Capital market regulator SEBI has made it mandatory for mutual funds to disclose the total recurring expenses, half-year and compounded annualised yields for direct and regular plans separately, apart from the disclosure of total recurring expenses of the scheme on the whole.
To standardise the disclosures, the format for half-yearly financial statements for MF schemes will be reviewed and finalised by AMFI, in consultation with SEBI, said the regulator.
The changes will come into effect from December 5.
For all other regulatory disclosures where expenses, expense ratio, returns and yield of the schemes are required to be disclosed, separate disclosures will be made for both regular and direct plans, it said in a circular on Tuesday.
Disclosure norms
Under the current regulatory framework for mutual funds, SEBI said various disclosure requirements have been mandated, which include disclosures to expenses and risks pertaining to schemes.
The Advisory Committee has recommended few changes in order to facilitate enhanced transparency, ease of comprehension by investors and a standardised approach towards disclosures by the MF industry, it said.
Investments under direct plan of a MF scheme are not routed through distributors and hence MFs do not levy distribution expenses and commission on investors under direct plan.
Following this, the expense ratio of direct plan will be lower than that of the regular plan of the same scheme and hence the returns of the direct and regular plans also differ, said SEBI.
The fund houses should also disclose any change in risk-o-metre or benchmark of a scheme along with Notice cum Addendum through an e-mail or SMS to unitholders of that particular scheme.