SEBI has banned mutual fund houses from giving any guarantee of return.
SEBI has clarified that no mutual fund company can promise guaranteed returns in any of its advertisements.
To woo investors, many mutual fund houses have been running promotions for the past few days with guaranteed returns on investments. The Securities and Exchange Board of India (SEBI) has come up with these tricks of individual fund houses.
SEBI has clarified that no mutual fund company can now promise guaranteed returns in any of its advertisements or brochures. The market regulator has asked MF houses to remove such misleading advertisements.
In a letter to the Association of Mutual Funds of India (AMFI), SEBI directed the companies to stop the practice immediately.
According to a Moneycontrol report, SEBI said in the letter that it has found some cases where mutual fund houses have distributed pamphlets. After reading the information provided in these brochures, investors can expect to get regular returns after using a certain combination of Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP). However, in practice there is no such guarantee.
SEBI said mutual fund companies cannot promise returns. SEBI has banned mutual fund houses from giving any guarantee of return. AMFI has been asked to save the promotional code. This code is included in the SEBI Mutual Funds Regulations.
SWP is a facility where you can withdraw a fixed amount from your invested money every month. With SIP, you invest a fixed amount every month. By law, mutual funds cannot provide income. However, SWP has become a popular way to generate regular income over time. According to a Moneycontrol report, brochures obtained by SEBI claimed that if you start SIP and start SWP after three or more years, you will get reliable returns.
As per SEBI regulations, no mutual fund house can guarantee returns. As all mutual funds invest in equity and debt funds, the net asset value (NAV) fluctuates with market ups and downs. Hence, the promise of guaranteed returns is impractical and against the rules laid down by SEBI.
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