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nism-series-va-interval-funds-transaction-period-rules[ MUTUAL FUND DISTRIBUTORS ]

Which operational feature correctly characterizes Interval Funds in accordance with SEBI regulations?

[ A ]They remain open for continuous subscriptions and redemptions on every business day throughout the year.
[ B ]They are completely prohibited from listing on recognized stock exchanges under all circumstances.
[ C ]They permit unitholders to redeem units directly from the AMC on any day without stock exchange involvement.
[ D ]They open for transactions only during specified periods, with minimum transaction period of 2 working days and minimum interval period of 15 days.[ CORRECT ]
Takeaway

Option D is correct: They open for transactions only during specified periods, with minimum transaction period of 2 working days and minimum interval period of 15 days.

Derivation
Interval funds combine features of open-ended and close-ended schemes. They operate largely as close-ended funds but open for subscription and redemption during pre-specified transaction periods. As per SEBI norms, the minimum duration of a transaction period is 2 working days, and the minimum duration of the interval period between transaction windows is 15 days. Units must also be listed on stock exchanges. This tests interval scheme operational rules. A common error is assuming interval funds allow daily redemption directly with the AMC.
Why the others fail
A — They remain open for continuous subscriptions and redemptions on every business day throughout the year.
Continuous daily purchase and repurchase on all business days defines open-ended schemes, not interval funds.
B — They are completely prohibited from listing on recognized stock exchanges under all circumstances.
Units of interval funds are compulsorily listed on stock exchanges to provide liquidity to investors between transaction intervals.
C — They permit unitholders to redeem units directly from the AMC on any day without stock exchange involvement.
Direct redemptions with the AMC are strictly restricted to the specified transaction period windows, not permitted on any random day.