SEBI issues timetables for rebalancing portfolios of mutual fund programs

Market regulator Sebi on Wednesday released timelines for rebalancing portfolios of mutual fund programs in order to achieve consolidation.

When issuing a circular, the watchdog said that the rebalancing period will be applicable in case of deviation from the mandatory asset allocation mentioned in the System Information Document (SID) due to negative violations.



Usually negative violations that did not arise due to deletion and commissioning of Asset Management Companies (AMCs).

The mandatory rebalancing period for all mutual fund schemes, except for index funds and ETFs, is 30 business days.

In the event that the rebalancing is not carried out within the established timelines, a written justification, including details of the efforts made to rebalance the portfolio, must be submitted to the investment committee concerned. The Committee can extend the schedules up to 60 working days from the date of completion of the mandatory rebalancing period.

According to Sebi, if the portfolio of schemes is not rebalanced within the extended schedules, AMCs will not be allowed to launch any new scheme until the time of portfolio rebalancing.

Nor will they be allowed to impose an exit burden, if any, on investors who exit such schemes.

AMCs are required to report the deviation to the relevant secretaries at each stage.

In the event that the AUM of the deviating portfolio is more than 10 percent of the AUM of the main portfolio of the scheme, Sebi said that AMCs should immediately disclose this to investors through SMS and email/letter, including details of the portfolio that has not been rebalanced. .

“AMC shall also communicate immediately with investors through SMS and email/letter when the portfolio is rebalanced,” the regulator said.

The criteria will only be applicable to the main portfolio and not to separate portfolios, if any. It will come into effect on July 1, 2022.

(The title and image for this report may have been reformulated only by the Business Standard staff; the rest of the content is automatically generated from a shared feed.)

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