SEBI has directed fund houses to pass on the interest accrued during the NFO period to investors.
Mutual funds are allowed to deploy NFO proceeds in Collateralized Borrowing and Lending Obligation (CBLO) before the closure of NFO period. CBLO is a money market instrument, which means that the scheme earns interest from this account till the closure of NFO period on a daily basis. However, AMCs cannot charge management fee or advisory fee during this period.
In a circular, SEBI has said, “The appreciation received from investment in CBLO shall be passed on to investors. Further, in case the minimum subscription amount is not garnered by the scheme during the NFO period, the interest earned upon investment of NFO proceeds in CBLO shall be returned to investors, in proportion of their investment, along-with the refund of the subscription amount.”
The circular comes into effect from April 1.
