Sebi Issues New Ad Norms For MFs

Mumbai, June 26: | Updated: Jun 27 2003, 05:30am hrs
In order to tighten the grip over compliance standards of mutual funds (MFs), the Securities and Exchange of India (Sebi) has issued new guidelines pertaining to the improvement of the standard of disclosures in advertisements.

As per a Sebi circular dated June 26, 2003, advertisements of mutual funds through hoardings and posters may carry only the following statement apart from the copy of advertisement: Mutual Fund investments are subject to market risks, read the offer document carefully before investing.

The above statement shall be displayed in black letters of at least 8 inches height or covering 10 per cent of the display area, on white background. The compliance officers shall ensure that the statement appearing in such advertisements is in legible font, the circular further specifies.

Likewise, advertisements through audio-visual media like television, a statement, Mutual Fund investments are subject to market risks, read the offer document carefully before investing shall be displayed on the screen for at least 2 seconds, in a clearly legible font-size covering at least 80 per cent of the total screen space and accompanied by a voice-over reiteration, the circular states.

The Sebi circular specifies that the same message be carried through all other vehicles of communication to investors.

As per Sebi, the retail investor being the backbone of the fund management business it is essential for the investor to read the offer documents and risk factors before investing in MF schemes to take well-informed, investment decisions.

Mr Shailendra Bhandari, managing director, Prudential ICICI AMC, said, I think most of the guidelines are sensible. What Sebi is saying is to make sure that the person who invests in a mutual fund sees the risks involved.

It is not right to just flash an advertisement outside or have a small print advertisement which does not convey much to the investor. Rather it should have a minimum size, which gives a pointer to the investor to read the offer document.