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SEBI has brought new rules to stop mis-selling in mutual funds.
If an investor switches from an existing scheme to an NFO of a regular plan within the same AMC, the distributor will get the lower commission of the two schemes. This is to ensure that distributors do not sell NFOs just to earn higher commissions. SEBI has asked AMFI to issue detailed guidelines on this after discussing it with the regulator.
SEBI has also set stricter timelines for using NFO funds. AMCs must invest the money collected within 30 business days of allotting units. If they cannot do so, they must give a written explanation to their Investment Committee. The committee can allow an extra 30 business days but only after reviewing the reason for the delay.
If the AMC still does not deploy the funds on time, it will not be allowed to take fresh investments in that scheme until the funds are properly invested. Also, investors who exit the scheme after 60 business days will not have to pay an exit load. AMCs must also inform investors through email or SMS about their option to exit without an exit load.
These rules, which will apply from April 1, 2025, aim to protect investors and bring more discipline to fund management.
