SEBI relaxes performance advertisement rules for MFs

AMCs can now publish CAGR returns of schemes in performance advertisements for 1 year, 3 years, 5 years and since inception.

SEBI has relaxed rules pertaining to performance of mutual fund advertisements. Fund houses had been requesting SEBI to relax these rules which came into effect through a 2011 SEBI circular.

From April, AMCs can show the CAGR returns for the past 1 year, 3 years, 5 years and since inception instead of the current rule which requires them to show as many twelve-month periods as possible for the past 3 years in performance advertisements. Performance of other schemes managed by a fund manager can be showed in a similar fashion in a summarized format in print advertisements. For online advertisements, AMCs can provide a link to such summarized information.

Further, the advertisements can feature performance based on last day of month end preceding the date of advertisement. Earlier, AMCs were required to publish such information based on last day of preceding quarter end.

Also, SEBI has asked AMCs to mention whether performance is of regular or direct plan with a footnote mentioning that different plans have a different expense structure. They will be also required to disclose if the scheme has been in existence for more than 1 year but less than 3 years or 5 years.

 Besides, the regulator has allowed AMFI to rope in celebrities to endorse mutual funds with immediate effect. SEBI said that AMFI should take its approval before releasing any advertisements featuring a celebrity. Celebrity endorsements can only promote the category and not any particular scheme of an AMC. SEBI said that the budget for celebrity endorsements should not exceed the one basis point corpus collected by AMFI from AMCs.

Source: Morningstar India Website