Mutual Funds
Mutual fund-broker route may drive up investor costs

Cost to investor under the new proposed route could reach up to eight times the expenses under current model

While SEBI’s move to allow brokers to deal in mutual fund products was meant to serve investor interests, it looks more likely that investors may end up shelling out more than they bargained for, if they were to buy or sell units through stock-exchange brokers or depository participants.

This is evident from the huge difference in transaction costs an investor would incur under the existing and new models. Under the present model, where investors approach distributors or apply to funds directly, only registrar and transfer agent (R&TA) costs are incurred by the investor. This boils down to per folio cost roughly amounting to Rs70 per annum. Whereas, industry sources reveal that under the depository/ stock-exchange trading-member model, costs will shoot up to between Rs540-Rs790 per folio per annum. In other words, the cost per folio would be eight times higher under the new model!

R&TAs are also more cost-effective when it comes to hosting large databases. While depositories today hold a mere 1.6 crore investor accounts, R&TAs hold 7.34 crore such accounts, and have a proven record of technical capability. Costs under the R&TA model are significantly lower as it plays a deeper role than that played by a depository or stock-exchange broker.

Industry experts indicate that brokers could charge between 0.25%-0.50% of the value of any buy and sell transaction involving mutual fund units. However, it is not yet clear how additional costs such as securities transaction tax and stamp duty would be levied. Brokers may even charge separately for investors who want advisory or support services.

All these costs would only increase the burden on the retail investor. Considering the already alarmingly low number of investors buying into mutual fund schemes, this extra baggage would only further their indifference to this segment.
– Sanket Dhanorkar

User

The CAT fiasco and the virus story

Computer glitches resulting from viruses continued to disrupt the Common Admission Test (CAT) 2009 for the third consecutive day on Monday amid indications that the exam could be extended beyond the 7th December deadline. 

According to media reports, two viruses namely 'Conficker' and 'Nimda' are being held responsible for the fiasco. Due to this virus attack, nearly 4,000 students could not appear for the test during the first two days of the 10-day entrance examination process that started on Saturday.
 
However, both the viruses are not new and can be easily detected and removed by any well-known, updated anti-virus software like Norton, McAffee, AVG and Avast. So why was no anti-virus package installed on the computers on which the exams were being conducted? The second question is related with the very nature of the exams. The CAT 2009 was supposed to be an online (you have to solve the question paper while staying connected to the Internet) exam, but according to some students who took the test, this was not the case.
 
As per the plan designed by Prometric, one has to download the complete file of the exam and it can be uploaded back only after finishing the paper. So if you are using the Internet only to download and upload your exam paper, where is the online quotient in the test? That means students are not required to stay online for the entire duration while solving the exam paper, so how can CAT 2009 be called an online exam? Also, this whole episode of downloading and uploading the exam paper might have opened the door for virus attacks.
 
Cyber expert Vijay Mukhi, who is also head of IT for the Federation of Indian Chambers of Commerce and Industry (FICCI) has raised the question of using an obsolete technology for conducting a prestigious exam like CAT. Mr Mukhi said, "Had the CAT exams been conducted using cloud technologies, none of the servers would have crashed and students would not have had to go through such hardships. I cannot understand why the IIMs shy away from using the latest state-of-the-art technologies used by the likes of Facebook, Yahoo, Google and Amazon."
 
The so-called 'responsible' attacker 'Conficker', first detected in early November 2008, is a worm that primarily targets the Microsoft Windows operating system. 'Conficker' is also known as Downup, Downdup and Kido. Nimda, also a worm, was first discovered in 2001; it spreads quickly, eclipsing the economic damage caused by past outbreaks such as the Code Red worm.
 
Multiple propagation vectors allowed Nimda to become the Internet’s most widespread virus worm within 22 minutes from its release on 18 September 2001. Both these worms can be easily detected, and destroyed by today's anti-virus packages. So the question remains, why didn’t Prometric and its partner NIIT have minimum security enabled on the computers on which they conducted the exam? One IT expert pointed out, "It is the height of negligence to have Windows computers on the Internet without a good anti-virus package."
 
"For a critical test such as the CAT, there needs to be highly reliable infrastructure (in place) during the duration of the test, which was not there. Also, it seems if by chance you press a key (on the computer) which you are not supposed to, the software can go for a toss thus destroying your work again," said another expert.
 
Prometric Testing Pvt Ltd (Prometric India), a subsidiary of Prometric, was awarded a multi-year, multi-million dollar contract by the IIMs to conduct the CAT for entry into top management schools in India. IIM Ahmedabad director Samir Barua said that the contract is meant for conduct of the exam by the agency for about 20 years.
 
According to a statement, the IIMs were responsible for generating questions for the tests and Prometric was responsible for conducting the test. The delivery could not be executed flawlessly because of virus attacks at several test sites. Prometric is working to address the issues arising from the attacks.
 
