For the first time, investors of scores of portfolio management schemes run by banks and brokers will be able to access information on their performance and track-record on the SEBI website. This follows an order by the Chief Information Commissioner under the RTI Act. SEBI has been asked to upload this information from April 2013
In a pathbreaking order, the Chief Information Commissioner (CIC) Satyananda Mishra, at a hearing conducted on 17 January 2012 in Mumbai has directed the Securities and Exchange Board of India (SEBI) to put up monthly information of individual Portfolio Management Services (PMS) on its website effective from April 2013. Once the data is put up, it will allow investors to compare and contrast various PMS schemes and make careful and informed decisions, based on their track record before entrusting sums starting from a whopping Rs25 lakh or more to portfolio managers.
This order not only represents a big victory for Indian investors and comes at the end of a long battle by Moneylife to ask the regulator to make PMS schemes more transparent. For the past three years, Moneylife has also helped several investors recover funds, wrongly deducted by PMS. The wrongful losses have extended from a few lakh to as much as Rs1 crore.
The CIC’s order said, “We have carefully considered the facts of the case and the submissions made before us. It is an admitted fact that the desired information is available with SEBI, if not on an annual basis, at least on a monthly basis. Since this information is received electronically, it’s publication through the website would not be a difficult task. By publishing such information about all Portfolio Management Services (PMS) regulated by it, SEBI would serve two objectives. One, help the investing public to access all information at one place and not have to visit 50 different websites and, two, eliminate the need for seeking such information under RTI, from time to time”.
The CIC goes on to say, “We would like to direct that the monthly information received from the Portfolio Management Services (PMS) which can be disclosed without attracting any of the exemptions provisions of the Right to Information (RTI) Act should be published on the SEBI website beginning April 2013 and an intimation sent to the Appellant in this case about this.”
This has been a long battle for Moneylife. Our request for information was repeatedly rejected until we approached the CIC. Interestingly, Moneylife has been informally requesting SEBI to upload PMS performance information on its website for several years, but it refused to do so. In fact, after several hard-hitting reports about how leading banks and finance companies had damaged investors’ savings, SEBI issued an order asking them to disclose three years performance on its website and on application forms. But this was clearly not enough, since it did not allow comparison of authentic records.
In the final hearing before the CIC through a video conference, Gaurang Damani, a well known Mumbai-based activist appeared on our behalf. He argued that PMS is a very complex product requiring careful comparative analysis as parting with serious investment in the region of Rs25 lakh. Therefore, it was of utmost importance for people to have comparative data and it was not feasible to access the websites of 40 odd PMS providers to get the required information. While SEBI had irrationally taken the stand that this information was “fiduciary” in nature, we made the point that this information was already in the public domain, under SEBI’s own direction. All that we wanted was that the data be made available at one source. It is ironical that information dissemination, which is key to SEBI’s disclosure based regulatory regime, is likely to be put in the public domain only after a long battle with the regulator. The CIC heard our appeal on 17 January 2012. Convinced of our argument, CIC directed SEBI to put up information on the website.
Moneylife filed its first RTI query in 8 February 2012 after over two years of following up with SEBI to put out information on portfolio returns, assets under management (AUM), fees, etc, for individual PMS schemes on its website. Our application had been rejected on flimsy grounds (SEBI misrepresents public information on PMS as fiduciary; offers mindless response to simple RTI query).
We filed a first appeal to SEBI’s appellate authority on 26 April 2012. This was rejected on the grounds that—“It maybe true that AUM of PMS may be available on the website of PMS. It may also be true that SEBI may receive AUM from each of the PMS for regulatory purposes. However, to provide the information in the form sought, SEBI will have to compile the information. SEBI is not expected to compile the information to suit the need of individuals.” The arrogant callousness of the response should be seen in the context that SEBI itself has an investor education fund with crores of rupees, but won’t make the effort to compile and upload data and information that is crucial for a sensible investor to make an informed decision. The attitude also exposes the hypocrisy of all the spending on financial education and financial literacy that is being mandated and pushed by the regulator.
