Sebi asks MFs to disclose expenses, returns separately for direct plans

Asks Amfi to come up with standardised half-yearly disclosure format

The Securities and Exchange Board of India (Sebi) has made it mandatory for mutual fund (MF) houses to provide separate disclosures for direct plan and regular plan schemes in their half-yearly financial results.

 

"The expenses disclosed… shall contain separate disclosures for total recurring expenses for direct and regular plans, apart from the disclosure of total recurring expenses of the scheme," the regulator said in a circular.

 

Sebi has also asked fund houses to reveal the returns delivered by both direct and regular plans of MF schemes in their half-yearly reports.

 

The regulator has directed the Association of Mutual Funds in India (Amfi) to create standardised disclosures for half-yearly financial statements.

 

The new norms come into effect from December 5, 2024.

 

According to Sebi, separate disclosures for direct plans of MF schemes were necessary as they have a different expense structure compared to regular plans.

 

"As distribution expenses and commission cannot be charged to investors of a direct plan, the expense ratio of the direct plan of any scheme is lower than that of the regular plan of the same scheme, and hence the returns of the direct and regular plans also differ," it stated.

 

Additionally, Sebi has modified the risk-o-meter to more accurately depict risks. The low-risk level of the risk-o-meter will be Irish Green, while the very high-risk level will be Red.

 

The risk-o-meter is a graphical representation of the risk a mutual fund carries. It resembles the speedometer of a vehicle and displays five levels of risk.