Mutual Fund: There is a big update for mutual fund investors. The Securities and Exchange Board of India (SEBI) has changed the mutual fund rules and fixed the time limit for the use of the funds raised from the new fund offering (NFO).
Now the asset management companies (AMCs) will have to ensure that they use this amount within the stipulated time limit. Apart from this, disclosure of stress test has been made mandatory to increase transparency in mutual fund schemes. These new rules will come into effect from April 1, 2025.
Time limit set for use of NFO funds
The notification issued by SEBI states that the amount received from the New Fund Offer (NFO) should be used within the stipulated time limit. Usually this period is 30 days. If the amount is not used by a fund house within this period, then investors will get the option to exit the scheme without any exit fee.
Objective of the new SEBI rule
The purpose of this rule of SEBI is to ensure that fund houses do not collect funds from investors through NFO without planning. Invest it as soon as possible, so that investors can get returns as quickly as possible.
Transparency will increase in mutual fund schemes
SEBI has made stress testing mandatory for mutual fund schemes so that investors can easily understand how a fund will perform under different economic conditions. This will help investors to better assess the risk.
Investment will also be made from the salary of AMC employees
SEBI has decided to link the salaries of employees of asset management companies (AMCs) to mutual fund investments. Under the new rules, AMCs will have to invest 1% of their employees’ salaries in mutual fund units depending on their role.
Investors benefit from the new rules
- Investing in NFO will be more secure.
- Fund houses will be made more accountable.
- Investors will be able to exit the scheme without any exit charges.
- Stress test will make it possible to better assess the risk.
Important advice for investors
If you are investing in mutual funds or planning to invest in a new NFO, then keep these new rules in mind. Before investing in any scheme, understand the strategy of the fund house and take the right decision according to your financial goals.
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