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Sebi issues colour codes, product labelling for mutual funds

Market regulator Securities and Exchange Board of India (Sebi) has issued a framework on 'product labelling' with colour coding for mutual funds, a move that would help investors assess the risk associated with the schemes.

The guidelines would be effective from 1 July 2013, for all existing and forthcoming schemes, Securities and Exchange Board of India  said in a circular on Tuesday.

As per the norms, product labels carrying details about the schemes would be disclosed on the front page of initial offering application forms.

Besides, the labels would have to be placed in common applications forms and advertisements.The regulator has also decided up on colour codes to indicate the level of risk associated with the product.A blue colour coded box would indicate low risk, yellow would signify a medium risk, while brown would be represent schemes with high risk, Sebi said."In order to address the issue of mis-selling, a committee was set up to examine the system of product labelling that would provide investors an easy understanding of the kind of product/scheme they are investing in and its suitability to them," Sebi said.

Based on the recommendations by the committee, it has been decided that all the mutual funds would 'label' their schemes on certain parameters, it added.
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