In recent days, to attract investors, many mutual funds have placed advertisements with a guaranteed return on investment. This mutual fund gimmick has now come under the radar of the Securities and Exchange Board of India (SEBI).
SEBI has now made it clear that no mutual fund 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 to the Association of Mutual Funds of India (AMFI), SEBI has instructed the companies to stop this practice immediately.
According to a Moneycontrol report, SEBI said in the letter that it found a number of cases where mutual funds distributed pamphlets. After reading the information in these pamphlets, investors can expect to receive a fixed rate of return after using a particular combination of a Systematic Investment Plan (SIP) and Systematic Indrawal Plan (SWP). However, in reality there is no such guarantee.
SEBI has said mutual funds cannot promise returns. SEBI has prohibited investment funds from providing any form of certainty about returns. AMFI has been asked to follow the ad code. This code is included in SEBI’s Mutual Funds Regulation.
SWP is a facility where you can withdraw a fixed amount of your invested money every month. Via SIP you invest a fixed monthly amount. By law, mutual funds cannot guarantee returns. But SWP has become a popular way to get regular regular income. According to the Moneycontrol report, in the brochures SEBI received, it is assured that if you start SIP and start SWP after three years or more, you will get an assured return.
Under SEBI’s regulations, no investment fund 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. Therefore, the promise of guaranteed returns is impractical and against SEBI’s rules.
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