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What Happens to Your Money If a Fund House Cancels NFO? - ET Money Learn

Last month, two fund houses called off their New Fund Offers (NFOs). They failed to meet the criteria set by SEBI for NFOs.

What Happens to Your Money If a Fund House Cancels NFO?

When a mutual fund scheme is first made available for investment, it is called an NFO. The aim is to accumulate an initial corpus so that the fund manager can build a portfolio.

What is NFO?

SEBI has laid out the criteria for NFOs. If all the requirements are not met, the NFO must be called off. Let’s take a look at these rules:

Rules and regulations

There’s a minimum amount a fund house must collect for an NFO to sail through. For debt and hybrid schemes, it is Rs 20 cr. For all others, it is Rs 10 cr.

Rule 1: Minimum amount

At least 20 investors must participate in the NFO. No single investor can hold more than 25% of the corpus.

Rule 2: Minimum number of investors

The duration of an NFO can not exceed 15 days. The ELSS category is an exception.

Rule 3: Duration of the NFO

A fund house launching an NFO must invest in the scheme. Right now, it is 1% of the amount raised during NFO or Rs.50 lakh, whichever is less.

Rule 4: Skin in the game

If NFO sails through, investors are allotted units within 5 days. If it is called off, the fund house refunds your money.

Process after NFO

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