In a move to enable investors to take more informed decisions, the Securities and Exchange Board of India (Sebi) on Monday further tightened disclosure norms for close-ended debt-oriented mutual fund schemes.
The regulator had barred communication pertaining to indicative portfolio and indicative yields by fund houses and distributors on products. Now, Sebi wants investors to be “more informed” regarding the quality of securities and risk associated with different close-ended debt-oriented schemes.
According to the new rules, fund houses are now required to disclose their credit evaluation policy for investments in debt securities and also the list of sectors they would not be investing in.
Further, fund managers need to disclose the type of instruments their schemes propose to invest in, including commercial papers, certificates of deposits (CDs) and treasury bills.
“MFs shall disclose the floors and ceilings within a range of five per cent of the intended allocation against each sub asset class/credit rating,” Sebi said in its note. For instance, if fund houses are investing 2-3 per cent in an AAA-rate bank CD, the same has to be disclosed.
Once the new fund offer closes, asset management companies will report the publicised percentage allocation and the final portfolio. “Variations between indicative portfolio allocation and final portfolio will not be permissible,” said the note.