Newly launched asset management company - Samco Mutual Fund has come under fire from market regulator SEBI for misleading investors during their maiden New Fund Offer (NFO).
In January, Samco MF had kicked off their first NFO - Samco Flexi Cap Fund touting it as a 'pure' equity scheme. The problem though is that besides the equity component, the scheme intended to allocate up to 35% in TREPS (Tri-party repo dealing & settlement). TREPS is a platform where mutual funds, corporates, insurance companies etc. can borrow or lend excess cash on an overnight basis. Due to this nature, any allocation to TREPS is considered a cash call by the mutual fund scheme.
SEBI's view therefore was that any scheme with such a high cash allocation fails to be called a 'pure' equity scheme. To put it in context, the average cash allocation by schemes in the flexi cap category stands at approximately 4%. Samco Mutual Fund has now altered the tagline of its flexicap fund from 'pure' equity fund to 'dynamic' equity fund.
According to a communication issued by Samco MF to its unit holders, they state the below as the advisory issued by SEBI:
The Unit Holders of SAMCO Flexi Cap Fund are requested to note that in order to ensure that disclosures are true, clear, and complete, Securities and Exchange Board of India (SEBI) vide email dated February 03, 2022 has advised SAMCO Mutual Fund to:
- Incorporate the clauses pertaining to Hexashield Framework in investment strategy section of the SID of SAMCO Flexi Cap Fund;
- To change the tagline of Mutual Fund to avoid dissonance with regulatory parlance;
- Rectify the incorrect disclosures done on SAMCO Mutual Fund's website w.r.t. asset allocation mentioned in the scheme information document ("SID") of SAMCO Flexi Cap Fund
The AMC will also pay interest at the rate of 15 percent per annum from the last date of NFO to exiting investors.
Experts largely term this action by Samco MF as a case of 'mis-representation'.
Feroze Azeez, deputy CEO of Anand Rathi Wealth says combination of 3 'new' factors is never preferable. In this case - 'new' scheme following a 'new' concept of research & by a 'new' AMC. He adds that this episode is also a reflection of the newer AMCs not having strengthened their departments of compliance & operations... urging similar AMCs to stress on evolving the support verticals.
Mohit Gang, CEO & Co-founder of moneyfront.in says the Samco incident is a timely reminder to all investors to not get swayed by advertising catchlines. It's important to dissect the process behind claims which an AMC or scheme is making. One cannot blindly invest without knowing if the scheme indeed is true-to-label. This also reaffirms the faith of investors in SEBI that the regulator is keeping its eyes and ears to the ground and reprimanding fund houses for unsubstantiated claims.
Some industry insiders add that the exit to investors should have been provided at the NFO NAV of `10 & not the prevailing NAV which as of Feb 22 stands a shade below it at `9.88.
Samco MF has also now introduced clauses pertaining to Hexashield Framework in the scheme's investment strategy section.
Moneycontrol has written to Samco MF inquiring about this lapse & is awaiting their reply.
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