SEBI Circular on Mutual Fund

SEBI Circular on Mutual Fund

Securities and Exchange Board of India

CIRCULAR

SEBI/HO/IMD/DF2/CIR/P/2020/175                                 September 17, 2020

All Mutual Funds (MFs)/
Asset Management Companies (AMCs)/
Trustee Companies/ Boards of Trustees of Mutual Funds/
Association of Mutual Funds in India (AMFI)

Sir / Madam,

Subject: Circular on Mutual Funds

1. Uniformity in applicability of Net Asset Value (NAV) across various schemes upon realization of funds.

1.1. In partial modification to SEBI Circular No. SEBI/IMD/DF/21/2012 dated September 13, 2012, 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.

1.2. The existing provision on NAV applicability for liquid and overnight funds and cut-off timings for all schemes shall remain unchanged.

2. Trade Execution and Allocation

2.1. It has been decided that AMCs shall put in place a written down policy which inter-alia 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.

2.2. The aforesaid policy shall ensure that all the schemes nd its investors are treated in a fair and equitable manner. Further, the policy shall be approved by the Board of AMC and the trustees and they shall ensure compliance with the following:

2.2.1. For orders pertaining to equity and equity related instruments:

a) AMCs shall use an automated Order Management System (hereinafter referred to as ‘OMS’), wherein the orders for equity and equity related instruments of each scheme shall be placed by the fund manager(s) of the respective schemes.

b) In case a fund manager is managing multiple schemes, the fund manager shall necessarily place scheme wise order.

c) All regulatory limits and allocation limits as specified in SID shall 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 its internal policy. Further, any change in limits specified in OMS shall be subject to the approval of Compliance and Risk Officer.

d) All orders of fund manager(s) shall be received by dedicated dealer(s) responsible for order placement and execution.

e) 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.

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