Investor Issues
SEBI asks MFs to keep expense ratios flat under liquid funds

The market regulator has found that liquid and debt schemes change their expense ratio numerous times during a month and has proposed to limit it to 5 basis points on a daily basis (or 0.05%) in a day or 0.5% in a year

Market watchdog Securities and Exchange Board of India (SEBI) in its recently held mutual fund advisory committee meeting has observed that fund houses were frequently changing the expense ratios of liquid and short-term debt schemes. It was changed 18 times in a super institutional liquid scheme ranging from 0.25%-1.15% in a month.  

"It is mainly done to accommodate high net-worth individuals (HNIs). Fund houses are doing this for the last one year. Investor's interest cannot be protected by increasing the expense ratio. If they (AMCs) reduce it then it is done to pass on the benefits," said a top official of a fund house.   

Fund houses are of the view that such frequent changes in expense ratio is done due to fluctuations in the market and to protect investor's money. The regulator has proposed to limit the expense ratio at 5 basis (0.05%) points on a daily basis or 0.5% in a year.

According to SEBI, Reliance Money Manager Fund short-term institutional plan had revised the expense ratio 15 times (from 0.39%-1.49%) while in the non-institutional category it was changed 11 times (from 0.45%-1.69%). Most of the schemes highlighted by SEBI were of debt and liquid fund category.

"An institutional liquid scheme had revised the expense 13 times in the range of 0.35%-1.35% in January 2009. Most of these schemes have been only increasing their expense ratio," said a CEO of a leading fund house.
Apart from this, SEBI has given the leeway to MFs to have different expense structures for different schemes of a fund. It has also suggested MFs to either have a flat structure at 1.5% for equity funds, 1% for debt funds and 0.75% for index funds including exchange-traded funds (ETFs) and to do away with different expense slabs.

Currently MFs are allowed to charge 1.25% as investment and management fee for the first Rs100 crore of assets under management (AUM), and 1% for the subsequent amount. For the first Rs100 crore of AUM, a fund house can charge a total expense of 2.50% under an equity scheme and 2.25% for a debt scheme. As the corpus increases, the maximum permissible limit the MFs can charge is 1.50% for debt schemes and 1.75% for equity schemes annually. According to sources, the frequent expense ratio changes are aimed to smoothen the net asset value (NAV) movement.

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CAG audit: Second setback for telcos as HC too spurns plea for stay

The Court, however, also said the CAG will not ask for any further document except the details relating to revenue-sharing

In a setback to mobile operators, the Delhi High Court today asked them to submit their account books to the apex auditor Comptroller and Auditor General of India (CAG), which has been asked by the government to check under-reporting of revenue for calculating the licence fee, reports PTI.

A division bench comprising justices Sanjay Kishan Kaul and Valmiki Mehta directed telecom operators to provide details of their revenue sharing to the CAG for auditing.

"We direct that without prejudice to the rights and contentions of the parties, the petitioners (telcos) will make available the revenue sharing details/documents to the CAG for auditing," the bench said in an interim order.

Over the telcos plea that they are private industry players and do not fall under the domain of the CAG, the court said, "In our considered view, prima facie the interest of the government is the revenue generated under the licence agreement."

The court, however, also said the CAG will not ask for any further document except the details relating to revenue sharing. "No further material would be asked from petitioners except those concerning the revenue sharing arrangements," the court said.

The court further directed the CAG not to disclose the information given by the telcos in the public domain or to any third-party. "Since this information is being directed to be disclosed without prejudice to the rights and contentions of the petitioners, the said information shall not fall into the public domain and will not be disclosed to any third party," the court said.

The court, however, admitted the petition filed by the GSM lobby the Cellular Operators Association of India (COAI) and CDMA lobby Association of Unified Telecom Service Providers of India (AUSPI) and issued notices to the Department of Telecom (DoT) and the sectoral regulator Telecom Regulatory Authority of India (TRAI).

The COAI and AUSPI had challenged the recent CAG direction to the telcos to submit their revenue sharing details with it for auditing.

Earlier on May 20, telecom tribunal Telecom Disputes Settlement and Appellate Tribunal (TDSAT) had also declined a similar request from Bharti Airtel and Vodafone to stay the CAG audit.

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GVK unit wins Deoli-Kota road project worth Rs850 crore

GVK Power & Infrastructure Ltd (GVKPIL) said its unit GVK Developmental Projects Pvt Ltd won the bid for construction of Deoli-Kota road under the National Highways Development Program-phase III. The estimated cost of the project is Rs850 crore.

The scope of the work involves four laning-starting from 165 km to Junction of National Highway (NH) 76 on Kota Bypass on the Deoli-Kota Section of the NH 12 in Rajasthan on build, operate and transfer (BOT) basis.
The project will be implemented by GVK Deoli Kota Expressway Pvt Ltd, a special purpose vehicle, which has signed the concession agreement with the National Highways Authority of India.  

On Tuesday, GVKPIL shares ended 0.5% down at Rs42 on the Bombay Stock Exchange, while the benchmark Sensex closed 2.2% down at 16,572 points.

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