sebi:WTM/KMA/IMD/219/02/2010
This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.
Facts / Headnote
Show cause notice dated November 13, 2009 disposed of with a direction to Religare Mutual Fund, Religare Asset Management Company Limited including its Chief Executive Officer, to ensure that they abide strictly by the stipulations on advertisements by mutual funds issued by SEBI from time to time, both in letter and spirit; no monetary penalty imposed.
Provisions invoked
- s. 19
- s. 11(1)
Regulations
- Reg. 25
- Reg. 76
- Reg. 77
Parties
- Religare Mutual Fund
- Religare Asset Management Company Limited
- Mr. Saurabh Nanavati, Chief Executive Officer of Religare Asset Management Company Limited
Holding
Religare Mutual Fund and Religare Asset Management Company Limited contravened the SEBI circular on standard warning in advertisements and the Chief Executive Officer thereby violated Regulation 25(6A) of the Mutual Funds Regulations. The proceedings were disposed of with a direction to ensure strict future compliance with SEBI advertisement stipulations.
Full text
Page 2 of 5 referred to as RAMCL) to show cause as to why necessary action should not be taken against them for the aforesaid violation. It was also alleged that the Chief Executive Officer of RAMCL had failed to ensure that RMF had complied with all the provisions of the guidelines, circulars issued in this regard from time to time, in violation of Regulation 25 (6A) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. (hereinafter referred to as the Mutual Funds Regulations). In reply to the aforesaid show cause notice, RMF, vide letter dated November 23, 2009 inter alia stated that, it had taken several steps to ensure that the standard warning was conveyed to the investors in a proper and fair manner as laid down under the SEBI norms and that the standard warning as recited in the audio-visual advertisement was not unintelligible to the viewers/listeners. RMF also claimed that it had pulled off all the spots booked across the channels for October 27, 2009 and October 28, 2009 as soon as it received an alert from SEBI. Thereafter, an opportunity of personal hearing was granted to the aforesaid entities on January 6, 2010, wherein, Mr. Saurabh Nanavati, Chief Executive Officer of RAMCL made submissions before me. Mr. Suresh Jakhotiya, (Head Compliance) of RAMCL and Mr. Haresh Sadani, (Head Marketing) of RAMCL were also present in the hearing. Mr. Saurabh Nanavati reiterated the submissions made by RMF in its aforesaid reply. He also submitted that
Page 3 of 5 2. I have considered the oral as well as written submissions made on behalf RMF, RAMCL and its Chief Executive Officer and the other material available on record. One of the submissions of RMF was that as the word “Offer Document” in the standard warning was replaced by seven words (i.e. Scheme Information Document/Statement of Additional Information) and an additional word “please” to convey updated standard warning to the prospective investor. According to it, because of the additional words in the standard warning in the Television commercial, it sounded as being fast-read but was intelligible. I do not see any merit in this argument. SEBI, in respect of the standard warning in advertisements by mutual funds, vide Circular dated February 26, 2008 decided that the time for display and voice over of the standard warning shall be read in an easily understandable manner over a period of five seconds in audio visual advertisements. It was also decided that that in case of audio advertisements the standard warning shall be read in an easily understandable manner over a period of five seconds. Thus, according to the aforesaid circular, the duration of the standard warning “Mutual Fund Investments are subject to market risks, read the offer document carefully before investing”, would be at least five seconds. The intention or the reason behind the same was to educate the investors that their investments in mutual funds are subject to market risks and to advise them to
Page 4 of 5 circular are statutory and mandatory in nature. Therefore, the contention that the words “offer document” were replaced with other words, is not acceptable, as the same was not in accordance with the said circular. RMF cannot replace the contents of the standard warning prescribed and replace the same with its own substitute, whatever be the reasons. It is statutorily mandated to comply with the circular mentioned above. It failed do so. In the facts and circumstances, I am unable to accept the contention that the inclusion of additional words sounded as being fast read. It should have given the standard warning as prescribed therein. I cannot accept the contention that the standard warning was modified, keeping in mind the provisions of SEBI circular dated May 23, 2008. The aforesaid circulars (May 23, 2008 and February 26, 2008) govern two different areas.
You have read the preview. Create a free account to read the full order, track this party, and analyse it in Ontology.
Free accounts include 10 searches/day with full order access.
Source: SecMarx — sebi:WTM/KMA/IMD/219/02/2010. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.