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Mutual fund ads to carry standard risk warning

Mutual funds mis-selling their schemes through attractively packaged audio-visual advertisements need to watch out....

Written by ENS Economic Bureau | Mumbai |
February 5, 2010 2:39:41 am

Mutual funds mis-selling their schemes through attractively packaged audio-visual advertisements need to watch out. Market regulator Sebi has standardised the risk warning that mutual fund firms have to display in the audio-visual advertisements in a bid to help the investor to understand the message clearly.

The new rule,which will be effective from May 1,stipulates that the warning in audio-visual advertisements should be displayed and both the visual and the voice-over of the standard warning should be run for at least 5 seconds. As per the present guidelines,in advertisements through audio-visual media like television,the warning — “Mutual fund investments are subject to market risks,read the offer document carefully before investing,” is required to be displayed on the screen for at least 5 seconds and be accompanied by a voice over reiteration.

However,Sebi said it observed that in some cases the visual and voice over were run for less than 5 seconds,or if the visual stayed for 5 seconds the voice over either started late or ended early or both. In some cases,extra words are inserted in the visual and voice-over. As a result,the warning was “rendered unintelligible to the viewer”,Sebi said.

Announcing the measure,Sebi said that no addition or deletion of words should be made in the standard warning statement. All mutual funds firms should comply with the requirements “in letter and spirit”,Sebi said.

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