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SEBI says no to extension of unit allotment period after an NFO but mutual funds decide to persist with their demand
 Mumbai: SEBI has rejected a request from AMFI to increase the period for allotment of units in an NFO from the existing five working days, an industry official said.
In March 2010, SEBI had cut the NFO period to 15 days from 45 days for close-ended funds and 30 days for open-ended schemes), except equity linked savings schemes (ELSS). From October 1, 2010, mutual funds are required to allot units, make refunds and dispatch account statements to investors within five days from the closure of an NFO.
Mutual fund houses claim that the new regulation on NFO period has put limits on their reach and as a result they are not able to tap smaller towns.
SEBI recently wrote a letter to AMFI saying, “We have examined the request and it is decided not to change the existing provisions,” the official said.
“SEBI is not looking at extending it (unit allotment period). We may have to discuss it further with SEBI. It has said that status quo has to be maintained. We (mutual funds) want a reasonable time for NFOs,” said V Ramesh, Deputy Chief Executive, AMFI.
Mutual funds are arguing that it becomes difficult for them allot units within the regulatory period in the case of large NFOs. Reliance Small Cap Fund was the last large NFO in September 2010. The NFO had received one lakh applications.
“We have to revise the way our NFOs are launched. Five working days is too short a period for us to get money from small locations. The industry will have to focus on ongoing funds. We are already dealing with the new rule. NFOs are not the reason for AMCs to survive,” said Srinivsan Jain, CMO, SBI Mutual Fund.
Cafemutual had reported on October 19, 2010 that fund houses were struggling to comply with the reduced NFO period under the headline
Mutual Funds grapple with regulatory changes for NFOs.
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