Sebi ups MF disclosure norms, wants agent commission to be spelt out

With an aim to bring in greater transparency in dealings of mutual funds, regulator Sebi today asked them to disclose to investors the commissions paid to their distributors, including payouts in the form of gifts, trips and sponsorships. Like listed companies, mutual funds (MFs) will also have to disclose the annual salary of those earning Rs 60 lakh or above, and also the ratio of CEO’s remuneration to median employee salary. To ensure MFs are able to carry out their own credit assessment of assets and reduce reliance on credit rating agencies, fund houses are required to have an appropriate policy and system in place to conduct an in-house credit risk assessment before investing in fixed income products.

The fund houses will also have to disclose in the Consolidated Account Statement (CAS), sent to investors, the ratio of the total purchase value and the cost of investment. In a detailed circular, Sebi further asked MFs to provide additional disclosures in their scheme documents, including the tenure for which a fund manager has been managing the scheme, the portfolio holdings, and also illustrate impact of expense ratio on the scheme’s returns.