Mutual funds to disclose more in NFO documents

[Priyesh Shah]

In the last few months, market regulator Securities and Exchange Board
of India (Sebi) has been trying its best to clean up the mutual funds
industry.

In his interview to Mint, K.N. Vaidyanathan, recently appointed
Executive Director, Sebi said, "New fund offers (NFOs) must justify
investment strategy and risks. The game of garnering money through
NFOs is over. The capital market regulator would like the fund offer
document to be a self-contained one."

NFO is one of the things that Sebi is more focused. Market regulator
wants every investor to know what the investment objectives are, and
fund houses need to explicitly state what are the risks and the
mitigating factors for that are. Vaidyanathan says, "The idea really
is can the manufacturer, which is the mutual fund, talk direct to the
investor and tell the investor that 'I propose to do the following'. I
think that would help investors in taking more informed decisions
about it. So, one of the things that we have embarked about more
recently is to take a closer look at the process we have for
evaluating new offers or new funds or new schemes that mutual funds
have on this measure of transparency."

Sebi had a combination of issues which made it easier for fund houses
to raise new money under a new banner than to raise new money under an
existing fund. "One of the things that they would have to talk about
is that if I am a fund house and I am launching a new fund is how is
'A' different from what I have (offered) in the past," says
Vaidyanathan.

Source: http://www.blissxpress.com/newsdetails.asp?BNID=37