SEBI issues framework for colour coding, product labelling for mutual funds
With the aim to inform investors with the amount of risk involved in various mutual funds scheme, market regulator- the Securities and Exchange Board of India (SEBI) has issued guidelines on ‘product labelling’ with colour coding for mutual funds.
The guidelines would be effective from July 1, 2013, for all existing and forthcoming schemes, Securities and Exchange Board of India (SEBI).
As per the norms:
- The front page of initial offering application forms will carry product labels with details about the schemes.
- The labels would have to be placed in common applications forms and advertisements.
Color and Risk
- Blue colour : Low risk
- Yellow color : Medium risk
- Brown color: High risk
Labels would include details about the nature of schemes “such as to create wealth or provide regular income in an indicative time horizon (short/ medium/ long term)”.
Mutual funds should give a brief about the investment objective in a single sentence followed by kind of product in which investor is investing (equity or debt).
Mutual funds would have to include a disclaimer that “investors should consult their financial advisers if they are not clear about the suitability of the product”.
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