Stock market regulator Securities and Exchange Board of India is expected to simplify the guidelines for new fund offerings (NFOs) of mutual funds shortly.
According to the proposal, the offer documents will be required to be bifurcated. While one part will deal with the fund’s investment philosophy and pattern, the other will deal with additional information, including details of the asset management company and the trust, and also define duties and obligations. The revised guidelines are expected soon.
“Investors find it difficult to read and understand bulky offer documents filed by mutual funds for new fund offerings. We have decided to make them simpler and leaner, which will be easy to understand for investors and also less time-consuming,” a highly placed Sebi official told Hindustan Times .
“The benefit of this will be that it will reduce the size of the offer document and will make it a lot more user friendly,” the official added.
Experts in the mutual fund industry welcome the regulator's proposal. “It is a welcome move. The basic information-like investment objective, philosophy and risks involved-will be given in a much more precise manner. This will help the investor understand what the fund is all about and the risks involved, without having to spend much time reading the document," said R Swaminathan, vice-president (mutual funds), IDBI Capital.
In order to make fund-raising and investments across asset classes simpler and faster, the market regulator is working towards simplifying initial public offer documents. According officials in Sebi, the simplification of IPO documents is a priority of the new Sebi chief, CB Bhave.
The regulator had recently proposed fast-track issuance of debt instruments by listed companies and also cut filing fees for mutual funds to 0.005 per cent of the amount raised in a new fund offering, subject to a minimum of Rs 1 lakh and a maximum of Rs 50 lakh. Sebi had also slashed the registration fees payable by mutual funds from Rs 50 lakh to Rs 25 lakh.