Sebi asks mutual funds to reduce information overload on customers

Markets regulator Sebi has asked mutual funds to make a disclosure about scheme risk-o-meter, performance and portfolio details to investors only for the particular plans in which they have invested. 
 
This is aimed at enhancing the quality of disclosure with respect to risk and performance and portfolio of the schemes without creating information overload on the investor, Sebi said in a circular. 
 
The new framework will be applicable with effect from June 1, 2021. 
 
According to the regulator, mutual funds will have to "disclose risk-o-meter of the scheme and benchmark while disclosing the performance of scheme vis-a-vis benchmark". 
 
They need to send the details of the scheme portfolio while communicating the fortnightly, monthly and half-yearly statement of the scheme portfolio via email.
 
In October 2020, Sebi revamped the product labelling on mutual fund schemes under the risk-o-meter by introducing the "very high risk" category to warn investors.
 
This was in addition to the existing five categories to measure risks - low, low to moderate, moderate, moderately high, and high.
 

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Changes in Our Business Model
 
 
Greetings from Moneylife Advisory Services
 
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
 
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
 
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
 
What remains the same:
  • Recommendations on insurance, investment and Lion stocks, will continue as a part of the MAS premium subscription. Our strength has always been research and this will remain available to you through our recommendations.
  • The magazine and all textual content will remain as part of the service
  • The investools will have to be reworked and will offer model portfolios. We will have to suspend the restructuring tool.
 
What changes:
  • The interactions in Ask / Handholding will offer investment advice but not specific to your situation. It will offer information on investment products and also clarify your doubts about various financial products. It will be a forum for information, not for advice. This will be implemented with immediate effect and our guidelines in Ask, reflect this now.
 
Over the next few weeks our site and our communication to you will reflect these and other additional changes.
 
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
 
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Debashis Basu
Founder