SEBI Sets New Timeline for Mutual Fund NFO Deployments

The Securities and Exchange Board of India (SEBI) has mandated asset management companies to deploy funds collected through new fund offers within 30 days from allocation. Effective from April 2025, the rule aims to curb mis-selling and ensure mutual fund schemes adhere to specified timelines for deployment.

The Securities and Exchange Board of India (SEBI) announced a new regulation requiring asset management companies to deploy funds collected through new fund offers (NFOs) within 30 days from the date of unit allotment. This change, set to take effect on April 1, 2025, aims to prevent mis-selling and ensure efficient fund allocation.

Currently, there is no specific timeframe for deploying collected funds. SEBI's latest move emphasizes the need for asset management companies to ensure collected funds are used promptly. Trustees will be tasked with monitoring these deployments and will restrict fresh fund flows if the timelines are not adhered to.

In cases where funds cannot be deployed within the initial 30-day window, SEBI allows for an extension, provided there is adequate justification and approval from the investment committee. Efforts to prevent mis-selling will also include regulations on distribution commissions, particularly for mutual fund distributors.