SEBI and

MUTUAL FUNDS

SEBI has issued regulation and code of conduct in 1993,

that provided a basic legal framework for the functioning of
the mutual funds.
The Mutual Fund Regulation Act 1996 has provided a
sound footing and considerable leeway to fund
management.
Disclosure norms:
With the number of mutual fund schemes ever on the
increase the investor should be kept well informed about the
nature and functioning of the mutual funds.
The offer document should provide essential
information to assist the investors to take informed.

According to the SEBI regulations, the standard offer document should

give the following details:
1. Standard and scheme specific risk factors. The latter may be related
to investment objective, investment strategy, asset allocation, risk
from non-diversification if any and from investing in close ended
schemes.
2. Due diligence by the AMC (Asset Management Companies)
3. Fundamental attributes such as type of scheme, investment objective
and terms of issue.
4. Details of the offer, such as sale purchase, minimum corpus and
pricing of units in relation to NAV.
5. Likely initial issue expenses, actual issue expenses for schemes
launched during the last year, expenses borne by AMC and annual
recurring expenses.

6.

Identification of AMC and background of fund managers.

7. The policy of diversification or concentration to be pursued.
8. Asset allocation pattern with indicative range of investments or
maximum investment in a certain asset class.
9. The portfolio turnover policy and the effects of investment
techniques on portfolio turnover.
10.The policy with respect to dividends and distributions,
including any options for unit holders.
11.Associate transactions.
12. The borrowing policy, including the intent and purpose of
borrowing and any stock lending by the fund.
13. Valuation of assets, accounting policies and NAV.
14. The manner of determination of redemption and repurchase
price of the units.
15. Tax treatment of investments in mutual funds, investors rights
and services and redressal of investor grievances

The amendment in 1998 made a significant change in information

disclosure pertaining to penalties.
1. All cases of penalties awarded by SEBI or any other regulatory
body against the sponsor of the mutual funds, the trustee
company/board of trustees or any of the directors or key personnel
of the AMC and Trustee Company. The nature of penalty must be
disclosed.
2. Pending material penalties proceedings including pending
criminal and economics cases against any of the proceedings are
pending, the date instituted, the principal parties thereto, a brief
description of the factual basis alleged to underline the proceedings
and relief sought, if any shall be indicated.
3.Any deficiency in the systems and operations of the sponsor of
the mutual fund or any company associated with the sponsor in any
capacity such as AMC or the trustee company. This must pertain to
matters that SEBI has specifically directed disclosures. The full
portfolio disclosure in the annual reports in mandatory.