In order to improve the quality of information related to the performance of mutual funds and to promote better investment decisions, the Securities and Exchange Commission of Pakistan (SECP) has specified certain requirements for the advertisements of equity funds.
The requirements have been issued to curb the problem of misselling through advertisements being circulated on social media, especially concerning equity-oriented mutual funds.
Advertisements solely projecting favorable information on a fund’s performance and not presenting the complete risk profile, comparisons to benchmark, and important disclaimers can lead to being misconstrued by potential investors.
The SECP, vide Circular No. 16 of 2021, has specified certain conditions for the advertisement of equity funds, requiring the fund’s projected performance/return to be based on a minimum period of twelve (12) calendar months on a rolling basis.
Moreover, to improve the legibility of risk profiles and disclaimers, the text format has also been specified. These conditions form part of the SECP’s policy to raise the bar on AMCs fiduciary responsibility by encouraging a true and fair view of the fund’s performance to attract investment.