Capital market regulator SEBI has proposed to stop uploading scheme information documents (SIDs) on NFOs on its website in draft format and make it public only after its observations are passed.
It also wants to keep the window for seeking investors comments on SIDs for five days and wants MFs to file final documents in two days after the public comments windows are closed.
Market participants can comment on SEBI proposal before November 20.
After submitting SIDs to SEBI, mutual funds have to upload the same on SEBI website for 21 days. Mutual funds have now moved SEBI to reduce the number of days from 21 to five days for SID display on SEBI website.
First-mover advantage
SEBI has noted instances wherein AMCs which file SID based on new product lose the first-mover advantage due to the upload of the initial draft SID on SEBI website. It has been observed that once a draft SID proposing a new product is uploaded on SEBI website, other AMCs tend to follow suit. At times, this leads to a situation where NFO of an AMC which followed suit precedes the NFO of an AMC that conceived the idea and the AMC proposing the new product loses its first-mover advantage, said SEBI in a consultation paper issued on Wednesday.
The mandate of SID display for 21 days was introduced over 20 years ago and ever since, a lot has changed in the entire process of getting approval for NFO from SEBI.
Further, it said SID processing time has reduced significantly and SEBI observation letters are issued in 21 working days from the date of receipt of application. Following this, SEBI has sought comments from investors on reducing the time frame for display of draft SID on its website.