Greeting To All Our Readers!
Year-End Is Here! It’s time to recapitulate what you did and what you experienced the whole year! Well as we discuss financial things, today we will be going through all the rules and regulations that SEBI (Securities Exchange Board Of India) introduced to the mutual fund sector.
The Mutual Fund industry has evolved to a great extent in the last few years. Several new rules and regulations have been introduced by SEBI to help strengthen the system and made it fairer and more transparent for investors.
Here is a round-up of what all new regulations and changes come into existence in the year 2021.
Mutual Fund Risk-O-Meter…………
The concept of Mutual Fund Risk-O-Meter was introduced by SEBI in October 2020; however, it came into effect from January 2021.
As per the circular, it was made mandatory for fund houses to indicate the risk level of their schemes on a six-stage scale from “low” to “very high”. Also, the circular mentions that the risk-o-meter should be evaluated on a monthly basis.
Asset Allocation in Multicap Funds………..
SEBI introduced a new rule for asset allocation in multi-cap funds in September 2020, which came into effect from January 2021.
Sebi came up with the circular on asset allocation by multi-cap funds, making it mandatory for the fund to allocate at least 25 percent each to the large-cap, mid-cap, and small-cap companies. This rule was basically introduced to fulfill the true-to-label concept.
Dividend Option Become IDCW………..
SEBI introduced a labeling norm for dividend options of MF schemes. This came into effect from April 2021. As per the new norm, mutual fund schemes with dividend options are now called income distribution-cum-capital withdrawal schemes.
Accordingly, dividend payout plans are called payout of income distribution-cum-capital withdrawal options. Similarly, the dividend reinvestment plan is called reinvestment of income distribution-cum-capital withdrawal option, while the dividend transfer plan is now called the transfer of income distribution-cum-capital withdrawal option.
Net Asset Value (NAV) Applicability………
Before February 2021, investors used to get the same-day NAV as long as the investment value was less than Rs 2 lakh and the investment was made before the cut-off timing. From February 2021, investors would get the NAV of the day when the money reaches the fund house.
Two-Tiered Benchmarking………….
Sebi has issued guiding principles for bringing uniformity in the benchmarks against which a scheme’s performance is measured. According to the new directive, there would be a two-tiered structure for benchmarking schemes falling under certain categories.
The first-tier benchmark shall be reflective of the category of the scheme and the second-tier benchmark should be demonstrative of the investment style or strategy of the Fund Manager within the category.
This was supposed to be implemented from December 01, 2021, but now this will be applicable from April 2022.
Keep reading our article and stay updated with the latest news about Mutual Funds!
For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).