The Securities and Exchange Board of India vide its notification dated 5th October 2020 has reviewed the guidelines for product labeling in mutual funds and has issued new norms that will require mutual funds to label each of their schemes based on the blended risk of the securities.
The Risk Level of a scheme will be depicted by “Risk-o-meter” and it shall have six levels of risk for mutual fund schemes i.e. Low Risk, Low to Moderate Risk, Moderate Risk, Moderately High Risk, High Risk and Very High Risk. Based on the scheme characteristics, Mutual Funds shall assign risk level for schemes at the time of launch of scheme/New Fund Offer.
Any change in risk-o-meter shall be communicated by way of Notice cum Addendum and by way of an e-mail or SMS to unitholders of that particular scheme.
Risk-o-meter shall be evaluated on a monthly basis and Mutual Funds/AMCs shall disclose the Risk-o-meter along with portfolio disclosure for all their schemes on their respective website and on AMFI website within 10 days from the close of each month.
Mutual Funds shall disclose the risk level of schemes as on March 31 of every year, along with the number of times the risk level has changed over the year, on their website and AMFI website.
This circular shall be in force with effect from January 1, 2021, to all the existing schemes and all schemes to be launched on or thereafter. However, mutual funds may choose to adopt the provisions of this circular before the effective date.
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