Sebi directs MFs to improve monthly disclosure standards

It's the second intervention by the regulator since 2007 in an exercise voluntary adopted by AMCs

The Securities and Exchange Board of India (Sebi) has directed mutual fund houses to standardise their fact sheets or the monthly information documents sent to unit holders. The move is aimed at bringing about more transparency and uniformity and helping investors take more informed investment decisions.

Asset management companies (AMCs) will have to provide information such as dividend history and total monthly expenses in a format prescribed by the Association of Mutual Funds of India (Amfi). Also, fund houses will have to present certain data in a graphical and easy-to-read manner. The move follows Sebi citing lack of uniformity in the fact sheets presented by various fund houses. “Sebi has sought a review and recommended standardisation of monthly fact sheets by AMCs,” Amfi wrote to AMCs

Amfi said the fact sheets published by various fund houses should be reviewed to ascertain the level of standardisation. It also asked to review international fact sheets to identify the information furnished as part of the standardisation exercise. Further, AMCs should filter information that was non-standardised and define parameters for information that differed in content, formula and presentation across different fund houses, it added.

Though publishing fact sheets isn’t mandatory under Sebi’s mutual fund regulations, AMCs have been doing so for several years.

The Sebi intervention is despite the fact that Amfi categorically informed the regulator that fact sheets were, by and large, standardised and in line with Amfi’s best-practice guidelines, and that fund houses were free to provide additional information.

The use of technologies and systems varies across fund houses — if a particular fund house highlights an additional parameter based on its investment philosophy, it is considered a requirement for other fund houses.

In 2007, the regulator had advised Amfi to standardise the content of fact sheets so that investors weren’t confused by various formats across fund houses. Accordingly, the industry body had issued a ‘best practice guidelines’ circular in October 2007. After Sebi sought a further review, Amfi referred the matter to a working group, which recommended a revised framework for product labelling of mutual fund schemes, based on a ‘riskometer’.

“Members are advised to adopt the revised guidelines contained herein for uniform implementation with respect to their fact sheets for September, which will be issued in the first week of October,” read the Amfi letter.