Reveal full details of plans, Sebi orders MFs

Tells the AMCs not to deal with non-compliant funds

 
Further, the market regulator has made it clear to asset management companies (AMCs) not to deal with any non-compliant mutual funds intermediaries.  “No mutual fund shall deal with those intermediaries who do not follow code of conduct,” the Securities and Exchange Board of India circular said.  They are to report such cases to the Association of Mutual Funds of India (AMFI) and Securities and Exchange Board of India , it added.

Client’s interests

In a 16-point code of conduct issued here, Securities and Exchange Board of India  has emphasised that clients’ interests are to be protected and that intermediaries should highlight the risk factors of each scheme and avoid misrepresentation and exaggeration.

Industry observers maintain that in the wake of entry load ban on equity schemes came into effect from August 1 this year, few malpractices were reported at several locations.  As such, the code of conduct seeks to check such cases and also asks intermediaries to abstain from indicating or assuring returns to clients.

At the same time, the Mutual Fund distributors are also to maintain necessary infrastructure to support the asset management companies in ensuring high service standards.

Code also prescribes intermediaries to be fully conversant with the key provisions of the Scheme Information Document (SID), Statement of Additional Information (SAI) and Key Information Memorandum (KIM) as well as the operational requirements of various schemes.

Business practices

It also advises intermediaries to avoid colluding with clients in faulty business practices such as bouncing cheques, wrong claiming of dividend or redemption cheques to mention a few.  The code also avoids making negative statements about any asset management companies  or scheme and ensure that comparisons if any, are made with similar and comparable products.

Code also envisages that all investor related statutory communications – such as changes in fundamental attributes, loads, exit options and other material aspects – are sent to investors reliably and on time, while maintaining confidentiality of all investor deals and transactions.

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