For several years, various SEBI chairmen have wrung their hands over television advertisements of new fund offerings (NFOs) and initial public offerings (IPOs), where the risk factors fade out of the screen before anyone can read them. But no action was ever initiated. All of a sudden, just when a new finance minister had taken charge, SEBI decided to make an example of the biggest mutual fund company in the country. It asked Reliance Mutual Fund to show cause why it should not be restrained from making fresh offerings, allegedly because it did not adhere to the regulation on statutory warning about market risks. According to the regulations, the risk factors ought to be displayed for at least five seconds, while the Reliance advertisement was just over 4.5 seconds.
Also, the advertisement had to be submitted to the regulator within seven days which it allegedly failed to do. Given the number of problems with the mutual fund industry that need to be fixed, is SEBI making a mountain out of a molehill? After all, there are far bigger issues relating to investments by various schemes that need urgent fixing. Even if SEBI wanted to signal that it is not afraid of acting against the Anil Dhirubhai Ambani Group, the message would have been more effective had it picked on a more significant issue.