mention the timelines for fund deployment in their Scheme Information Documents (SIDs). In case the AMC fails to deploy the funds within the specified time, investors are allowed to exit without being charged for any exit load.
The initiative focuses on controlling unfair practices and ensuring that investors’ money is being used efficiently. Earlier, there were no specified rules regarding the time frame for deployment of funds raised through NFO. This led to delays in fund deployment, which would leave investors in a state of uncertainty.
The new rule encourages AMCs to raise only as much funds in NFOs as can be deployed in a timeline. Therefore, preventing excessive fund raising that cannot be deployed and avoiding further delays. It will boost the confidence of investors and enhance transparency.
Experts have highlighted the importance of this newly introduced initiative. The changes will ensure that mutual funds operate with enhanced transparency and accountability.
SEBI has also announced changes in the provisions for stress-testing disclosures and the requirement for AMC employees to invest a portion of their income in mutual fund schemes.
The implementation of these changes plays a significant role in strengthening the mutual fund industry, which represents a major transformation in the management of new fund offers (NFOs) in India.
