SEBI for tighter leash on wealth managers

SEBI has also flagged the need for concerted efforts and better coordination both at the operational as well as the surveillance level between various regulators to protect the interests of investors in this increasingly complex world of financial products

Mumbai: If the Securities and Exchange Board of India (SEBI) has its way, wealth managers will have a tough time going forward as the capital markets watchdog is in the process of coming out with stern measures to regulate the relationship managers in particular and wealth management firms in general, reports PTI.

SEBI has also flagged the need for concerted efforts and better coordination both at the operational as well as the surveillance level between various regulators to protect the interests of investors in this increasingly complex world of financial products.

In fact, SEBI executive director KN Vaidhyanathan, who heads the investment management department that oversees foreign institutional investors (FIIs) and mutual funds (MFs) at SEBI, was very vocal at a seminar over the weekend here. "We can't remain silent. We need to come together and address how to regulate the wealth management sector which straddles across different jurisdictions," he said

"The markets are far too advanced now. The wealth managers of today straddle across products that cut through banking, capital markets and insurance regulatory frameworks.

We need to integrate across regulators, not just at the policy level, but at the operating and surveillance levels too," he stressed.

The strong pitch for co-ordination and firmer control on these nascent areas of the financial system assume critical importance in the light of the recent Rs350 crore wealth management fraud, which took place at the Gurgaon branch of Citi.

In the fraud, Citi's relationship manager allegedly used fraudulent documents to lure high networth individuals and companies such as the privately held Hero Investments, an arm of the country's largest two-wheeler maker.

Further, pointing fingers at the relationship managers at wealth management firms, he said the risk in the wealth management business lies with the relationship manager, as his remuneration is not completely aligned with the interest of the customer.

"Relationship managers are the key risk in the wealth management business from an investor's point of view. His remuneration is not fully aligned with the interest of the investor," Mr Vaidhyanathan said.

"The institution guards its risk by getting certain documents from the customer, so the risk of the relationship manager is actually borne by the customer. Therefore, we regulators should better address the issue of regulating the relationship manager," he added.

When contacted, Karvy Private Wealth Management chief executive Hrishikesh Parandekar said, "Such regulatory steps will definitely help the industry in a regulated manner so that another bad name can be avoided."

"At Karvy, we have a multi-layer screening process of our relationship managers and wealth managers, plus a long induction programme. Having said so, no authority on earth can prevent a person from committing a crime if he/she is hell-bent on committing it," he said.

The domestic private wealth management sector is pegged at round Rs2 lakh crore and had been growing at a compounded annual growth rate of 25%, Mr Parandekar said.

Another private manager said while it will be easier to work under one umbrella regulation instead of having different regulators for different products, it will increase the cost of operations for firms, as they would have to put in place new systems and infrastructure to comply with new norms.

It can be noted that following the fall of the Lehman Brothers and the resultant global financial meltdown, the government has set up a super regulatory body called the Financial Stability and Development Council, with the finance minister as the chairman and the Reserve Bank of India governor as deputy chairman.

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Headline inflation rises marginally to 8.31% in February

With inflation showing no signs of moderation, it is widely expected that the RBI will raise key policy rates at its quarterly monetary policy review on 17th March

New Delhi: India's headline inflation rose marginally to 8.31% for the month ended February from 8.23% in the previous month, putting pressure on the Reserve Bank of India (RBI) to raise interest rates when it reviews the monetary policy later this week, reports PTI.

The rise in inflation was mainly on account of higher milk, edible oil, vegetables and fruit prices. In addition, high fuel prices on account of soaring international crude oil rates also contributed to the higher inflation.

With inflation showing no signs of moderation, it is widely expected that the RBI will raise key policy rates at its quarterly monetary policy review on 17th March.

It may be recalled that food inflation, which accounts for over 14% of overall wholesale price index (WPI) inflation, stood at 10.65% in February.

As per the WPI data, the prices of primary articles-food, non-food articles and minerals-shot up by 14.79% on an annual basis, official data released here showed. However, prices of certain food items declined on a year-on-year basis.

While wheat became cheaper by 1.67%, pulses prices fell by 5.10% and rates for potatoes by 11.28%.

During the month, fuel and power prices went up by 11.19%, driven mainly by a 28.73% rise in petrol prices and a 14.99% jump in cooking gas (LPG) rates.

At the same time, the manufactured goods group index rose by 4.49% on an annual basis. Manufactured items have the highest weight of 64.9% in the WPI.

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Court allows further probe into palmolein case

The case relates to alleged corruption in the import of palmolein from Malaysia at exorbitant rates, which allegedly caused a loss of Rs2.32 crore to the exchequer in 1991-92

Thiruvananthapuram: In a decision fraught with political significance, the vigilance court here today allowed a plea from prosecution to further investigate the palmolein import graft case, reports PTI.

The prosecution in a petition filed earlier this month had sought court direction for further probe into the case contending that some more persons were likely to become accused in the case.

The move was seen as an attempt to implicate opposition leader Oommen Chandy, who was finance minister in the UDF ministry headed by late K Karunakaran, which cleared the palmolein import deal in 1992, which led to the case.

The case related to alleged corruption in the import of palmolein from Malaysia at exorbitant rates, which allegedly caused a loss of Rs2.32 crore to the exchequer in 1991-92.

The accused in the case included then food minister TH Musthafa and former Central Vigilance Commissioner PJ Thomas, who was food secretary during the period.

Mr Musthafa's advocate had recently moved a petition before the court that like the concession given to Mr Chandy, the then minister of finance, his client should also be absolved from the case.

The charge-sheet in the case was filed by the vigilance and anti-corruption bureau in 2003.

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