Reminder to comply with Advertising Code of Mutual Fund Rules
SEBI has also written to the Association of Mutual Funds of India (AMFI). SEBI has asked Amfi to advise asset management companies (AMCs) in this regard.
SEBI has highlighted instances of such misleading leaflets and brochures being circulated by some mutual funds. It misleads the investors that combining SIP and SWP will result in a certain return.
An SWP is a monthly withdrawal facility while a SIP is a regular investment facility. Sebi clarified that while the SWP offers the option of receiving fixed returns, the advertisements do not clearly mention that the SWP may withdraw money from the capital amount if the NAV of the scheme does not grow consistently.
According to Sebi, mutual fund companies have also been directed to stop using such ambiguous images or the like in advertisements, brochures and presentations. Asset management companies have been asked not to engage in these practices. Also ordered to remove such graphics advertisements / presentations / leaflets, brochures from all advertising media.
Also, mutual funds have been asked to put the B-30 incentive structure on hold until fund houses put in place a mechanism that addresses SEBI’s concerns. The incentives were put on hold because of misuse of incentives given to mutual funds to attract more small towns to mutual fund investments.
Days ago SEBI had clarified that the trustees would be responsible for carrying out system-level checks to prevent fraudulent transactions. To ensure focus on core responsibilities, SEBI has suggested that trustees seek help from audit, law firms and merchant bankers. In addition, SEBI has recommended amending certain regulations for AMC and incorporating additional provisions to enhance the role and responsibility of the AMC board. SEBI said that as the scope and spread of the mutual fund industry increases, the role of trustees in relation to investor protection will become more important.
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Over the past ten years, the size of the mutual fund industry has increased fivefold. That is, from the industry’s AUM of Rs 7.93 lakh crore as on November 30, 2012, AUM crossed the milestone of Rs 10 lakh crore in May 2014. It crossed 20 lakh crore in August 2017 in a period of about three years. Industry AUM size crossed 30 lakh crore in November 2020. AUM as on December 31, 2022 is Rs 39.89 lakh crore.
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