The Securities and Exchange Board of India (SEBI) has announced detailed guidelines for product labelling in mutual funds. Currently, there are five categories to measure the level of risks in the mutual fund schemes. However, the regulator has now introduced one more category known as ‘very high risk’.
The new guidelines shall be in force with effect from January 1, 2021, to all the existing schemes and all schemes to be launched thereafter.
Mutual Funds shall disclose the risk level of 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.
Product labels shall be disclosed on the:
- Front page of initial offering application form, Scheme Information Documents (SID) and Key Information Memorandum (KIM).
- Common application form – along with the information about the scheme.
- Product label with respect to (a) & (b) above shall be placed in proximity to the caption of the scheme and shall be prominently visible.
- Scheme advertisements – placed in manner so as to be prominently visible to investors.
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