Capital market regulator SEBI has deferred applicability of NAV based on availability of funds for utilisation by the mutual funds by a month to February due to difficulty in banks to provide the service to implement the new norms.

The RBI has recently streamlined opening of multiple current accounts by banks to bring in some discipline. This has posed significant unexpected challenges and implications on the banking arrangements by mutual funds, said AMFI in a statement.

Following this, AMFI had requested SEBI to defer the new norm by a month from January to prevent potential disruption of service to investors.

AMFI also wants RBI to permit mutual funds to continue operating collection account with multiple banks to provide better service to unit holders.

Some relief

SEBI’s decision to defer implementation of new norms will provide some relief to the industry as this would allow adequate time to first migrate all banking arrangements in compliance with the RBI circular, before taking up the necessary changes in order to comply with the referred SEBI circular, said AMFI.

NS Venkatesh, Chief Executive, AMFI, said AMCs have multiple payment and collection accounts for collections, redemption, dividend, custody, intra-day, borrowing with numerous banks.

As per RBI circulars, mutual funds would need to change their operational process, restructure the banking operations at a short notice. This would involve consolidation of banking relationships and withdrawal of facilities that could potentially hamper the collection process, he said.

SIPs will be particularly impacted significantly as investors were accustomed to getting the same day NAV allotment as most SIPs are below ₹2 lakh, he added.

SEBI has also eased trade execution and allocation norms of mutual funds. It has allowed an authorised person of the fund manager to execute the orders in equity and equity related instruments placed on the automated Order Management System.

The fund manager has to send the instructions on the orders through electronic mode to ensure scheme-wise audit trail.

The employee placing the order will be bound by the same requirements of maintaining confidentiality and the code of conduct as applicable to the fund manager, said SEBI.

Further, the orders in arbitrage transactions, stock lending, borrowing transactions, passive schemes where the discretion of the fund manager is not required for placement of order, is not mandated to be placed through OMS provided the AMC demonstrate that no discretion of the fund manager is required for placement of such orders.

Fund managers have to provide scheme-wise details of order placement such as value of transactions and nature of transactions to the dealer.

Scheme-wise order

The scheme-wise audit trail of placement of orders, order execution and trade allocation shall be maintained along with time stamping of each stage of the process, said SEBI.

All orders of fund managers will be received by dedicated dealers responsible for order placement and execution. However, in case of orders for arbitrage transactions, stock lending and borrowing transactions, passive schemes the requirement of a dedicated dealer shall not be mandatory, it said.

Audit trail of activities related to order placement, trade execution and allocation shall be available in the system.

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