Sebi streamlines cut-off timing for NAV computation

Purchase and redemption requests received by equity and debt funds up to 3 pm on any day will be assigned the closing net asset value (NAV) of that day, while requests received after 3 pm will be assigned the closing NAV of the next day.

According to a circular from the Securities and Exchange Board of India (Sebi), the cut-off timings is applicable to all mutual funds and have to be implemented by March 25, 2004.

In case of liquid schemes, the cut-off timings are slightly different. For purchase requests, the closing NAV of the day "immediately previous to the day on which funds are available for utilisation by the fund shall be applicable."

However, where applications are received after 1 pm and the funds are available for utilisation by the fund on the same day, closing NAV of the same day shall be applied.

In case of redemption in liquid schemes, for applications received up to 10 am the previous day's closing NAV shall be applicable and for applications received after 10 am, the same day's closing NAV shall be applicable.

For liquid schemes, funds have to calculate NAVs for every calendar day.

In all this the Sebi circular has clarified that in respect of applications with outstation instruments, which are not payable at par at the place where the application is received, the closing NAV of the day on which instrument is credited will be applicable.

Incidentally, Sebi has laid the onus of prompt action with regard to purchase or redemption on mutual funds. "Any loss in NAV incurred by the investor, scheme or plan on account of delays, shall be made good by the Asset Management Company (AMC)," the circular said.

For switch transactions, that is, switching between schemes, switching out will be deemed as redemption and switching in as purchase and such transactions have to be treated accordingly.

To ensure that these timings are really being adhered to, Sebi has directed fund houses to have stamping machines at all its points of acceptance of transactions which will have a proper serialing.

"For a given machine, the running serial number will be stamped from the first serial number of the machine and continue to be stamped up to its maximum capacity. Only, thereafter the cycle will be repeated," according to the Sebi circular. The stamping details have to be identical on both the application as well as the corresponding instrument.

Bunching of applications by giving single serial number will not be permitted. For implementing the time stamping machines, the last date is May 15, 2004 for metropolitan centres and other centres, which constitute at least 60 per cent of the value of the business of the mutual fund. or the remaining centres, the deadline is June 15, 2004.

Mutual funds also have to inform Sebi about the names of their schemes, especially those which fall under the category of liquid schemes.