Securities and Exchange Board of India (SEBI)
Investor Education Programme
Basics of Mutual Funds and their operations

Chapter XII / Oct 15

MF can change the nature of scheme

The Mutual Funds (MFs) can change the nature of the scheme. However, no change in the nature or terms of the scheme, known as fundamental attributes of the scheme, e.g., structure, investment pattern, etc. can be carried out unless a written communication is sent to each unit-holder and an advertisement is given in one English daily having nationwide circulation and in a newspaper published in the language of the region where the head office of the mutual fund is situated. The unit-holders have the right to exit the scheme at the prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual funds are also required to follow similar procedure while converting the scheme from close-ended to open-ended scheme and in case of change in sponsor.

How will an investor come to know about the changes, if any,
which may occur in the mutual fund?

There may be changes from time to time in a mutual fund. The mutual funds are required to inform any material changes to their unit-holders. Apart from it, many mutual funds send quarterly newsletters to their investors.

At present, offer documents are required to be revised and updated at least once in two years. In the meantime, new investors are informed about the material changes by way of addendum to the offer document till the time offer document is revised and reprinted.