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In its latest circular, SEBI has made it mandatory for AMCs to have separate disclosures of expense ratios, returns and yields for direct and regular plans. The regulator aims to facilitate enhanced transparency, ease of comprehension by investors and a standardized approach towards disclosures by the MF industry with this new regulation.
Currently, AMCs disclose expense ratio, returns and yields only for regular plans of their schemes. SEBI had proposed to have similar disclosures for direct plans in a consultation paper released in September based on the recommendations made by the Mutual Fund Advisory Committee and had asked for public comments on the same.
In addition, SEBI has also finalized the color scheme of the risk-o-meter with six colors showing different levels of risk.
The six colors finalized for the risk levels are:
- Low risk – Irish green
- Low to moderate risk – Chartreuse
- Moderate risk – Neon yellow
- Moderately high risk – Caramel
- High risk – Dark orange
- Very high risk – Red
The regulator has also asked AMCs to communicate the change in risk-o-meter of the scheme to its unitholders alongside the old risk-o-meter through email or SMS. This would look like this:
The circular will come into effect from December 5, 2024.
