SEBI Brings in New Mutual Fund Rules From April 1: Stricter NFO deadlines, SIF Launch and More
The Securities and Exchange Board of India (SEBI) has come out with new mutual fund regulations, effective April 1. The changes cover stricter NFO deployment timelines, new guidelines for distributors’ commissions, the launch of Specialised Investment Funds (SIFs), and the use of DigiLocker for tracking investments.
Stricter NFO Deployment Timelines
Asset Management Companies (AMCs) will now be required to invest money mobilized through NFOs within 30 business days from the date of allotment of units. In the event of default, one extension of an additional 30 business days would be permitted at the Investment Committee’s discretion. But non-use during the 60-day time limit will result in suspension on new flows, free-of-charge redemption back to the investors, and compulsory intimations to the investors on delay.
Revised Commission Norms for Distributors
In order to avoid misselling, SEBI has launched a new regulation impacting distributor commissions. If the investors shift from a current scheme to a fresh NFO, the distributors would be compensated at the lower of the two commissions. This action is certain to dissuade distributors from proposing NFOs for higher commissions and ensure investment decisions in investors’ interests.
Introduction of Specialised Investment Funds (SIFs)
There is a new fund category that has been introduced, Specialised Investment Funds (SIFs), to make more formal investment opportunities available.
Between PMS and mutual funds, the funds will be made available to those AMCs that have been running their business for a minimum period of three years and have assets under management (AUM) of Rs.10,000 crore and above. SIFs will also facilitate flexible investment plans like equity, debt, and hybrid long-short varieties with a minimum investment of Rs.10 lakh.
DigiLocker Integration for Investment Tracking
From April 1, 2025, investors will be able to deposit and retrieve Demat and mutual fund holding statements in DigiLocker. This convergence will reduce the deserted assets and make it easy for nominees to access, bringing ease of investment tracking and transparency. Impact on Investors
Conclusion
The implementation of these regulations is expected to improve investor protection and market transparency. By ensuring the timely deployment of funds, discouraging misselling, offering structured alternatives through SIFs, and enabling better investment tracking via DigiLocker, SEBI’s new rules mark a significant step toward strengthening the mutual fund industry.
