SEBI revamps format of offer documents of mutual fund schemes

Offer documents such as Key Information Memorandum (KIM), Scheme Information Document (SID) and Statement of Additional Information (SAI) provide fundamental attributes of a scheme.

To streamline the dissemination of relevant information to investors, the Securities and Exchange Board of India (SEBI) has revised the format used by asset management companies (AMCs) for filing offer documents of mutual fund

schemes.

As per the circular dated November 1, notable changes are in the section, 'summary of the scheme' where the AMC needs to highlight the name of the benchmark of the scheme and provide justification (specific to the scheme objective) for the use of benchmark index with which the performance of the scheme can be compared with. The section will also need to highlight the second-tier benchmark, if applicable.

A second-tier benchmark shows the investment style or strategy of the fund manager within the category.

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Further, from now on the 'summary of the scheme' section will provide a weblink, wherein the Total Expense Ratio (TER) for the last six months as well as the scheme factsheet will be made available.

The fund houses are also required to provide scheme’s portfolio holdings (top 10 holdings by issuer and fund allocation towards various sectors) by way of a functional web link where the data would be hosted.

As per the circular, the aggregate investment in the scheme by concerned scheme’s fund managers would be required to be mentioned in scheme documents.

Moreover, in the new format, the fund houses have to provide information on how is the scheme different from existing schemes of the mutual fund.

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The fund houses would be required to provide a reference list of existing schemes and a functional website link that contains detailed comparative table.

Offer documents such as Key Information Memorandum (KIM), Scheme Information Document (SID) and Statement of Additional Information (SAI) provide fundamental attributes of a scheme such as investment objective and policies, fees and liquidity provisions. These documents also inform investors about fund management team details, all risk factors in the scheme as well as risk mitigation mechanisms.

As per the capital markets regulator, an updated format for the offer documents will be implemented with effect from April 1, 2024.

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“Draft SIDs to be filed with SEBI on or before March 31, 2024 or SIDs already filed with SEBI (final observations yet to be issued) or SIDs for which the final observations have already been received from SEBI (if launched on or before March 31, 2024), can use the old format of SID,” the capital markets regulator said in the circular.

In line with the new SID format, industry body Association of Mutual Funds in India (AMFI) has been asked by SEBI to carry out the necessary changes in the formats of KIM and SAI in consultation with SEBI, within two months from the date of this circular.

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