Amfi directs MFs not to indicate returns, yields for fixed maturity plans

The Association of Mutual Funds in India (Amfi) has directed fund houses not to disclose indicative returns and yields for fixed maturity plans (FMPs).

This decision was taken after market regulator Securities and Exchange Board of India (Sebi) raised concerns over mis-selling of FMPs.

Confirming the move, HN Sinor, CEO of Amfi said, ?The decision was taken at a meeting with the regulator, which has discovered some irregularities in the selling of FMPs. We are very clear that fund houses should not disclose indicative returns and yields to the investors while selling FMPs.?

FMPs are income schemes, which invest in corporate and government paper, thereby earning interest, which is then returned to investors.

They are so called because they have a fixed tenure ranging from three months to three years and are close-ended in nature.

In order to minimise losses, fund managers try to invest in paper that has, more or less, a residual maturity that matches the life of the scheme.

Achal Kumar Gupta, managing director at SBI Mutual Fund, said, ?I can?t comment about the industry, but we are sticking to the regulations and we never disclose returns and yields when we sell FMPs.?

In 2009, Sebi had instructed all fund houses to stop declaring indicative yields on FMPs and had made it compulsory for these schemes to be listed on stock exchanges.

A sales head from a leading fund house said, ?Before the global slowdown of 2008, we had seen huge number of FMPs hitting the market which later saw redemption. At that time, strict regulations were brought in by the regulator. In the last few months, several FMPs have hit the market and this may have been a cause for concern.?

Market participants however say this would be a positive move as many fund houses were selling FMPs and disclosing the returns.

Fund houses like HDFC mutual fund, Birla Sun Life, Axis MF, ICICI Prudential Mutual Fund have filed offer documents with the market regulator to launch FMPs.

Sebi data shows that 30 FMPs? offer documents have been filed in the last two months.