The Securities and Exchange Board of India (Sebi) has asked mutual fund houses to stop misleading advertisements, brochures and presentations, and said that the illustrations provided in the advertisements, presentations, brochures, and pamphlets seem to be assuring fixed returns to investors on their investments.
“It has been noticed that some of the Asset Management Companies are indulging in practices relating to advertisements, which are not in letter and spirit compliance with the Advertisement Code prescribed in SEBI (Mutual Funds) Regulations, 1996,” Sebi said.
The regulator added it came across instances where some MFs have circulated pamphlets and brochures that are shown depicting future returns on the basis of assumptions and projections. It also said disclaimers and assumptions are in fine print that are likely to be missed out by the investors.
“Such disclosures/advertisements are ambiguous and likely to be misunderstood by the investors and are not in compliance with letter and spirit of the provisions of Sixth Schedule of SEBI (Mutual Funds) Regulations, 1996,” Sebi said.
As per SEBI MF regulations, no mutual fund can assure returns. Since all mutual funds invest money in equity and debt markets, the NAVs are subject to market ups and downs. In this case, promising returns doesn’t make sense.
Sebi also asked mutual fund houses to refrain from such practices in future and remove such advertisements/presentations/pamphlets and brochures from all the medium and to advise their distributors not to use such advertisements/presentations/pamphlets and brochures.
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