By The BuyT Desk
The Securities Exchange Board of India (Sebi) has brought about new mutual fund (MF) rules. These changes aim to make MF more transparent for investors. So if you are planning to invest in mutual funds or are invested, you must know about the changes. Here are the five new rules of MF-
1.Multi cap equity fund’s portfolio allocation
A multi-cap mutual fund scheme must invest at least 75% in equities. The scheme also has to invest at least 25% each in large-, mid-, and small-cap stocks. Earlier the minimum equity allocation cap was at 65%. There as no allocation restriction and fund managers can invest across the market cap as per their own choice. But now they have to invest a minimum of 25% across the three categories. The mutual fund houses have time until 31 January 2020 to implement this.
2. NAV calculation
According to the old rules, the Net Asset Value(NAV) of the same day was considered for unit valued up to Rs 2lakh or less. It didn’t matter if the money reached the AMC or not as long as the order is placed within the cut off time. But now the investors will get the purchase NAV of the day when investor’s money reaches the AMC, irrespective of the investments’ size. The new NAV calculation will not apply to liquid and overnight funds.
3.New Riskometer tool
The risk-o-meter will have a new category of ‘very high’ risk. This will help investors to make an informed decision once they can identify the risk level. The earlier riskometer did not adequately assess the risk but divided the funds based on the scheme. But now the risk-o-meter will be evaluated monthly, and every AMC has to keep reviewing the portfolio disclosure. AMCs have to publish the risk levels on their website and AMFI’s website every month. Mutual Funds also have to post a history of riskometer changes every year. Further, AMC must inform the unitholders about any risk-o-meter shift of that particular scheme.
4.Dividend option renamed
From April 2021, mutual funds will have to rename dividend options as income distribution cum capital withdrawal.
5.Inter-scheme transfers (ISTs)
From 1 January 2021, investors are allowed an inter-scheme transfer(IST) in close-ended funds within three days of the allotment of the units. IST involve shifting of debt papers from one mutual fund scheme to another. Earlier ISTs was executed at market prices and that the transfer should conform with the recipient scheme’s investment objective.
Sebi also explained that no ISTs should be allowed if there is any negative market news or rumour about security in the mainstream media or an alert generated by the fund’s internal risk assessment in the previous four months.
