Sebi Proposes Color-Coded Risk-O-Meter for Mutual Funds

Sebi has proposed using a color scheme to enhance the pictorial representation of the risk-o-meter for mutual fund schemes. This move aims to aid investors in making informed decisions. The regulator also suggested standardizing the format of disclosure and communicating changes in risk levels to unitholders via notice, e-mail, or SMS.

Sebi has introduced a proposal to enhance the visual representation of the risk-o-meter for mutual fund schemes by incorporating a color scheme. This initiative is designed to assist investors in making informed decisions.

To ensure uniformity and ease of understanding changes in risk levels, Sebi recommends disclosing both the current and revised risk-o-meter. Any modifications should be communicated to unitholders through notices, emails, or SMS.

The proposed color scheme will categorize risk into six levels from green for low risk to red for very high risk. Different disclosures for direct and regular plans will also be standardized, aiming to improve transparency and clarity in the mutual fund industry. Public comments on the proposal are invited until October 18.

(With inputs from agencies.)