The genesis of our battle for transparency in PMS performance was the saga of investor Rajan Manchanda, who lost a whopping Rs1 crore when it invested more than Rs2 crore with Kotak PMS (Sordid tales). In other words, half of his portfolio got wiped out and SEBI did little to help.
Another investor who approached Moneylife saw 30% of his Rs52 lakh evaporate when he invested in a PMS scheme. For more details, check out this article we had written: Broking Houses Make Investors Go Broke.
A doctor saw a big chunk of her PMS investment vanishing after investing in JM’s portfolio schemes. She managed to get a few lakh rupees back after help from Moneylife. We had also compiled investors’ views on PMS here: Bad Experience.
Simply put, most investors do not know where to find information regarding PMS. Since they do not have information readily, they will not be able to verify deceiving numbers thrown around by ambitious sales persons. At the end of the day, they need to know if the high commission is worthwhile before parting with Rs25 lakh. Thus, with the information put up, now they will be in a better position to decide.
Other stories covered by Moneylife on PMS can be accessed below:
We had said yesterday that a higher high on the Nifty would be the first sign of reversal. Today the market closed well above yesterday’s high. Now the Nifty will try to have a go at 6,100 again
Gains in rate-sensitive sectors like realty and auto, and global cues helped the market close near the highs of the day. We had said yesterday that a higher high on the Nifty would be the first sign of reversal. Today the market closed well above yesterday’s high. Now the Nifty will try to have a go at 6,100 again. The National Stock Exchange (NSE) recorded volumes of 89.97 crore shares and advance-decline volumes of 882:558.
The market opened with small gains on hopes that the Reserve Bank of India (RBI), in its policy review meeting on 29th January, will reduce interest rates. Markets in Asia were mostly up on positive economic data from across the world while the US markets closed mixed overnight, as a drop in Apple Inc shares, pulled the Nasdaq lower.
Back home, the Nifty opened six points higher at 6,025 and the Sensex started off at 19,946, a gain of 22 points over its previous close. The volatile market dipped to its low in early trade with the Nifty at 6,014 and the Sensex going back to 19,928.
The benchmarks overcame the early hiccups and began on a northward journey as buyers picked up stocks of auto, consumer durables, healthcare and capital goods sectors.
Meanwhile, India’s largest car maker Maruti Suzuki India today reported an over two-fold jump in net profit at Rs501.29 crore for the third quarter ended December 201 compared to Rs205.62 crore during the same period last fiscal. Net sales during the period under review stood at Rs10,956.95 crore, up 45.57% from Rs7,527.10 crore in the year-ago period.
The indices continued their upmove in noon trade, as investors picked up stocks at lower levels after the recent decline in the market. A strong opening of the key European markets also supported the sentiments.
The market hit its highs towards the close of the trading session with the Nifty rising to 6,081 and the Sensex at 20,129. The benchmarks closed near the highs on hopes from the RBI on rates next week. The firm European markets also supported the gains.
The Nifty closed 55 points (0.92%) higher at 6,075 and the Sensex logged off at 20,104, a gain of 180 points (0.90%).
Markets in Asia settled mixed as consumer prices in Japan fell for the seventh time in eighth month in December making a case for further easing of the country’s monetary policy to boost growth.
The Jakarta Composite gained 0.43%; KLSE Composite rose 0.11%; the Nikkei 225 jumped 2.88% and the Straits Times advanced 0.64%. Among the losers, the Shanghai Composite declined 0.49%; the Hang Seng lost 0.08%; the Seoul Composite dropped 0.91% and the Taiwan Weighted fell 0.30%.
At the time of writing, the key European indices were up between 0.16% and 1.01% and the US stock futures were in the green, an indication of a firm opening for US stocks later in the day.
Back home, foreign institutional investors were net buyers of shares totalling Rs1,026.31 crore on Thursday while domestic institutional investors were net sellers of equities amounting to Rs752.26 crore.
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