Chapter 7 : Cut-off Time Regulations & Time Stamping
7.3 Time Stamping Requirements
• For every machine, running serial number has to be stamped from the first number to the last number as per its capacity before repetition of the cycle.
• Every application for purchase is to be stamped on the face and the corresponding payment instrument is to be stamped on the back indicating the date and time of receipt and the running serial number. The application and payment instrument should contain the same serial number.
• Every application for redemption has to be stamped on the face and on the investor’s acknowledgment copy (or twice on the application if no acknowledgment is issued) indicating the date and time of receipt and running serial number.
• Blank papers should not be time stamped. Genuine errors, if any, are to be recorded with reasons and the corresponding applications requests are to be preserved.
• The time stamping machine should have a tamper proof seal and the ability to open the seal for maintenance or repairs must be limited to vendors or nominated persons of the mutual fund, to be entered in a proper record.
• Breakage of seal and/or breakdown of the time stamping process has to be duly recorded and reported to the Trustees.
• Every effort should be made to ensure uninterrupted functioning of the time stamping machine.
In case of breakdown, the mutual funds have to take prompt action to rectify the situation. During the breakdown period, mutual funds need to adopt an alternative time stamping method that has already been approved by the Board of the AMC and the Trustee(s).
An audit trail should be available to check and ensure the accuracy of the time stamping process during the said period.
• Any alternate mode of application that does not have any physical or electronic trail needs to be converted into a physical piece of information and time stamped in accordance with the time stamping guidelines.
• Mutual Funds need to maintain and preserve all applications/ requests, duly time stamped, at least for a period of eight years. They should be able to produce them as and when required by SEBI or auditors appointed by SEBI.
Points to remember
• If investors are permitted to subscribe to new units of a scheme at a price lower than their intrinsic value, then the prior investors lose out.
• Similarly, if investors are able to offer their units for re-purchase at a price higher than their intrinsic value, the investors who continue in the scheme are cheated.
• If investors subscribe to or re-purchase units at their intrinsic value, then neither the prior investors nor the continuing investors are adversely affected.
• The applicable NAV for a transaction depends on whether or not the investor’s application for subscription / re-purchase was received before the specified “cut-off” timing. This is applicable to all mutual funds. It is to be uniformly applied to all investors. The only exceptions are:
o International funds
• Where the application is received in a liquid scheme by 2.00 p.m. and funds are available for utilization before the cut-off time on the same day, units will be allotted based on the closing NAV of the day immediately preceding the day of receipt of application.
• Where the application is received in a liquid scheme after 2.00 p.m. and funds are available for utilization on the same day units are allotted based on the closing NAV of the day immediately preceding the next business day.
• Irrespective of the time of receipt of application in a liquid scheme, where the funds are not available for utilization before the cut-off time, units are allotted at the closing NAV of the day immediately preceding the day on which the funds are available for utilization. • Where re-purchase application is received up to 3.00 pm, it is effected at the closing NAV
of day immediately preceding the next business day.
• Where re-purchase application is received after 3.00 pm, it is effected at the closing NAV of the next business day.
• Where the application is received in a non-liquid scheme up to 3.00 pm with a local cheque or demand draft payable at par at the place where it is received, units are allotted at the closing NAV of the day on which the application is received.
• Where the application is received in a non-liquid scheme after 3.00 pm with a local cheque or demand draft payable at par at the place where it is received, units are allotted at the closing NAV of the next business day.
• In respect of purchase of units in Income/ Debt oriented schemes (other than liquid fund schemes and plans) with amount equal to or more than Rs. 1 crore, irrespective of the time of receipt of application, units are allotted at the closing NAV of the day on which the funds are available for utilization.
• Where re-purchase application is received for a non-liquid scheme up to 3.00 pm, it is effected at the closing NAV of the day on which the application is received.
• If re-purchase application is received for a non-liquid scheme after 3.00 pm, it is effected at the closing NAV of the next business day.
• In order to ensure transparency in capturing the timing, SEBI has mandated official points of acceptance for receipt of these applications.
• The Official PoA are typically offices of the AMC and RTA. Offices of the DP can also be an Official PoA for re-purchase transactions. Offices of stock exchange brokers can be Official PoA for transactions routed through the stock exchange.
• Mutual Funds need to maintain and preserve all applications/ requests, duly time stamped, at least for a period of eight years.