DEPUTY GENERAL MANAGER
INVESTMENT MANAGEMENT DEPARTMENT
SEBI/IMD/CIR No. 5/126096/08
May 23, 2008
All Mutual Funds Registered with SEBI Association of Mutual Funds in India (AMFI)
Sub: Simplification of Offer Document and Key Information Memorandum of Mutual Funds Scheme
1. All offer documents (ODs) of Mutual Fund schemes filed with SEBI in terms of Regulation 28 (1) of SEBI (Mutual Funds) Regulation 1996 (hereinafter referred to as Regulation) are prepared as per the format prescribed in circular dated March 31, 1998. The format for memorandum containing key information (Key Information Memorandum/KIM) of Mutual Fund schemes is prescribed in the circular dated July 28, 2004.
2. AMFI had set up a committee to examine the ways of simplification of OD and KIM to make it more reader friendly. The committee recommended that the existing OD may be split into two parts i.e. Statement of Additional Information (SAI) and Scheme Information Document (SID). SAI shall incorporate all statutory information on Mutual Fund.
3. The formats of Standard OD and KIM specified through circulars dated March 31, 1998 and July 28, 2004 respectively stand revised. Henceforth, Mutual Funds shall prepare SID, SAI and KIM in the simplified format enclosed with the circular. Contents of SID,SAI, and KIM shall follow the same sequence as prescribed in the format.
All ODs of mutual fund schemes filed with SEBI in terms of Regulation 28 (1) on or after June 1, 2008, shall be prepared in the aforesaid format. Accordingly, the format of SID, SAI and KIM enclosed here shall be applicable for draft OD filed with SEBI on or after June 1, 2008.
ii. OD of any scheme already filed with SEBI and for which SEBI has not yet suggested modifications as required under Regulation 29 (2) shall, as far as possible, be recast in the format of the SID and SAI after receiving observations (final) from SEBI.
iii. The schemes for which the observations (final) have already been received from SEBI, can use the old format of the OD, if they are launched on or before July 31, 2008. Such schemes which are launched with the old format of the OD shall adopt the SID along with the other schemes as mentioned in clause v.
iv. A single SAI (common for all the schemes) shall be filed with SEBI as a one time filing. The SAI shall be filed along with first draft SID for any scheme filed on or after June 1, 2008. The SAI can also be filed separately in case no scheme draft SID has been filed with SEBI as soon as possible but not later than July 31, 2008. After receiving the comments, if any, from SEBI, AMC shall upload the SAI on its website.
The existing schemes shall adopt the SID and KIM format as soon as possible but not later than 12 months from the date of issuance of this circular. A confirmation in this regard shall be given in the half yearly trustee report.
5. Updation of SID and KIM – Henceforth, clause 1 of circular dated February 9, 2001 pertaining to ‘Updating the offer document on a continuous basis’ shall not be applicable. The procedure for updation of SID and KIM shall be as follows:
i. For the schemes launched in the first half of a financial year, the SID shall be updated within 3 months from the end of the financial year. However, for the schemes launched in the second half of a financial year, SID shall be updated within 3 months of the end of the subsequent financial year. (For example, for a fund launched in May, 2008 the SID shall be updated by June 30, 2009 and for a fund launched in December 2008, the SID shall be updated by June 30, 2010) Thereafter, the SID shall be updated once every year.
ii. The procedure to be followed in case of changes to the scheme shall be as under:
a. In case of change in fundamental attributes in terms of Regulation 18 (15A) SID shall be revised and updated immediately after completion of duration of exit option.
b. In case of other changes:
• The AMC shall be required to issue an addendum and display it on the website.
• The addendum shall be circulated to all the distributors/brokers/Investor Service Centre (ISC) so that the same can be attached to all KIM and SID already in stock till it is updated.
• Latest applicable addendum shall be a part of KIM and SID. (For e.g. in case of changes in load structure the addendum carrying the latest applicable load structure shall be attached to all KIM and SID already in stock till it is updated).
• A public notice shall be given in respect of such changes in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of region where the Head Office of the Mutual Fund is situated.
• Further account statements shall continue to include applicable load structure.
iii. A copy of all changes made to the scheme shall be filed with SEBI within 7 days of the change.
iv. KIM shall be updated at least once a year and shall be filed with SEBI forthwith.
6. Updation of SAI – The procedure for updation of SAI shall be as follows:
i. Mutual Funds shall be required to prepare SAI and upload the same on their website and on AMFI website. The printed copy of the same shall be made available to the investor on request. SAI shall be updated within 3 months from end of financial year and filed with SEBI.
ii. Any material changes in the SAI shall be made on an ongoing basis by way of updation on the Mutual Fund and AMFI website. SEBI shall be intimated of the changes made in the SAI within 7 days. The effective date for such changes shall be mentioned in the updated SAI.
7. Other requirements
i. Application forms for schemes of mutual funds for which the offer documents are filed with SEBI shall be accompanied by the KIM in terms of Regulation 29 (4). KIM shall be printed at least in 7 point font size with proper spacing for easy readability.
ii. With effect from June 1, 2008, draft SID of schemes of mutual funds filed with SEBI shall also be available on SEBI’s Internet site – www.sebi.gov.in for 21 working days from the date of filing. AMC shall submit a soft copy of SID to SEBI in HTML or PDF format, for this purpose. AMC shall be fully responsible for the contents of soft copies of the SID. AMC shall also submit an undertaking to SEBI while filing the soft copy of SID certifying that the information contained in the soft copy matches exactly with the contents of the hard copy.
iii. SID must reach SEBI before it is issued for circulation. If the printed SID is at variance with the SID which has been filed with SEBI and the variation is in the nature of material alteration or the suggestions made by SEBI under Regulation 29 (2), SEBI shall order immediate withdrawal of the SID from circulation and shall publicise such withdrawal of the SID.
iv. Validity of SID – The scheme shall be launched within six months from the date of the issuance of observations (final) from SEBI. If the AMC intends to launch the scheme at a date later than six months, a fresh SID under Regulation 28 (1) alongwith filing fees shall be filed with SEBI. Further, it is clarified that the mutual funds must file their replies to the modifications suggested by SEBI on draft SID as required under Regulation 29 (2), if any, within six months from the date of the letter. In case of lapse of six-month period, the mutual funds shall be required to file fresh SID alongwith filing fees.
8. Standard Observations – In order to ensure minimum level of disclosures in the SID and SAI, the revised and updated format of Standard Observations as on date of issuance of this circular are enclosed. SEBI may revise the Standard Observations from time to time and in that case the date of revision shall also be mentioned. While filing the SID and SAI, AMC shall highlight and clearly mention the page number of the SAI and SID on which each standard observation has been incorporated.
9. Easy Availability of Offer Document – It has been observed that the ODs are not readily available with all distributors/ISCs of Mutual Funds and investors find difficult to get the same. Trustees and AMCs shall ensure that the SID of the schemes and SAI are readily available with all the distributors/ISCs and confirm the same to SEBI in the half yearly trustee report.
10. SEBI circulars IMARP/MF/CIR/06/793/98 dated March 31, 1998, MF/CIR/12/109/2000 dated February 22, 2000, MFD/CIR No.2 / 205 /01 dated April 27, 2001, MFD/CIR/ 06 / 275 / 2001 dated July 9, 2001 and SEBI/IMD/CIR No.10/16521/04 dated July 28, 2004 stand withdrawn.
11. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.