In the case of closed-ended funds, AMCs stop accepting subscription requests once the NFO period is over. In an open-ended fund, units can be purchased and sold on a continuous basis even after the initial offering
Approval from the regulator
Before an asset management company (AMC) launches a scheme, it has to file a draft offer document with market regulator SEBI (Securities and Exchange Board of India) and get its approval.
The draft offer document is available on the SEBI website for public comments for 21 days from the filing of the document with SEBI. The regulator may specifies changes, if any, in the draft offer document and the AMC or the lead merchant banker shall carry out such changes in the draft offer document before filing the offer document with ROC (Registrars of Companies) / stock exchanges.
However in reality, if SEBI doesn’t give feedback in 21 days, then it is likely to take more time to approve the scheme. Hence, the AMC should wait for the regulator’s approval.
Initial subscription period
When an AMC gets the SEBI approval and launches the scheme, you can invest in it for a limited period. This period is called the initial offering period (IPO). According to SEBI guidelines, the AMC’s new fund offer (NFO) has to be open for a maximum of 15 days. A new fund offer (NFO) is the first-time subscription offer for a new scheme launched by a fund management company.
In the case of closed-ended funds, AMCs stop accepting subscription requests once the NFO period is over. In an open-ended fund, units can be purchased and sold on a continuous basis even after the initial offering.
However in case of Rajiv Gandhi Equity Savings Scheme (RGESS), the NFO is open for subscription for up to 30 days.
Please note that all MFs, except RGESS, have to allot units and dispatch account statements within five working days after the completion of the NFO period.
Dispatch of dividends
Once the AMC declares a dividend, a unitholder generally receives the dividend within 10 days from the record date, while the maximum time period is 30 days.