Ajay Tyagi, Chairman, SEBI has directed fund houses to remain true to the label to avoid confusion among investors and possibilities of mis-selling. He was speaking at the virtual annual general board meeting of AMFI held today in Mumbai.
Tyagi said the improper categorization of schemes only creates confusion among investors apart from the possibilities of mis-selling. He said, “I have been told that 46 mutual funds have over 1700 schemes. SEBI, in consultation with the industry, had done a mammoth exercise in 2017 and come out with categorization of schemes in 36 categories. Improper categorization of schemes will only lead to confusion amongst the investors apart from the possibilities of mis-selling.”
Tyagi further said that scheme category and its performance with respect to benchmark are major inputs based on which investors decide if they want to invest in a scheme. “If a scheme portfolio is not true to its label, it might be giving very different risk return exposure to the unitholders of the scheme than what they have signed up for,” said Tyagi.
Talking about the categorization, the SEBI chairman said, “SEBI norms for categorization of mutual fund schemes have two objectives – that the scheme portfolio should reflect the name of the scheme; and that the scheme performance can then be compared against an appropriate benchmark. The funds need to keep their scheme portfolios true to their label.”
