Premium| Listen to this article |
In order to bring uniformity across mutual funds, Sebi has come out with timeliness for rebalancing of portfolios. In a circular issued today, the market regulator said they would come into effect from July 1.
Sebi said the rebalancing period will be applicable in the event of deviation from mandated asset allocation mentioned in the Scheme Information Document (SID) due to passive breaches.
Passive breaches are generally that have not arisen due to omission and commission of Asset Management Companies (AMCs).
The mandated rebalancing period for all mutual fund schemes, except Index Funds and Exchange Traded Funds (ETFs) is 30 business days.
In case the portfolio of schemes are not rebalanced within the mandated timelines, justification in writing, including details of efforts taken to rebalance the portfolio must be placed before an investment committee.
The investment committee, if so desires, can extend the timelines up to sixty (60) business days from the date of completion of mandated rebalancing period.
In case the portfolio of schemes is not rebalanced within the mandated plus extended timelines, AMCs will not be permitted to launch any new scheme till the time the portfolio is rebalanced. They will also not b allowed to levy exit load, if any, on the investors exiting such schemes.
AMCs must report the deviation to trustees at each stage.
In case the AUM of deviated portfolio is more than 10% of the AUM of main portfolio of scheme, they have to immediately disclose the same to the investors through SMS and email / letter including details of portfolio not rebalanced.
Sebi further said AMCs will also have to immediately communicate to investors through SMS and email / letter when the portfolio is rebalanced.
The subject line of the aforementioned emails or letters should be uniform across industry and clearly indicate “breach of" / “deviation" from mandated asset allocation.
According to the cirular, AMCs will also have to disclose any deviation from the mandated asset allocation to investors along with periodic portfolio disclosures as specified by SEBI from the date of lapse of mandated plus extended rebalancing timeline.
Download the App to get 14 days of unlimited access to Mint Premium absolutely free!