DELHI: The Securities and Exchange Board of India (Sebi) has tightened norms pertaining to disclosure of performance track record of merged mutual fund (MF) schemes.
The market regulator today issued a circular for standardising performance disclosures following a merger of schemes.
Currently, due to lack of formal guidelines some fund houses use a weighted average of the performance of the schemes involved, while others only show the performance of the surviving schemes, the regulator said.
A weighted average of the two schemes is to be used only if they have similar features. The track record of a scheme, whose features are retained in the surviving scheme, is to be disclosed if merged schemes are different, according to the circular, effective May 1, 2018.
Further, no track record needs to be provided if neither schemes’ features are retained in the new scheme. This would also apply to mergers where the surviving schemes’ features are fundamentally different from both parent schemes.
“In addition to disclosing the performance of the scheme as mentioned… past performance of such scheme(s) whose features are not retained post-merger may also be made available on request with adequate disclaimer,” the circular said.
The move gains significance in the light of an October 2017 circular for rationalising schemes. The regulator had said all schemes must fit in standardised categories, leading to expectations of mergers since there could be only one scheme per category.
The market regulator today issued a circular for standardising performance disclosures following a merger of schemes.
Currently, due to lack of formal guidelines some fund houses use a weighted average of the performance of the schemes involved, while others only show the performance of the surviving schemes, the regulator said.
A weighted average of the two schemes is to be used only if they have similar features. The track record of a scheme, whose features are retained in the surviving scheme, is to be disclosed if merged schemes are different, according to the circular, effective May 1, 2018.
Further, no track record needs to be provided if neither schemes’ features are retained in the new scheme. This would also apply to mergers where the surviving schemes’ features are fundamentally different from both parent schemes.
“In addition to disclosing the performance of the scheme as mentioned… past performance of such scheme(s) whose features are not retained post-merger may also be made available on request with adequate disclaimer,” the circular said.
The move gains significance in the light of an October 2017 circular for rationalising schemes. The regulator had said all schemes must fit in standardised categories, leading to expectations of mergers since there could be only one scheme per category.