From change in NAV calculations to new riskometer tool; 5 mutual funds rules that will change from 2021
New Delhi | Jagran Business Desk: Mutual funds are considered as one of the best options for investments as they are safe and riskless. In order to make mutual investment more transparent and safer, Securities and Exchange Board of India (SEBI) has decided to make some changes in its rules that will come into effect from January 1, 2021. So as 2020 ends, here are some changes mutual funds rules that will come into effect from January 1, 2021:
New Riskometer tool:
To help investors to make a better decision, the SEBI has introduced a new riskometer tool that will assist them in making with decisions with high-risk mutual funds. It will come into effect from January 1, 2021, and will replace the old model riskometer tool that was based on the scheme's category without adequately considering its actual portfolio.
In another major decision, the SEBI has said that inter-scheme transfer of debt papers in close-ended funds can only be done "within three business days of the allotment of the scheme's units to investors" from the beginning of 2021. This means that inter-scheme transfers can only be done after "other avenues of raising liquidity are attempted and exhausted by a fund house".
"The option of market borrowing or selling of security … may be used in any combination and not necessarily in the above (given) order. In case the option of market borrowing and/or selling of security is not used, the reason for the same shall be recorded with evidence," the market regulator had said.
"No inter-scheme transfer of a security shall be allowed, if there is negative news or rumours in the mainstream media or an alert is generated about the security, based on internal credit risk assessment," it added.
Dividend options to be renamed:
From January 1, 2021, dividend options of mutual funds will be known as "income distribution cum capital withdrawal", the SEBI has said.
Change in NAV calculation:
The SEBI has also changed the net asset value (NAV) calculation rules. As per the new rules, investors will be able to purchase NAV of the day when their money reaches the asset management company (AMC).
"It has been decided that in respect of the 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," the SEBI had said in September.
Change in portfolio allocation rules:
The SEBI has also changed the portfolio allocation rules for multi-cap equity mutual fund schemes. As per the new rules, that will come into effect from the new year, a multi cap mutual fund scheme will have to invest at least 75 per cent in equities. Earlier it was 65 per cent.
In a statement in September this year, the market regulator had also said that the investors will have to invest nearly 25 per cent each in large-, mid- and small-cap stocks.
"In order to diversify the underlying investments of multicap funds across the large, mid and smallcap companies and be true to label, it has been decided to partially modify the scheme characteristics of multicap fund," it had said.
Posted By: Aalok Sensharma