SEBI has taken action against people who promote mutual funds in deceptive ways and make guarantees of profits. SEBI had already imposed regulations for mutual fund businesses. An advertisement rule for investment advisers and analysts has now been released by the regulator. SEBI has instructed advisers and analysts of mutual fund firms to strictly abide by its regulations in a circular delivered to mutual fund organization AMFI. Experts won’t be able to spread false information about risk-free high returns. A new regulation from market regulator SEBI states that individuals who defraud investors would face harsh punishment. From May 1st, this new regulation will be in force.
SEBI’s Strict Rules
Three organizations have been suspended from the securities markets by SEBI for a period of six months for offering investment advising services without authorization. Course Work Focus, its owner Shashank Hirwani, Gopal Gupta, the owner of 1 Capital Research, and Rahul Patel, the owner of Cappers, have all been prohibited by SEBI from taking part in the securities market for a period of six months. During its inquiry, SEBI discovered that these businesses were providing advisory services without having certifications to act as financial advisors. The market authority has noticed that certain mutual fund providers include information about their plans to withdraw funds through a systematic withdrawal plan after making investments in a systematic investment plan in their brochures. According to SEBI, after reading the information provided in these, the investor may anticipate that after combining SIP and SWP, the investor will receive a specific amount. While providing such assurances in market-linked investment products constitutes defrauding investors.
In the documents that SEBI has received, Businesses that perpetrate this fraud and the businesses have made this type of guarantee, that investors who start SIP and SWP after three years or more would receive set returns. But, the reality is that we can take your money out of SWP if your scheme’s Net Asset Value (NAV) does not rise. That is to say, it is useless to talk about delivering us a set return.
Investors should understand the red flags. All mutual funds, according to SEBI, invest in stocks and debt funds, which means that if the market rises or falls, so does the fund’s NAV. It’s similar to defrauding investors to claim returns. Guaranteed returns in market-linked investment products, especially high-return guarantees, can be viewed as a warning sign.