Foreigners: Foreign institutional investors bought shares at the start and towards...
The know-your-distributor norms introduced by SEBI are making distributors see red; some feel that the mandatory biometric verification is stretching things a bit too far
At a time when the assets under management (AUM) of mutual fund companies are dwindling rapidly, market regulator Securities and Exchange Board of India's (SEBI) tough stand on in-person verification of distributors may just tighten the noose around the struggling mutual fund industry. The new know-your-distributor (KYD) requirements have not gone down too well with some distributors, who question the extent of verification as demanded by SEBI.
The KYD requirements have been introduced by the Association of Mutual Funds in India (AMFI) under SEBI's diktat. It is mandatory to comply with the KYD procedure (with effect from 1 September 2010) before applying for fresh ARN Registration/ARN Renewal. Existing ARN holders are required to comply with KYD norms by the end of February 2011, failing which payment of commission will be suspended till ARN holders comply with KYD requirements.
The requirement of biometric verification seems to have irked the sensibilities of distributors the most. They find the requirement for biometric verification rather excessive and invasive of their privacy. One such distributor told Moneylife, "It is an insult to the integrity of a person who is in this field for more than 20 years and doing his job with the utmost sincerity. It is quite disgusting to learn that after all these years you have been treated like a criminal."
Why the distributors are complaining is because they feel singled out as a threat to security. While they are aware that the step has been taken as a counter against a few ARN holders who have misguided investors for their own benefit, they question why other unscrupulous entities that are known to defraud investors are not given the same treatment by regulators.
"Why is there no biometric process for doctors, lawyers, CAs, dentists and other professionals who can do more harm to an individual than an ARN holder? If AMFI and SEBI think that there are cheats in financial markets then why are the stock brokers not compelled to have this biometric process?" asked a distributor. He added, "If the distributor is required to undergo this insulting process then why not the fund manager who has an opportunity to play mischief with investors' money? The ARN holder can only misguide the client but cannot play mischief with investors' funds, whereas the fund manager has an opportunity to do monkey business with investors' funds. Then why is there no biometric process for fund managers?"
The entire procedure of verification is also quite lengthy and cumbersome. Distributors are required to visit the nearest Point of Service (POS) with duly completed KYD application, self-attested photocopies of relevant documents and two self-attested (passport size) colour photographs. They are then required to produce, in person, the original documents for over-the-counter verification at the time of submission of their applications along with self-attested photocopies of the same. The biometric process is to be completed at the POS, at the time of submission of applications for registration or renewal of ARN along with the KYD application form. Distributors will then obtain the acknowledgement from the POS confirming completion of KYD process. Existing ARN holders are required to send a photocopy of the acknowledgement to the AMCs/RTAs confirming KYD completion.
While most distributors are agreeable to the concept of KYD, they have frowned upon the call for biometric verification. Earlier, Ramesh Bhatt, an advisor, told Moneylife, "People who wish to do business in a straightforward way will not hesitate to give KYC details. The biometric issue needs to be reconsidered." Another planner had quipped, "Investor education is still lacking. I don't know how biometric (checking) will curb the intention of mis-selling. I am not averse to KYD but they should come up with simple and practical solutions."
The Indian market is likely to witness a flat-to-positive start today on supportive global cues. Wall Street settled mixed as the Federal Open Market Committee (FOMC) reiterated its stand to infuse more money, if required, to boost the economy. Markets in Asia were in the green in early trade on assurance from the Fed to boost the sagging economy. The SGX Nifty was up 11 points at 6,026 against its previous close of 6,015.
The market saw some consolidation on Tuesday. While the Sensex and Nifty touched their intraday highs in early trade, profit booking took away all the early gains plunging the indices into the red. The market managed to recover from the lows but range-bound trading resulted in the market closing with marginal gains. Finally the market closed with gains of nearly half a percent. The Sensex ended 95.45 points (0.48%) higher at 20,001, after touching a high of 20,088, last seen in January 2008. The index touched a low of 19,861, intraday. The Nifty settled above the 6,000 mark at 6,009, up 28.60 points (0.48%).
The US market closed mixed on Tuesday as the Federal Open Market Committee (FOMC) reiterated its stand to infuse more money, if required, to boost the economy. However, it kept its overnight interest rates steady at near zero levels. In other news, US housing starts surged in August to their highest level in four months, while permits for future construction rose, indicating the housing market was beginning to stabilise.
The Dow was up 7.41 points (0.07% at 10,761. The S&P was down 2.93 points (0.26%) at 1,139. The Nasdaq was down 6.48 points (0.28%) at 2,349.
Markets in Asia were in the green on assurances from the US Federal Reserve that it would infuse more funds, if required, to boost the sagging economy. Besides, indications that the US housing market was beginning to stabilise also boosted stocks in the region.
The Hang Seng was up 0.11%, KLSE Composite was up 0.03%, Nikkei 225 added 0.03%, Straits Times rose 0.25%, The Chinese, South Korean and Taiwanese markets were closed for local holidays.
India's gross domestic product (GDP) is expected to grow at 9.2% in FY11 on the back of spurt in economic activities, Centre of Monitoring Indian Economy (CMIE) said in its monthly review.
The GDP had grown 7.4% in the preceding year.
The economy think tank has maintained a 9.2% growth projection for FY11 since March 2010. It expects the three broad sectors of the economy (industry, services and agriculture) to improve their performance in FY11.
The industrial sector, including construction is projected to grow by 9.4% in FY11, better than the 9.2% growth in FY10. The services sector is projected to expand by 10%, compared to 8.6% last year led by the growth in trade and transport segment.