New Delhi, Oct 5 : Mutual fund schemes will be evaluated by the investors on the basis of a ‘risk-o-meter’ on a monthly basis beginning January 1.
The Securities and Exchange Board of India (Sebi) announced on Monday that mutual funds/AMCs shall disclose the risk-o-meter along with portfolio disclosure for all their schemes on their respective websites and on the AMFI website within 10 days from the close of each month.
Any change in the risk-o-meter shall be communicated by way of notice-cum-addendum and by way of an e-mail or SMS to the unit holders of that particular scheme.
The risk-o-meter will have six levels of risk for mutual fund schemes — low risk, low to moderate risk, moderate risk, moderately high risk, high risk and very high risk.
The very high risk category has been added to the five other categories.
Sebi, based on the recommendations of the Mutual Fund Advisory Committee (MFAC), has reviewed the guidelines for product labelling in mutual funds.
The detailed guidelines for evaluation of risk levels of a scheme have been issued. Pursuant to the calculation of risk value of the scheme and portfolio based on the methodology specified, risk levels of a scheme shall be depicted by the risk-o-meter.
Based on the scheme characteristics, mutual funds shall assign risk level for schemes at the time of launch of scheme/new fund offer.
Mutual funds shall disclose the risk level of the schemes as on March 31 of every year, along with the number of times the risk level has changed over the year, on their website and AMFI website.
This circular shall be in force with effect from January 1, 2021, to all the existing schemes and all schemes to be launched on or thereafter. However, mutual funds may choose to adopt the provisions of this circular before the effective date.
Sebi issued another circular on the review of dividend option and plan in case of mutual fund schemes. There is a need to clearly communicate to the investor that, under the dividend option of a mutual fund scheme, certain portion of his capital (equalisation reserve) can be distributed as dividend, the market regulator said.
All the existing and proposed schemes of mutual funds will name or rename the dividend option as income distribution. Under the new norms, dividend payout will be called a income distribution cum capital withdrawal option. The provisions shall be effective from April 1, 2021.
Offer documents shall clearly disclose that the amounts can be distributed out of investors capital (equalisation reserve), which is part of sale price that represents realised gains.
Further, AMCs shall ensure that the said disclosure is made to investors at the time of subscription of such options/plans.
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