Offer Document Format Revised To Help Investors Easily Understand Risk, Composition; Sebi Extends Deadline To June 1

Offer Document or SID that will introduce mutual fund schemes will come with major scheme portfolio holdings, and investments by key personnel. Read how this will benefit investors.
Offer Document or SID that will introduce mutual fund schemes
Offer Document or SID that will introduce mutual fund schemes

The Securities and Exchange Board of India (SEBI) has extended the timeline for Asset Management Companies to issue the revised simplified format of the Mutual Fund scheme information document (SID) from April 1 to June 1, 2024. In the revised SID, AMCs will have to prominently display the risk-o-meter on the front page and disclose the top 10 portfolio holdings and investment details. This will help investors gain deeper insights into fund composition and risk profiles.


In this new format of the Scheme Information Document (SID), Sebi aims to facilitate easier mutual fund preparation and improve investor readability and transparency.

Based on a request from the Association of Mutual Funds of India (AMFI) the deadline was extended. Sebi called for the revised format as they felt the relevant information could be better communicated to investors through the new format. It also felt the move would simplify the SID preparation process, and ease periodic updation of SIDs.

How This Will Help Investors?

Disclosure of Scheme Holdings: Mutual funds must now disclose major scheme portfolio holdings through functional web links. According to the release, the scheme's portfolio holdings (top 10 holdings by issuer and fund allocation towards various sectors) will be made available via a functional web link. Also, fund houses will have to offer such a link to disclose the total expense ratio (TER) of the last six months.

Full Disclosure Of AMC's Skin In The Game: Statement of Additional Information (SAI) should disclose the aggregate investment made by AMC’s board of directors, the scheme’s fund manager and other key personnel.

Creation of Segregated Portfolio: Though the creation of segregated portfolios is now optional and subject to AMC discretion, AMCs can only create segregated portfolios if they mention it on their SIDs and SAI. Other disclosures like swing pricing and stock lending/short selling must also be made for application in schemes. Segregated portfolios can only be created if SID has enabling provisions to do so, the regulator said.

A segregated Portfolio is usually created when an issuer of a security fails to pay interest or sees a downgrade to below investment grade, those securities are segregated into the newly created portfolio.

Risk-O-Meter Disclosure & Better Transparency: Asset Management Companies (AMCs) are required to disclose the risk-o-meter of the Benchmark on the front page of the initial offering application form, SID, Key Information Memorandum (KIM) and Common application form. AMCs will have to disclose the justification for the use of the benchmark index.

Also, for better grievance redressal AMCs will have to give contact details for general service requests and complaint resolution.

The updated format for SID, KIM and SAI will be effective from June 1, 2024. Mutual funds are required to file draft SIDs with Sebi on or before May 31, 2024. For SIDs that have already been filed with Sebi and are set to be launched on or before May 31, 2024, the old SID format may be used, provided that these SIDs are updated by June 30, 2024. Further, all updated or revised SIDs shall be made available on the website of Sebi, AMFI or AMCs within the said deadlines.

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