SEBI’s latest proposal for biometrics based know your distributor (KYD) norms for independent financial advisors is being reworked and the final guidelines could be expected by 15th August
The Association of Mutual Funds in India (AMFI) is taking another look at its know your distributor (KYD) guidelines that were expected to be implemented by 1 August, 2010. We learn that a circular listing the new rules had even been issued and quickly withdrawn in the past few days.
Although KYD rules are largely supported by the industry, two issues are rankling many insiders- firstly, who would set it up and secondly the onus for verification on fund houses. Sources say that AMFI is reviewing its stand on the issue. When asked, AMFI's chief executive officer, HN Sinor said, "We are working on it. Around 15th August".
A top official from a fund house told us that the Securities and Exchange Board of India (SEBI) wanted the National Securities Depository Ltd (NSDL) to create a subsidiary to implement the 'background checker' model with biometrics-based identification (as was done for the database of IT company employees) for mutual fund distributors. There was also a condition that funds would be responsible for physical verification of addresses and other details.
According to sources, some senior AMFI office bearers pointed out that CDSL Ventures, a subsidiary of Central Depository Services of India Ltd (CDSL) had already worked with the mutual fund industry on an investor database. Further, Karvy and Computer Age Management Services (CAMS), with over 350 offices together across the country, have also been handling registration and transfer issues and had also created excellent software for online and offline tracking of portfolios. AMFI sources say, it makes much more sense to build on existing relationships rather than go to NSDL for a new database.
The market regulator essentially wanted the new guidelines for two reasons-to ensure that details about fund distributors are known to the industry and also to ensure that persons appearing for mutual fund certification examinations are genuine. Fund houses were given six months to verify their existing distributors' lists. After implementation of the KYD norms, there will be an 'in-person' verification of each distributor at the time of empanelment. "This process was not followed so far, but the guidelines will make it mandatory for every asset management company (AMC) to follow it," added the official. The need for verification is evident and distributors too support the idea.
Rajesh Krishnamurthy, managing director of iFAST Financial India Pvt Ltd, has this to say, "KYD is a welcome move. This will bring in complete authenticity of the person(s) dealing with the end client. With a few recent instances of mutual fund agent related fraud coming up in the media, there is also a need to demonstrate pro-consumer and pro-industry measures-for the consumer, for his protection, and for the industry-to avoid being broadbased as fraudsters. KYD will be a step in the right direction".
"As a private limited company, we are already confirming with similar requirements for directors - for example: A Director Identification Number (DIN). Plus, we go one step forward and file various papers with the ministry of corporate affairs by affixing the director's digital signature. To make it successful, there is a need to have points of presence for KYD in all locations where we have AMFI/NISM (National Institute of Securities Markets) registered distributors without which the biometric requirement will become a bigger challenge in itself," he said.
Moneylife, too, had exposed the case of a fraudulent, Jabalpur-based mutual fund distributor on 7 July 2010 (http://www.moneylife.in/article/81/6918.html ). However, many distributors find the requirement for biometric-based verification rather excessive and invasive of their privacy. The other irritant is the flood of new rules and operating guidelines that the regulator seems to issue almost everyday; source say that they spend most of their time on figuring out the compliance and implementation of each new change directed by SEBI. Meanwhile, assets under management (AUM) have been dwindling at an alarming rate and continue unabated every month since August 2009, when upfront commissions were abolished.
"I don't know why they come up with new rules every week. It is going to be difficult for all distributors to follow the all the rules. They (regulators) want people who have large AUM to be in the industry since complying with all their guidelines and rules have costs involved," said a Mumbai-based financial planner.
"People who wish to do business in a straightforward way will not hesitate to give KYC details. The biometric issue needs to be reconsidered," said Ramesh Bhatt, an advisor. A Mumbai-based planner says, "Investor education is still lacking. I don't know how biometric will curb the intention of mis-selling. I am not averse to KYD but they should come up with simple and practical solutions."
