On November 27, 2020, the Securities and Exchange Board of India (“SEBI”) issued an informal guidance (“Informal Guidance”) in connection with the SEBI (Mutual Funds) Regulations, 1996 (“Mutual Fund Regulations”) in response to a request from Mirae Asset Investment Managers (India) Private Limited ("Mirae").
Mirae acts as the investment manager to the schemes launched by Mirae Asset Mutual Fund, which is registered with SEBI as a mutual fund under the Mutual Fund Regulations.
Mirae had requested an informal guidance on the following- “The correct applicable net asset value ("NAV") for the transferor and the transferee scheme, in case of switch transaction request from Liquid/Overnight scheme to Non-Liquid/Equity scheme on friday or on a day preceding a non-business day, received before the applicable cut-off time for: (i) value less than Rs. 2,00,000 (Rupees two lac); and, (ii) value more than Rs. 2,00,000 (Rupees two lac) in light of SEBI circular no. SEBI/HO/IMD/DF2/CIR/P/2020/175 dated September 17, 2020 ("September Circular")."
SEBI held that in both cases, the applicable NAV for the switch in transaction would be as per the applicable provisions under the Mutual Fund Regulations and SEBI circulars relating to switch and sweep transactions, treating the switch in request as received on the day when NAV of switch out transaction is applicable.
SEBI stated that vide the September Circular, it is inter alia, provided that in respect of 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, therefore for any transferee scheme the applicable NAV shall be subject to availability of funds and submission of application on or before the applicable cut-off time.
The Informal Guidance may be accessed here.
This update has been contributed by Adity Chaudhury (Partner) and Aditi Gupta (Associate).
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