Amfi asks fund houses to use standardised returns for illustrations

Association of Mutual Funds or Amfi has asked mutual funds to use standardised numbers for future returns that can be used for advertisements, illustrations, brochures, pamphlets and so on.

“SEBI had observed that some of the Asset Management Companies (AMCs) were indulging in practices relating to advertisements, which were not in compliance with letter and spirit of the provisions with the Advertisement Code prescribed in SEBI (Mutual Funds) Regulations, 1996,” said AMFI Best Practice Guidelines circular.

Some of instances observed by SEBI were:
(a) Illustrations provided in the advertisements/presentations/brochures/pamphlets were such that they could lead the investors to believe that they will be receiving fixed returns for their investments including that of SIPs by demonstrating SWP as a multiple of SIP
(b) Illustrations shown depicting future returns on the basis of assumptions and projections
(c) Disclaimers and assumptions made were in fine print that are likely to be missed by the investors.

SEBI had advised AMFI to convey to all the AMCs to refrain from such disclosures/ advertisements which are ambiguous and likely to be misunderstood by the investors. In the above backdrop, AMFI Operations & Compliance Committee (OpCo) felt that it was expedient for AMFI to issue a best practice guideline (BPG) circular with regard to disclosure of numerical illustrations for depicting future returns in non-scheme related promotional materials which are intended to provide conceptual clarity to investors or for educational purposes.

The following guidelines have been framed in consultation with AMFI OpCo and SEBI:
1. For the purpose of implementation of these Guidelines, “non-scheme related material” shall mean any reference material which does not contain any scheme related information.
2. Numerical illustrations may be used in the case of SIP / SWP / STP calculators to explain the power of compounding.
3. The aforesaid numerical illustrations can be provided only for the categories/situations specified in the table below by using the compounded annualized growth rate % (CAGR) prescribed against each category/situation.
4. AMFI may modify the list of categories and the prescribed CAGR from time to time based on market conditions.

tableET Online

Amfi said the Illustration should clearly disclose the CAGR used and the basis of the same as stated in columns B and C, respectively, in the above table. None of the illustrations should indicate returns higher than the returns prescribed by Amfi in the table above.

It also said the illustration should contain the Standard Warning and the disclaimer stating, “past performance may or may not be sustained in future and is not a guarantee of any future returns”.


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