Sebi’s proposal for prompt deployment of new fund offer money can aid investors
In a recent move to tighten regulations in the mutual fund industry, the Securities and Exchange Board of India (Sebi) has issued a consultation paper proposing stricter guidelines for deploying funds collected through new fund offers (NFOs) by asset management companies (AMCs).
The central recommendation is a 30-day window for deploying these funds in line with the asset allocation specified in the scheme.
Sebi’s push for this timely deployment of NFO funds aims to protect investors from prolonged market exposure delays and ensure their money is actively invested as intended.
The current regulatory framework, as per Sebi’s 1996 Mutual Fund Regulations and the 2024 Master Circular, lays out a few deployment provisions for NFOs. Yet, there is no specified timeline within which AMCs must invest these funds per the intended asset allocation.
Sebi’s recent review found instances where AMCs delayed deployment, holding on to investor funds without actively investing. The reasons ranged from excessive market volatility to high valuations in specific sectors. However, Sebi argues this uncertainty shouldn’t leave investors’ money idle longer than necessary.
According to Sebi’s findings, most AMCs deploy funds within 30–60 days, with only a few instances of delays beyond that. Sebi analyzed 647 schemes, of which 633 deployed funds in under 60 days, with 603 schemes doing so in less than 30 days. Sebi’s proposal is aimed at reducing even the few delays if found.
Sebi has proposed that AMCs deploy funds within 30 business days from the date of unit allotment. In cases where AMCs cannot do so, they must report in writing to their investment committee, which may grant an extension of another 30 days, but only for valid reasons such
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