Allotment of Mutual Fund units- Cut-off time and Time Stamping

Allotment of Units:

Process: Once the NFO period closes, the AMC allots units to investors based on the subscription amount and the fixed price (e.g., ₹10 per unit during NFO). For schemes other than NFO, units are allotted at the NAV prevailing at the time of transaction (after cut-off time).
Finalization of Allotment:
- After the NFO period ends, the AMC finalizes the allotment of units to investors, typically within a few business days (e.g., 5-7 working days).
- The units are credited to the investor's account (folio number or Demat Account).
Confirmation of Allotment:
- Investors receive a Statement of Account or an email confirmation detailing the number of units allotted and the folio number.
- If an investor applies through a Demat account, units are credited there, and they receive confirmation from their Depository Participant (DP).

Cut-off Time:

Definition: Cut-off time is the deadline set by regulatory authorities for mutual fund transactions.
NAV Determination: It determines whether the investor will get the NAV of the same day or the next business day.
SEBI Guidelines: SEBI (Securities and Exchange Board of India) prescribes specific cut-off times for different types of mutual fund schemes.
Transaction Timing:
- If a transaction is submitted before the cut-off time, the same day's NAV is applicable.
- For online transactions, time of fund transfer is also considered along with the request submission time.

Time Stamping:

Definition: Time stamping is the process of recording the exact time when a mutual fund transaction request is received.
Purpose:
- Ensures that transactions are processed in a transparent and fair manner, preventing manipulation of NAV allotment.
- SEBI has made time stamping mandatory at all points of acceptance of mutual fund transactions.
Importance of Time Stamping:
- Ensures fair allocation of NAV to all investors.
- Prevents backdating or misuse of transaction requests.
- Helps in regulating compliance and tracking of transactions.
- Reduces disputes related to NAV allotment.
- Encourages digital transactions where time stamping is automated.
SEBI Guidelines on Cut-off Time & Time Stamping:
- SEBI mandates electronic time stamping for all mutual fund transactions.
- Transactions through intermediaries (e.g., distributors, agents, online platforms) must be time-stamped at the exact moment of receipt.
- For purchases, the NAV depends on both time of transaction and time of fund credit.