From January 1, 2021, purchases of units in a mutual fund scheme below Rs 2 lakh will get NAV on the day that money reaches the fund house, not on the day investors place the order, SEBI said in its recent circular.
However, the regulation will not be applicable to liquid and overnight funds.
"It has been decided that in respect of purchase of units of mutual fund schemes (except liquid and overnight schemes), closing NAV of the day shall be applicable on which the funds are available for utilization irrespective of the size and time of receipt of such application. The existing provision on NAV applicability for liquid and overnight funds and cut-off timings for all schemes shall remain unchanged," SEBI said in a circular.
Further, the market regulator said that AMCs will have to put in place a written down policy which among other things detail the specific activities, role and responsibilities of various teams engaged in fund management, dealing, compliance, risk management, back-office, etc., with regard to order placement, execution of order, trade allocation amongst various schemes and other related matters.
For orders pertaining to equity and equity related instruments, AMCs will now have to use an automated Order Management System (OMS), wherein the orders for equity and equity related instruments of each scheme will be placed by the fund managers of the respective schemes.
In case a fund manager is managing multiple schemes, the fund manager have to necessarily place scheme wise order.
All regulatory limits and allocation limits as specified in SID has to be in-built in the OMS to ensure that orders in breach of such limits are not accepted by the OMS.
AMCs may further place soft limits for internal control and risk management based on their internal policy. Further, any change in limits specified in OMS shall be subject to the approval of Compliance and Risk Officer.
All orders of fund managers will be received by dedicated dealers responsible for order placement and execution.
The internal policy of AMC may also provide certain scenarios within the regulatory limits, wherein, prior approval of Compliance or Risk Officer would be required through OMS before the order is received by the dealer.
Further, the market regulator has placed certain restrictions on the conduct in the dealing room. Let’s look at them:
- All conversations of the dealer will be only through the dedicated recorded telephone lines
- No mobile phones or any other communication devices other than the recorded telephone lines will be allowed inside the dealing room
- Restricted access to internet facilities on computers and other devices inside the dealing room. It shall be used for activities related to trade execution only
- No sharing of information by dealer through any mode, except for trade execution under the approved internal policy," SEBI said in the circular
