To improve the quality of information about mutual fund performance and to encourage prudent investment decisions, the Securities and Exchange Commission of Pakistan (SECP) has imposed certain limitations on equity fund ads.
The restrictions were enacted to address the issue of misselling using social media ads, particularly for equity-oriented mutual funds.
Advertisements that focus exclusively on the positive aspects of a fund’s performance and exclude the whole risk profile, benchmark comparisons, and critical disclaimers can lead to potential investors being misled.
The SECP has defined some conditions for the advertisement of equity funds in Circular No. 16 of 2021, mandating that the fund’s expected performance/return be based on a minimum of twelve (12) calendar months on a rolling basis.
Additionally, the text structure for risk profiles and disclaimers has been established to improve legibility. These restrictions are part of the SECP’s policy of requiring AMCs to demonstrate fiduciary responsibility by encouraging a genuine and fair representation of the fund’s performance in order to attract investment.