According to Sebi, the AMCs should specify achievable timelines in the SID regarding the deployment of the funds as per the specified asset allocation of the scheme and should garner funds during the NFO accordingly.
The AMCs may be mandated to deploy the funds garnered in NFO within the said period from the date of allotment of units. In case if an AMC is not able to deploy the funds in 30 business days, it has to give the reasons in writing, including details of efforts taken to deploy the funds, and this should be placed before the Investment Committee.
The Investment Committee may extend the timeline by 30 business days, while also making recommendations on how to ensure deployment within the stipulated time going forward and monitoring the same. After the reasons are shared, the Investment Committee should examine the root cause before approving part or full extension.
The committee should not ordinarily give part or full extension where the assets for such schemes are liquid and readily available.
The regulator has also mentioned certain provisions in case the funds are not deployed as per the asset allocation mentioned in the SID in aforesaid mandated plus extended timelines.According to the consultation paper, in case the funds are not deployed as per the asset allocation mentioned in the SID in aforesaid mandated plus extended timelines, AMCs may:
- not be permitted to launch any new scheme till the time the funds are deployed as per the asset allocation mentioned in the SID.
- not be permitted to levy exit load, if any, on the investors exiting such scheme(s) after 60 business days of not complying with the asset allocation of the scheme.
- report the deviation to Trustees at each of the above stages.
These provisions made by Sebi may be made applicable to all NFOs other than index funds and exchange traded funds.
During the examination of the periodic submissions made by AMCs, the delay was attributed to the size of the funds collected as well as the volatility in the market.