The ministry for human resources development (HRD) has also sought a report from Satish Deodhar, convener of CAT, on the disruption of the test being conducted by Prometric for nearly 2.4 lakh candidates for admission into IIMs and a few other B-schools.
 
The test will continue till next Monday at 105 centres over 32 cities across the country. Students can appear in the test at these centres during the 10-day examination period. There are nearly 1,800 seats in the seven IIMs at Ahmedabad, Bangalore, Kolkata, Indore, Kozhikode, Lucknow and Shillong.
 
The IIM authorities have also told Prometric that it should provide enough support systems at examination centres if there is something wrong with the computer on which the test is being given and strengthen the quarantine system to check any future virus attacks.
 
The blame game can continue between the IIMs, Prometric and NIIT, but what about the harassment of the students? Following the chaos during the first three days, many IIM aspirants—especially those who could not take the test—are feeling depressed.
 
Speaking about the agony these students have had to face, an IT expert said, "It is such a pathetic state, and aspiring young people of this country have been treated like guinea pigs. As it is, 1 out of every 100 students is selected. If you lose 15 minutes because your file is downloaded late, or due to noise (I am told that there was huge commotion in the hall when some students' servers crashed), you can easily lose a percentile point and thus lose admission to the IIMs."
 
The IIMs have put out a disclaimer on their site warning that anybody who attempts to leak the CAT questions will face three years of jail or a fine of Rs2 lakh. However, given the high stakes on IIM admissions and the long period of 10 days to conduct the CAT, there are chances that a lot of business and tech-savvy players may be making a killing by revealing question papers stealthily, another expert said.
 
A student from Jabalpur, whose test centre was Bhopal, is on the verge of losing his chance to appear for the exam. His first attempt to give the exam was cancelled due to technical problems. When he enquired with fellow students, almost everyone had the same 'terrible' experience to share. Some of the students were asked to strip in order to check whether they were carrying any technical equipment with them! Since this student could not appear for the test that day, he had to return to his home at Jabalpur. He was promised that he would be informed about the rescheduled date and time of his test by 6pm that day, but unfortunately there was no message till next day i.e., 30th November.
 
When at about 2pm he called the customer care centre, he was told that his test had been rescheduled on 30th November at 3.30pm and he was supposed to reach Bhopal within an hour!
 
When he protested, his call was transferred to other person who did not answer his query. Here is what the student told Moneylife,"My call received the same fate which my entire year’s hard work has faced. It’s almost 24 hours after my complaint and there is still no response. I have the highest respect for the IIMs but outsourcing doesn't mean you outsource your reputation as well. It was a terrible experience." One friend of this student, based at Lucknow, had his exam cancelled three times, till Tuesday.
 
"It seems that the systems were not tested for the scale at which they were deployed. Yes, our students did face issues. The issues faced were exams were rescheduled, test environments were far from conducive, questions took long to load, biometrics did not load and tests got cancelled and delayed. We have been counselling students to stay calm in such situations. Getting over anxious is only detrimental," said Anand Bhatia, general manager, Career Launcher India Ltd.
 
The whole CAT fiasco has turned out to be a matter of shame—not just for Prometric but for the IIMs too.
 
-Yogesh Sapkale with Lorain Viegas

 

User

The CAT fiasco and the virus story

The viruses being held responsible for the CAT 2009 fiasco can be easily detected and removed by any updated anti-virus software. Then why are the management gurus and 'masters of the online exam' acting like novices?

Computer glitches resulting from viruses continued to disrupt the Common Admission Test (CAT) 2009 for the third consecutive day on Monday amid indications that the exam could be extended beyond the 7th December deadline.

According to media reports, two viruses namely 'Conficker' and 'Nimda' are being held responsible for the fiasco. Due to this virus attack, nearly 4,000 students could not appear for the test during the first two days of the 10-day entrance examination process that started on Saturday.

However, both the viruses are not new and can be easily detected and removed by any well-known, updated anti-virus software like Norton, McAffee, AVG and Avast. So why was no anti-virus package installed on the computers on which the exams were being conducted? The second question is related with the very nature of the exams. The CAT 2009 was supposed to be an online (you have to solve the question paper while staying connected to the Internet) exam, but according to some students who took the test, this was not the case.

As per the plan designed by Prometric, one has to download the complete file of the exam and it can be uploaded back only after finishing the paper. So if you are using the Internet only to download and upload your exam paper, where is the online quotient in the test? That means students are not required to stay online for the entire duration while solving the exam paper, so how can CAT 2009 be called an online exam? Also, this whole episode of downloading and uploading the exam paper might have opened the door for virus attacks.

Cyber expert Vijay Mukhi, who is also head of IT for the Federation of Indian Chambers of Commerce and Industry (FICCI) has raised the question of using an obsolete technology for conducting a prestigious exam like CAT. Mr Mukhi said, "Had the CAT exams been conducted using cloud technologies, none of the servers would have crashed and students would not have had to go through such hardships. I cannot understand why the IIMs shy away from using the latest state-of-the-art technologies used by the likes of Facebook, Yahoo, Google and Amazon."

