Further, as investors do not generally receive the detailed offer document, an abridged offer document which should be circulated along with the application form for the scheme has also been formulated.
year-wise disclosure of past performance of schemes launched in the last three years.In the case of assured-return schemes, the offer document shall disclose how many schemes have assured returns, their number and corpus size, a justification as to how the net worth and liquidity position of the guarantor would be adequate to meet the shortfall in these schemes, details of the schemes which did not pay assured returns in the past and how the shortfall was met. This has been decided following the dismay expressed by a section of themutual fund industry itself, besides a number of industry observers, about guarantees being provided without much real backing. Currently, all that the offer document says is that the AMC or sponsor will bear the liability in case of a shortfall.
The financial information disclosed in the document should include details like the net-asset value (NAV) at the beginning and end of the year, the dividends, annualised return, key ratios like ratio of expenses to average assets, ratio of expenses to gross income, and the portfolio turnover rate. The scheme should briefly discuss in the offer document the probable effect of such portfolio turnover techniques on the rate of total portfolio turnover of the scheme and whether such effects will be significant. The investor grievances redressal mechanism should be mentioned with a brief description of investors' complaints history for the last three fiscal years of existing schemes and the redressal mechanism thereof with data updated as of 30 days prior to the launchof the scheme. A new head showing the penalties, pending litigation or proceedings, findings of inspections or investigations for which action may have been taken or is in the process of being taken by any regulatory authority has been included. Under this heading, the offer document should list out all cases of penalties awarded by SEBI under the SEBI Act or any of its regulations or any other regulatory body against the sponsor of the mutual fund or any company associated with the sponsor in any capacity such as the asset management company, trustee company/board of trustees, or any of the directors or key personnel (specifically the fund managers) of the AMC and trustee company. The nature of the penalty must be disclosed. Any pending material litigation proceedings should also be disclosed.
A brief description of the basis and the manner of determination of redemption and repurchase price of the units in terms of the regulations should be given. The names of associates of the sponsor or the AMC withwhich the mutual fund proposes to have dealings and transactions and those whose services may be used for marketing and distributing them and the commissions that may be paid to them will also have to be disclosed.
A disclosure of the percentage of illiquid assets for an open-ended scheme, if such assets are expected to be greater than 10 per cent of the value of the net assets of the scheme, should be made. A discussion on the extent to which such asset composition would impair the ability of the scheme to meet redemptions will be needed.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
