Mutual fund scheme offer documents are made simpler by Sebi

The markets regulator Sebi on Wednesday rationalized and simplified the offer document style in an effort to facilitate the creation of the Scheme Information Document (SID) by mutual funds and improve investor readability.

The updated structure aims to rationalize the compilation of the SID, simplify the distribution of pertinent information to investors, and make it easier for mutual funds to update it on a regular basis.

According to a circular from the Securities and Exchange Board of India (Sebi), the revised format will take effect on April 1, 2024.

The AMFI, an industry association, and the Sebi Mutual Fund Advisory Committee’s proposals served as the foundation for the decision to redesign the SID structure. The regulator has changed a number of laws to reflect the SID’s amendments.

The change calls for the disclosure of the scheme’s portfolio holdings, including the issuer’s top ten holdings and the fund’s allocation to different sectors, via a working online connection that will house the relevant data.

The Statement of Additional Information (SAI) for the MF scheme will also include certain disclosures made by the AMC board of directors and other important individuals on their combined interest in the scheme.

The AMC retains the power and opportunity to create a segregated portfolio. Only if the scheme’s SID has enabling provisions for a segregated portfolio with comprehensive disclosures given in SAI, could it be established, according to Sebi.

It said, “The enabling provision for the creation of a segregated portfolio shall be included in the SID for all new schemes.”

Additionally, in addition to providing scheme details, Asset Management Companies (AMCs) will be required to publish the benchmark’s risk-o-meter on the main page of the SID, Key Information Memorandum (KIM), and common application form.

Sebi instructed AMFI to make the required adjustments to the KIM and SAI forms in conjunction with it, in compliance with the new SID format, within a two-month timeframe.