SEBI modifies offer document format of mutual fund schemes

According to the circular issued on November 1, significant alterations have been made in the 'summary of the scheme' section. In this section, the AMC is required to highlight the benchmark name of the scheme and provide a rationale (specific to the scheme's objective) for using the benchmark index to compare the scheme's performance.

Further, if applicable, the section must also highlight the second-tier benchmark, which illustrates the fund manager's investment style or strategy within the category.

Moreover, moving forward, the 'summary of the scheme' section will feature a web link where both the Total Expense Ratio (TER) for the last six months and the scheme factsheet will be accessible.

Offer documents, including Key Information Memorandum (KIM), Scheme Information Document (SID) and Statement of Additional Information (SAI), reveal fundamental characteristics of a scheme such as investment objective and policies, fees and liquidity provisions.

These documents also throw light on details of fund management team, risk factors in the scheme and mechanisms for risk mitigation.

As per the capital markets regulator, an amended format for the offer documents will come into effect from April 1, 2024.

“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 accordance with the updated SID format, the regulatory body SEBI has instructed the Association of Mutual Funds in India (AMFI) to make the required adjustments to the formats of Key Information Memorandum (KIM) and Statement of Additional Information (SAI) in collaboration with SEBI. This task is to be completed within a period of two months from the issuance date of this circular.