The Economic Times wrote a few days ago that the mutual fund advisory committee has suggested a 2% entry load. Business Standard wrote today that no such thing was discussed and the minutes were doctored. If true, this only shows lawlessness inside SEBI. Here is a video discussion between Sucheta Dalal and Debashis Basu both of whom were in SEBI committees in the past, about how the committees function and the whole issue of entry load
Welcome to another Moneylife Discussions this time on the mutual fund industry and the whole issue of entry load. Sucheta Dalal, Managing Editor of Moneylife and Debashis Basu, Editor and Publisher of Moneylife discuss the issue.
CB Bhave, former chairman of Securities and Exchange Board of India (SEBI) scrapped the entry loan on MFs. However, this was an abrupt decision. There is no public record of who said what in the Advisory Committee meeting at that time. There is a lack of transparency as to what is happening in SEBI. “They should publish the minutes of the Advisory Committee meetings. It will also ensure that if a committee member is partisan—that becomes public,” said Mr Basu who himself has served as member of the SEBI advisory committee on mutual funds.
According to Ms Dalal, in all committees, whether it is advisory committees or expert committees, the majority representation is from industry or intermediaries, lawyers, chartered accountants, company secretaries—who all derive revenue from the industry. While the entire effort of everybody is to ‘sell’ products to retail investors, their representation is limited to one or two persons.
“Entry load is not correlated to the growth of the industry,” said Mr Basu, adding that there is one thing alone that can bring back investors—excellent performance and committed outreach. “Most of the fund companies don’t beat the benchmark. Mutual fund companies do not engage the savers and prefer to sell through third-party. They also need to tighten their belts,” he said.
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