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MFs await fast-track prop

Mumbai, Dec. 27: Mutual funds will be able to hit the market quickly — almost as soon as they conceive the idea for a new fund offering (NFO).

The Securities and Exchange Board of India (Sebi) today floated a discussion paper that is underpinned by the idea of fast-tracking NFOs.

The market watchdog said an asset management company (AMC) would be free to launch a new scheme right after the regulator confirms the receipt of a final offer document with all required disclosures.

At present, mutual funds have to go through an elaborate process of filing a batch of documents first and then submitting due diligence certificates.

Sebi now plans to telescope the process by allowing mutual funds to file just one document along with due diligence certificates from trustees.

Additional due diligence certificates will have to be submitted by the compliance committee comprising the chief executive officer of the AMC, the compliance head and the fund manager.

The regulator has proposed to upload only the final offer document instead of draft offer documents on its website.

At present, an AMC has to launch its scheme within six months from the date of receiving Sebi’s clearance. Each document is scrutinised separately before the AMC gets an approval for the launch.

To begin with, the regulator has proposed the adaption of the fast-track model by AMCs in fixed maturity plans (FMPs). According to Sebi, it will be appropriate to implement the fast-track mechanism for FMPs, which constitute the majority of new offer document filings, as they are close-ended income schemes and invest funds in debt and money market instruments.

“The Sebi move will allow the AMCs to work and launch funds at a much greater speed, which means the frequency of NFO launches is going to increase during 2008,” Dhirendra Kumar, CEO of Value Research Online, told The Telegraph.

“Equity-oriented funds with diversified portfolio are going to dominate the industry during the year 2008. Sectoral funds are no longer a flavour of the fund industry,” Kumar added.

Sebi has asked the AMCs and investors for their feedback by January 15.

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