Review of advertisement guidelines for Mutual Funds
Summary
This circular amends SEBI's advertisement guidelines for Mutual Funds to require performance disclosure in terms of CAGR for specific periods. It permits celebrity endorsements at the industry level for investor awareness, subject to prior SEBI approval and funding constraints. The amendments regarding performance advertising apply from April 1, 2017, while celebrity endorsement rules are effective immediately.
Text
Performance of Mutual Fund schemes shall be required to be advertised in terms of CAGR for the past 1 year, 3 years, 5 years and since inception.
Performance advertisement of Mutual Fund schemes should provide information based on period computed from last day of month-end preceding the date of advertisement.
Performance of other schemes managed by the fund manager shall be disclosed in a summarized manner, by providing performance of such other schemes managed by the concerned fund manager in terms of CAGR for the past of 1 year, 3 years and 5 years along-with the respective scheme’s benchmark.
In order to provide ease of understanding to retail investors, point-to-point returns on a standard investment of ` 10,000/- shall also be provided in addition to CAGR of the scheme.
It should be specifically mentioned whether performance so disclosed, is of regular or direct plan of the Mutual Fund scheme along-with a footnote mentioning that different plans have a different expense structure.
If a Mutual Fund scheme has not been managed by the same fund manager for the full period of the information being published in the advertisement, the same should be disclosed in a footnote.
Where the scheme has been in existence for less than one year, past performance shall not be provided.
In case the number of schemes managed by a fund manager is more than six, then the AMC may disclose the total number of schemes managed by that fund manager along with the performance data of top 3 and bottom 3 schemes.
Celebrity endorsement shall be allowed only at industry level, for the purpose of increasing awareness of Mutual Funds as a financial product category. Such celebrity endorsements... should not promote a scheme of a particular Mutual Fund or be used as a branding exercise of a Mutual Fund house / AMC.
Expenses towards such celebrity endorsements for increasing awareness of Mutual Funds shall be limited to the amounts that are aggregated by Mutual Funds at industry level for the purpose of conducting investor education and awareness initiatives.
Prior approval of SEBI shall be required for issuance of any endorsement of Mutual Funds as a financial product, which features a celebrity for the purpose of increasing awareness of Mutual Funds.
Clause A of the above circular will be applicable for advertisements issued from April 01, 2017 onwards.
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Source: SecMarx — Review of advertisement guidelines for Mutual Funds. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.