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SEBI simplifies and streamlines format of Offer Documents for Mutual Fund Schemes

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The Indian Capital Markets Regulator, SEBI in consultation with the Association of Mutual Funds in India (AMFI) has recently revamped the format of Scheme Information Document (SID) by mutual funds to increase its readability by the investors. This is the first time since SEBI has modified the format of SIDs since 2008. Some of these changes on an indicative basis are highlighted as below:

(i) Highlights / Summary of Scheme – This section has been significantly amended to elaborate the highlights of the scheme in a holistic manner. For instance, the Asset Management Company (“AMC”) is now required to emphasise the scheme’s benchmark name and provide a rationale specific to the scheme’s objectives for selecting the benchmark index for the comparison of performance. Additionally, if applicable, this section will also feature the secondary benchmark.

(ii) Investment Strategies – Mutual Funds will have to exercise due care in deciding whether the investment strategy is active or passive for eg. Fund of Funds with multiple funds cannot be considered as a scheme with passive investment strategy since fund manager has scope for active selection and management of fund.

(iii) Fees & Expenses – The new format requires Mutual Funds to detail the maximum Total Expense Ratio and additional expenses which may be incurred in operating the scheme. Further, the “Summary of the Scheme” section will include a web link where the Total Expense Ratio for the preceding six months and the scheme factsheet will be displayed.

In accordance with the updated SID format, SEBI has also asked AMFI to make the required modifications to the Key Information Memorandum (KIM) and the Statement of Additional Information (SAI) formats within two months from the date of issuance of this circular.

In order to ensure smooth implementation of the changes, the updated format shall be implemented with effect from April 01, 2024. Draft SIDs are required to be submitted to SEBI on or before March 31, 2024, and SIDs already filed with SEBI (awaiting final observations) or those for which final observations have been received from SEBI (for schemes launched on or before March 31, 2024), can continue using previous / old SID format.

A copy of the SEBI Circular is enclosed herewith.

Readers are welcome to send their views to Regstreet Law Advisors at info@regstreetlaw.com

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