Page 18 - Banking Finance September 2020

MUTUAL FUND

MUTUAL FUND

NEWS
NEWS
NEWS
NEWS
NEWS

Sebi introduces very high number of times the risk level has as to be prominently visible to inves-
changed over the year, on their website tors. "Change in risk-o-meter will not
risk category in mutual and Am website. The risk in equity funds be considered as a fundamental at-

fund schemes will be judged on the basis of three pa- tribute Change of the scheme in
Sebi has revamped the product label- rameters - market capitalisation, vola- terms...of Sebi (Mutual Fund) Regula-
ling on mutual fund schemes under the tility, and impact cost. tions," the regulator noted.
risk-o-meter by introducing "very high For investment by mutual funds in in- This directive will be in force with ef-
risk" category to warn investors. The struments having short-term ratings, fect from January 1, 2021, to all the
existing five categories to measure Sebi said, "the liquidity risk value and existing schemes and all plans to be
risks are - low, low to moderate, mod- the credit risk value shall be based on launched on or thereafter. However,
erate, moderately high, and high. the lowest long term rating of the in- mutual funds may choose to adopt this
Based on the scheme characteristics, strument of the same issuer (in order directive before the specified time pe-
mutual funds will assign a risk level for to follow conservative approach) riod. "Sebi has come up with a detailed
schemes at the time of launch of across credit rating agencies". How- description of risk associated with debt,
ever, if there is no long term rating of equity and derivatives instruments.
scheme/new fund offer, Sebi said in a
the same issuer, then based on credit
circular. This will enhance the risk information
rating mapping, the most conservative available to Investors and Investors
It further said any change in risk-o- long-term rating will be taken for a can now map their investments based
meter will be communicated by way of given short-term rating. upon their risk profile. "This is a very
notice-cum-addendum and by way of
Sebi said mutual funds need to publish good initiative from Sebi and looking at
an email or SMS to unit holders of that
scheme in a tabular form scheme-wise the recent experiences where there
particular scheme. Risk-o-meter will be
changes in risk-o-meter in the annual has been a gap between perceived risk
evaluated on a monthly basis and mu-
reports and abridged summary. The and actual risk and quite pragmatic
tual fund houses will have to disclose product label will be disclosed on the approach for the protection of Inves-
the risk-o-meter along with portfolio front page of the initial offering appli- tors interest," said Omkeshwar Singh,
disclosure for all their schemes on their cation form, Scheme Information head RankMF at Samco Securities
respective website and on the industry Documents (SID) and Key Information
body Amfi website within 10 days from Memorandum (KIM). Also, it needs to Forensic reveals more
the close of each month. be disclosed on the common applica- wrongdoings in Franklin
Sebi said mutual funds will have to dis- tion form - along with the information
close the risk level of schemes as on about the scheme. Scheme advertise- Templeton
March 31 of every year, along with the ments should be placed in a manner so A forensic audit has indicated several

18 | 2020 | SEPTEMBER | BANKING FINANCE