Sun TV: Release of the big-budget south Indian film Enthiran now
postponed to 24th September. If the film is a hit, benefits will accrue only
in the December quarter. The film features Rajinikanth and Aishwarya
Rai in the lead roles. The story goes something like this apparently-Rajini is a scientist who develops an android like robot with human characteristics (to help mankind) who looks like him. The robot fallsin love with Aishwarya Rai. Danny Denzongpa wants the robot to do evil things. Rajini fights to save the robot and destroys the villains using the robot (source: www.enthiran.net). It is touted to be Asia's costliest film.
Sterling Holiday Resorts: Potential buyout target. Sterling is a timeshare company established in 1986. Its website says it has 115,000 members. Interestingly, in its latest result, Club Mahindra (Mahindra Holidays) said its membership was 108,041. In November 2009, the Securities and Exchange Board of India (SEBI) directed Sterling to dematerialise about 300,000 shares of the company in the name of GIIC immediately since it had borrowed Rs50 million and repaid only Rs2,50,000.
JL Morison: Buzz is that ownership pattern to change. JL owns brands such as Bigen hair dye, Equal sugar, Zero Gravity deodorants, VO5 hair products, St Ives skin care products, and Playboy perfumes and deodorants. The promoters own 68.5% in the company (Rasoi Ltd, Hindustan Composites Ltd, Raghu Mody).
Uflex: Rights issue next month. Uflex is a flexible packaging company.
It reported a consolidated net profit of Rs605 million for the June quarter, up 20% y-o-y. The company's board recently approved changing the ratio of its rights issue to one share for every three held (four earlier) and upped the fund raising limit to Rs4 billion from Rs2.5 billion. Uflex is planning to spend Rs11.5 billion over the next two years on capacity expansion.
Indian Hume Pipe: Land bank worth is said to be around Rs20 billion.
Geodesic and Aarti Drugs: Bonus buzz.
UTI MF revises exit load under UTI Bond Fund
UTI Mutual Fund has revised the exit load structure under its scheme UTI Bond Fund. As per the revision, scheme will charge an exit load of 1% if the investments are redeemed within 180 days from the date of allotment and 0.75% if redeemed after 180 days but before 365 days from the date of allotment. The revision is effective from 09 August 2010. UTI Bond Fund is an open ended debt fund.
Central Bank of India introduces SMS facility in various Indian languages
Central Bank of India has launched SMS facility for its customers in various Indian languages. The language preferences available to the customers are Hindi, Marathi, Telugu, Bengali, Gujarati and Tamil which will be later extended to 15 languages. The customers will get a regional language SMS, based on their choice, whenever their account is credited/debited.
Oriental Bank raises lending, deposit rates
Oriental Bank of Commerce announced an increase of 50 basis points (bps) in its benchmark lending rate and up to 100 bps hike in fixed deposit rates. The benchmark prime lending rate (PLR) has been increased to 12.5% from 12% with effect from 6 August. This would make the floating rate for existing home and auto loans costlier. The bank has also increased the term deposit rates by 25-100 bps from August 5. Fixed deposit rate for 1,000 days would now attract an interest rate of 7.5%, against 6.75%. For 7-14 days maturity slab, the bank has effected a 100 bps increase to 2.5%, but in this case deposits should be over Rs1 crore. Term deposit rate with maturity between 91 and 179 days has been raised by 50 bps to 5.5%. For fixed deposits between 180 and 269 days, the new rate is 6%, up by 50 bps, while for 270 days to one year, it has been revised upward by 25 bps to 6.25%. The increase in three-five years tenor category is 25 bps at 7.25%.
Pass on 1% rate subsidy on home loans
The Reserve Bank of India (RBI) has asked banks to put in place a suitable mechanism to provide the benefit of the 1% interest subsidy granted by the government on home loans to buy a house of up to Rs20 lakh. RBI further said that after sanctioning and disbursing eligible loans under the scheme, banks will claim disbursement of subsidy from the RBI on a monthly basis. To encourage the housing sector, finance minister Pranab Mukherjee in his Budget for 2009-10, had announced a scheme under which the government would provide interest subvention of 1% on housing loans of up to Rs10 lakh for one year, provided the cost of the unit was less than Rs20 lakh. The scheme, which was initially for a period of one year up to 30 September 2010, is extended till 31 March 2011.