SEBI has prohibited mutual fund houses from giving any kind of assurance about the returns.
SEBI has made it clear that no mutual fund company can promise guaranteed returns in any of its advertisements.
In order to woo investors, for the last few days, many mutual fund houses have been running advertisements with guaranteed returns on the investments. This gimmick of mutual fund houses has now come under the radar of Securities and Exchange Board of India (SEBI).
SEBI has now made it clear that no mutual fund company can promise guaranteed returns in any of its advertisements or brochures. The market regulator has asked the MF houses to withdraw such misleading advertisements.
In a letter sent to the Association of Mutual Funds of India (AMFI), SEBI has directed the companies to stop this practice immediately.
According to a Moneycontrol report, SEBI has said in the letter that it has found some cases in which mutual fund houses have distributed pamphlets. After reading the information given in these pamphlets, investors can expect that after using a certain combination of a Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP), they will get fixed returns. However, in reality, there is no such guarantee.
SEBI has said that mutual fund companies cannot promise returns. SEBI has prohibited mutual fund houses from giving any kind of assurance about the returns. AMFI has been asked to follow the advertisement code. This code is included in the Mutual Funds Regulation of SEBI.
SWP is a facility in which you can withdraw a fixed amount out of your invested money every month. Through SIP, you invest a fixed amount every month. As per law, mutual funds cannot guarantee returns. But, SWP has become a popular way to get regular income periodically. As per the Moneycontrol report, in the brochures received by SEBI, it has been assured that if you start SIP and start SWP after three years or more, you will get assured returns.
As per SEBI’s regulations, no mutual fund house can guarantee returns. Since all mutual funds invest in equity and debt funds, the Net Asset Value (NAV) also fluctuates with the rise and fall of the market. Hence, the promise of guaranteed returns is not practical and goes against the rules set by SEBI.
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