The moneys collected under any scheme of a mutual fund shall be invested only in transferable securities in the money market or in the capital market or in privately placed debentures or securitised debts.
Provided that moneys collected under any money market scheme of a mutual fund shall be invested only in money market instruments in accordance with directions issued by the Reserve Bank of India;
Provided further that in case of securitised debts such fund may invest in asset backed securities and mortgaged backed securities.
Investment, & Borrowing, Restriction (Regulation: 44)
Any investments to be made under regulation 43 shall be invested subject to the investment restriction specified in the Seventh Schedule.
A) The mutual fund having an aggregate of securities which are worth Rs.10 crores or more, as on the latest balance sheet date, shall subject to such instructions as may be issued from time to time by the Board settle their transactions entered on or after January 15, 1998 only through dematerialised securities.
The mutual fund shall not borrow except to meet temporary liquidity needs of the mutual funds for the purpose of repurchase, redemption of units or payment of interest or dividend to the unit holders.
Provided that the mutual fund shall not borrow more than 20% of the net asset of the scheme and the duration of such a borrowing shall not exceed a period of six months.
The mutual fund shall not advance any loans for any purpose.
The mutual fund may lend securities in accordance with the Stock Lending Scheme of the Board.
Option Trading (Regulation: 45)
The funds of a scheme shall not in any manner be used in option trading or in short selling or carry forward transactions.
Provided that mutual funds shall enter into derivatives transactions in a recognised stock exchange for the purpose of hedging and portfolio balancing, in accordance with the guidelines issued by the Board.
Underwriting of Securities (Regulation: 46)
Mutual funds may enter into underwriting agreement after obtaining a certificate of registration in terms of the Securities and Exchange Board of India (Underwriters) Rules and Securities and Exchange Board of India (Underwriters) Regulations, 1993 authorising it to carry on activities as underwriters.
Explanation: For the purpose of these regulations, the underwriting obligation will be deemed as if investments are made in such securities.
The capital adequacy norms for the purpose of underwriting shall be the net asset of the scheme.
Provided that the underwriting obligation of a mutual fund shall not at any time exceed the total net asset value of the scheme.
Method of valuation of investments (Regulation: 47)
Every mutual fund shall compute and carry out valuation of its investments in its portfolio and publish the same in accordance with the valuation norms specified in Eighth Schedule.
Computation of Net Asset Value (Regulation: 48)
Every mutual fund shall compute the Net Asset Value of each scheme by dividing the net assets of the scheme by the number of units outstanding on the valuation date.
The Net Asset Value of the scheme shall be calculated and published at least in two daily newspapers at intervals of not exceeding one week:
Provided that the Net Asset Value of any scheme for special target segment or any monthly income scheme which are not mandatorily required to be listed in any stock exchange under Regulation 32, may publish the Net Asset Value at monthly or quarterly intervals as may be permitted by the Board.
Pricing of Units (Regulation: 49)
The price at which the units may be subscribed or sold and the price at which such units may at any time be repurchased by the mutual fund shall be made available to the investors.
The mutual fund, in case of open ended scheme, shall at least once a week publish in a daily newspaper of all India circulation, the sale and repurchase price of units.
While determining the prices of the units, the mutual fund shall ensure that the repurchase price is not lower than 93% of the Net Asset Value and the sale price is not higher than 107% of the Net Asset Value.
Provided that the repurchase price of the units of a close ended scheme shall not be lower than 95% of the Net Asset Value:
Provided further that the difference between the repurchase price and the sale price of the unit shall not exceed 7% calculated on the sale price.
The price of units shall be determined with reference to the last determined Net Asset Value as mentioned in sub-regulation (3) unless,
the scheme announces the Net Asset Value on a daily basis; and
the sale price is determined with or without a fixed premium added to the future net asset value which is declared in advance.
