The change in NAV calculation rule for uniformity in applicability of NAV across various schemes on realisation of funds was supposed to be implemented from January 1, 2021.
Markets regulator Sebi on Thursday extended the date for implementation of framework for uniformity in applicability of net asset value (NAV) across various schemes on realisation of funds to February 1, 2021 . The change in NAV calculation rule for uniformity in applicability of NAV across various mutual fund schemes on realisation of funds was supposed to be implemented from January 1, 2021.
In a circular issued in September in respect of purchase of units of mutual fund schemes (except liquid and overnight schemes), Sebi had said that closing NAV of the day will be applicable on which the funds are available for utilisation irrespective of the size and time of receipt of such application.
The decision to extend the date has been taken upon consideration of the representation received from the Association of Mutual Funds in India (AMFI) regarding operational challenges, Sebi said on Thursday.
Currently, NAV for allocation of mutual fund units is based on investment amount as follows:
For investment below ₹2 lakh, allotment of units is based on time of receipt of application within the cut-off time.
In case, the ticket size is above ₹2 lakh, mutual fund houses allot units when the scheme receives investor funds in their account.
Mutual Fund Utilities (MFU), in an email communication to the investors that in order to ensure NAV on the transaction date for SIP Instalments, Investor’s Bank Account will be debited ‘One Business Day Prior to the SIP instalment date’. This would have created a lot of confusion and chaos in case an investor did not have sufficient balance in the account one day prior to the SIP date.
Sebi has also partially modified its circular issued in September.
It said a fund manager may authorize an employee of the AMCs for order placement of equity and equity related instruments of each scheme on his behalf, subject to certain conditions.
AMCs shall use an automated order management system (OMS) wherein the orders for equity and equity related instruments of each scheme shall be placed by the fund managers of the respective schemes, Sebi had said in its earlier circular.
"Further, the orders in case of arbitrage transactions, stock lending and borrowing transactions, passive schemes (such as Index Funds and ETFs) and schemes investing primarily based on pre-defined rules and models, where the discretion of the fund manager is not required for placement of order, is not mandated to be placed through OMS," Sebi added.
This is also subject to certain conditions.
Sebi, through its circular in September, had said that all orders of fund managers need to be received by dedicated dealers responsible for order placement and execution.
In its latest circular, Sebi said the requirement of a dedicated dealer shall not be mandatory in case of orders for arbitrage transactions, stock lending and borrowing transactions, passive schemes (such as index funds and ETFs) and schemes investing primarily based on pre-defined rules and models.
"All other conditions specified in Sebi circular dated September 17, 2020 shall remain unchanged," it said.