New Riskometer tool
Sebi has introduced detailed guidelines for determining the place of a mutual fund on its riskometer tool. The new system introduces a fresh category of ‘very high’ risk. It replaces the old model based simply on a scheme’s category without adequately considering its actual portfolio. The circular will be effective from January 1, 2021. Risk-o-meter shall be evaluated on a monthly basis and AMCs shall disclose the Risk-o-meter along with portfolio disclosure for all their schemes on their website and on AMFI website within 10 days from the close of each month. Mutual Funds also have to publish a history of riskometer changes every year.
Any change in risk-o-meter shall be communicated to unitholders of that particular scheme.
Change in NAV calculation
From January 1, investors will get the purchase NAV of the day when investor’s money reach AMC, irrespective of the size of the investments. "It has been decided that in respect of purchase of units of mutual fund schemes (except liquid and overnight schemes), closing NAV of the day shall be applicable on which the funds are available for utilization irrespective of the size and time of receipt of such application," said the Sebi circular. The new NAV rules will not be applicable to liquid and overnight funds.
Under current rules, the NAV of the same day is considered for purchases of less than ₹2 lakh, even if the money does not reach the asset management company (AMC), but the order is placed within the cut-off time.
Portfolio allocation rules for multi cap equity mutual funds
Sebi has tweaked the portfolio allocation rules for multi cap equity mutual fund schemes recently. According to the new rules, multi cap mutual funds will have to invest at least 75% in equities. At present the minimum equity allocation must be 65%. Also, going forward, these schemes will have to invest at least 25% each in large cap, mid cap and small cap stocks. Currently there is no such allocation restriction and fund managers can invest across the market cap as per their own choice.
Sebi has provided time till January 31, 2021 to mutual fund houses to comply with the latest rules, within one month of Amfi releasing the next list of large cap, mid cap and small cap stocks.
Labelling norms of ’dividend option’
Sebi introduced labelling norms for the dividend options of mutual funds which will come into effect from 1st April 2021. Under the new norms, mutual funds will have to rename dividend options as income distribution cum capital withdrawal effective April 1, 2021.