Cut the cackle in the caveat, SEBI directs fund houses

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SEBI's move comes at an important time as dozens of mutual funds have surfaced in recent times, each one of them trying to outdo the rest in luring potential investors with promises of rewards.

Presently, the standard warning that is read out or flashed at the end of all mutual fund advertisements - "Mutual Fund investments are subject to market risk, read the offer document carefully before investing" - is so fast that it becomes virtually incomprehensible to the listeners or viewers.

To curb this trend and protect the interest of small investors, SEBI, after consulting the Association of Mutual Funds in India (AMFI), has issued a circular, mandating all fund houses to read or show the standard warning in the audio and audio visual advertisements in an easily understandable manner.

"The rapid-fire manner in which the standard warning is recited in the audio visual and audio media renders it unintelligible to the viewer/listener," the circular read.

According to the circular, all fund houses, from April 1, 2008, will have to stretch the standard warning up to five seconds instead of the current rapid-fire manner.

Presently, almost all fund houses announce or show the standard warning for 2-3 seconds at the end of an advertisement spot that is normally 15-20 seconds long.

In the initial years, when mutual funds surfaced in the market, they were not required to carry the standard warning. However, subsequently, they were required to put up the standard warning in print advertisements.

And, it was only in 2005 that SEBI made it mandatory for mutual fund advertisements on television or radio to carry the standard warning.

SEBI had then said that the disclaimer "shall be displayed on the screen for at least two seconds in a clearly legible font size, covering at least 80 percent of the total screen space and accompanied by a voiceover reiteration."

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