The so-called 'responsible' attacker 'Conficker', first detected in early November 2008, is a worm that primarily targets the Microsoft Windows operating system. 'Conficker' is also known as Downup, Downdup and Kido. Nimda, also a worm, was first discovered in 2001; it spreads quickly, eclipsing the economic damage caused by past outbreaks such as the Code Red worm.

Multiple propagation vectors allowed Nimda to become the Internet’s most widespread virus/worm within 22 minutes from its release on 18 September 2001. Both these worms can be easily detected, and destroyed by today's anti-virus packages. So the question remains, why didn’t Prometric and its partner NIIT have minimum security enabled on the computers on which they conducted the exam? One IT expert pointed out, "It is the height of negligence to have Windows computers on the Internet without a good anti-virus package."

"For a critical test such as the CAT, there needs to be highly reliable infrastructure (in place) during the duration of the test, which was not there. Also, it seems if by chance you press a key (on the computer) which you are not supposed to, the software can go for a toss thus destroying your work again," said another expert.

Prometric Testing Pvt Ltd (Prometric India), a subsidiary of Prometric, was awarded a multi-year, multi-million dollar contract by the IIMs to conduct the CAT for entry into top management schools in India. IIM Ahmedabad director Samir Barua said that the contract is meant for conduct of the exam by the agency for about 20 years.

According to a statement, the IIMs were responsible for generating questions for the tests and Prometric was responsible for conducting the test. The delivery could not be executed flawlessly because of virus attacks at several test sites. Prometric is working to address the issues arising from the attacks.

The ministry for human resources development (HRD) has also sought a report from Satish Deodhar, convener of CAT, on the disruption of the test being conducted by Prometric for nearly 2.4 lakh candidates for admission into IIMs and a few other B-schools.

The test will continue till next Monday at 105 centres over 32 cities across the country. Students can appear in the test at these centres during the 10-day examination period. There are nearly 1,800 seats in the seven IIMs at Ahmedabad, Bangalore, Kolkata, Indore, Kozhikode, Lucknow and Shillong.

The IIM authorities have also told Prometric that it should provide enough support systems at examination centres if there is something wrong with the computer on which the test is being given and strengthen the quarantine system to check any future virus attacks.

The blame game can continue between the IIMs, Prometric and NIIT, but what about the harassment of the students? Following the chaos during the first three days, many IIM aspirants—especially those who could not take the test—are feeling depressed.

Speaking about the agony these students have had to face, an IT expert said, "It is such a pathetic state, and aspiring young people of this country have been treated like guinea pigs. As it is, 1 out of every 100 students is selected. If you lose 15 minutes because your file is downloaded late, or due to noise (I am told that there was huge commotion in the hall when some students' servers crashed), you can easily lose a percentile point and thus lose admission to the IIMs."

The IIMs have put out a disclaimer on their site warning that anybody who attempts to leak the CAT questions will face three years of jail or a fine of Rs2 lakh. However, given the high stakes on IIM admissions and the long period of 10 days to conduct the CAT, there are chances that a lot of business and tech-savvy players may be making a killing by revealing question papers stealthily, another expert said.

A student from Jabalpur, whose test centre was Bhopal, is on the verge of losing his chance to appear for the exam. His first attempt to give the exam was cancelled due to technical problems. When he enquired with fellow students, almost everyone had the same 'terrible' experience to share. Some of the students were asked to strip in order to check whether they were carrying any technical equipment with them! Since this student could not appear for the test that day, he had to return to his home at Jabalpur. He was promised that he would be informed about the rescheduled date and time of his test by 6pm that day, but unfortunately there was no message till next day i.e., 30th November.

When at about 2pm he called the customer care centre, he was told that his test had been rescheduled on 30th November at 3.30pm and he was supposed to reach Bhopal within an hour!

When he protested, his call was transferred to other person who did not answer his query. Here is what the student told Moneylife,"My call received the same fate which my entire year’s hard work has faced. It’s almost 24 hours after my complaint and there is still no response. I have the highest respect for the IIMs but outsourcing doesn't mean you outsource your reputation as well. It was a terrible experience." One friend of this student, based at Lucknow, had his exam cancelled three times, till Tuesday.

"It seems that the systems were not tested for the scale at which they were deployed. Yes, our students did face issue. The issues faced were-exams were rescheduled- test environments were far from conducive- questions took long to load- biometrics did not load and test got cancelled-delayed. We have been counselling students to stay calm in such situations. Getting over anxious is only detrimental," said Anand Bhatia, general manager, Career Launcher India Ltd.

The whole CAT fiasco has turned out to be a matter of shame—not just for Prometric but for the IIMs too.
-Yogesh Sapkale with Lorain Viegas
 

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