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SEBI in consultation with AMFI has revised the format of scheme information document (SID) issued by mutual funds.
Among some key changes are prominent display of product suitability and applicability of risk-o-meter on the respective benchmark.
The new SID will have to highlight product suitability by explaining to readers that ‘This product is suitable for investors who are seeking…’ and disclose the risk level of its respective benchmark on the front page itself.
Currently, fund houses use Tier I benchmark i.e. Nifty benchmarks across asset categories to compare their performance.
In a circular issued today, SEBI said, “Based on the suggestions of AMFI and the recommendations of the Mutual Fund Advisory Committee, the format of SID was simplified and rationalized. The revised format is aimed at streamlining the dissemination of relevant information to investors, rationalizing the preparation of SID and facilitating its periodic updation by mutual funds.”
While majority of things remain unchanged as the existing SID offers comprehensive information, here are a few changes that will further enhance the disclosure standards:
- Functional link: Scheme portfolio holding or top 10 holdings should be disclosed by way of a functional web link. Also, fund houses will have to offer such a link to disclose the total expense ratio (TER) of the last six months
- Skin in the game: SAI should disclose the total investment made by AMCs board of directors, scheme’s fund manager and other key personnel
- Segregated portfolio: AMCs can only create segregated portfolio if they mention it on their SIDs. SAI will have the complete details. Similarly, other such disclosures have to be made like swing pricing and stock lending/short selling for applicability in scheme
- Risk level: AMCs should disclose risk-o-meter of benchmark on SID, KIM and common application form along with the risk level of scheme
- Rationale: AMCs will have to disclose the justification for the use of benchmark index
- Timelines: AMCs will have to disclose the disclosure timing of NAV and give timeline for dispatch of redemption proceeds or dividends
- Investor services: AMCs will have to give contact details for general service requests and complaint resolution
Further, SEBI has asked AMFI to carry out necessary changes in formats of KIM and SAI within two months.
The updated format will be implemented from April 01, 2024. Existing schemes can comply with these regulations by April 30, 2024 with data as on March 31, 2024.
