SEBI Asks Mutual Funds To Stop Misleading Illustrations
SEBI has asked mutual funds not to advertise fake claims like assured returns, misleading advertisements and to comply with the advertisement code.
The Securities and Exchange Board of India (Sebi) has ordered mutual fund companies to stop using deceptive advertising, brochures, and presentations, claiming that the visuals used in these materials give the impression that investors will receive fixed returns on their investments.
It has come to our attention that some Asset Management Companies are engaging in advertising practices that do not follow the Advertisement Code as set forth in the SEBI (Mutual Funds) Regulations, 1996, in both letter and spirit “said Sebi.
According to the regulator, there have been instances where MFs have distributed pamphlets and brochures that show future returns based on projections and assumptions.
Additionally, it stated that investors are likely to overlook disclaimers and assumptions that are in the fine print.
According to the Sixth Schedule of the SEBI (Mutual Funds) Regulations, 1996, “Such disclosures/advertisements are unclear and likely to be misunderstood by investors and are not in accordance with the letter and spirit of the provisions of the Sixth Schedule,” “said Sebi.
No mutual fund is permitted to guarantee returns under SEBI MF regulations. All mutual funds invest money in the equity and debt markets, so market fluctuations can affect NAVs. It makes no sense in this situation to guarantee returns.
Additionally, Sebi requested that mutual fund companies stop engaging in these actions going forward, stop using similar advertisements, presentations, pamphlets, and brochures, and notify their distributors not to do the same.
Another issue is making guarantees about returns or conveying the idea that this is a surefire way to make a consistent income. And that’s where the issue comes up.
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“If you start a SIP and then an SWP after three or four years, for example, SEBI obviously came across brochures and pictures being sold to convey the idea that returns are guaranteed.
In fact, if the net asset value (NAV) of your scheme doesn’t increase steadily, SWP may withdraw money from your account.”
