Regulations
SEBI implements measures to revive mutual fund industry

SEBI said a number of steps are being taken to increase the penetration of MF and to energise the distribution network while protecting the interest of investors

 
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has announced implementation of a number of steps for the benefit of mutual fund (MF) industry, including an additional levy on investors for catering to smaller cities and availing the services of a whole new class of persons as distributors, reports PTI.
 
As per the proposals approved by SEBI's board on 16th August, the market regulator said, a number of steps are being taken to increase the penetration of MF and to energise the distribution network while protecting the interest of investors.
 
Among the measures announced, the MFs can charge up to 30 percentage points of additional TER (Total Expense Ratio) -- a fee charged to investors for MF investments under fund management and other heads -- if the new inflows from beyond top 15 cities are at least 30% of gross new inflows in the scheme or 15% of the average assets under management (year to date), whichever is higher.
 
The top 15 cities would be decided on the basis of data compiled by the Association of Mutual Funds in India (AMFI) data for 'AUM by Geography Consolidated Data for Mutual Fund Industry' as at the end of the previous financial year.
 
MFs would need to make complete disclosures in their half yearly report to SEBI regarding the efforts to increase geographical penetration and the details of opening of new branches, especially those beyond top 15 cities.
 
In another step, SEBI has allowed MFs to charge service tax on investment and advisory fees to the scheme.
 
Also, MFs have been asked to launch schemes under a single plan and ensure that all new investors are subject to single expense structure. Existing schemes with multiple plans can accept fresh subscriptions only under one plan and other plans will continue till the existing investors remain invested in the plan.
 
SEBI also asked MFs to provide a separate plan for direct investments (investments not routed through distributor) in existing as well as new schemes. Such separate plans shall have a lower expense ratio excluding distribution expenses and commission, and no commission shall be paid from such plans.
 
The SEBI directive for direct MF investments would be effective from 1 January 2013, while all other measures would come into effect from next month, or 1 October 2012.
 
Regarding distribution of mutual fund products, SEBI said that all the agents or distributors of MF units are required to obtain certification from the National Institute of Securities Markets (NISM) and registration from AMFI.
 
A new cadre of distributors, such as postal agents, retired government and semi-government officials, teachers and bank officers with a service of at least 10 years, and other similar persons (such as Bank correspondents) may be allowed to sell units of simple and performing mutual fund schemes.
 
SEBI said that this new cadre of distributors would require a simplified form of NISM certification and AMFI registration.
 
Also, AMFI should create a unique identity number of the employee/relationship manager/ sales person of the distributor interacting with the investor for the sale of mutual fund products, in addition to the AMFI Registration Number.
 
SEBI also asked MFs to annually set apart at least two percentage points on daily net assets within the maximum limit of TER for investor education and awareness initiatives.
 
Besides, MFs have been asked to make monthly portfolio disclosures for all their schemes "in a user-friendly and downloadable format (preferably in a spreadsheet)" and in the same format as that of half yearly portfolio disclosures.
 
MFs may have to disclose certain additional information such as charges and fees as well, subject to compliance with the Advertisement Code.
 
In order to help enhance the reach of MF products amongst small investors, who may not have PAN/bank accounts, such as farmers, small traders/businessmen/workers, SEBI has allowed cash transactions of up to Rs 20,000 per investor in a mutual fund every year.
 
However, any repayment like redemptions and dividend with respect to such investments would be paid only through banking channel.
 
SEBI has also set certain prudential limits and disclosure norms for portfolio concentration risk in debt-oriented mutual fund schemes. It has asked MFs to ensure that total exposure of debt schemes of mutual funds in a particular sector, barring a few exceptions, shall not exceed 30 per cent of the net assets of the scheme.
 
For transaction charges, distributors shall have the option to either opt in or opt out of levying transaction charge based on type of the product.
 
Also, MFs would need to make half yearly disclosures of their unaudited financial results, along with additional details like total commission and expenses paid to distributors, distributor-wise gross inflows, net inflows and average assets under management.
 
In case the data suggests that a distributor has an excessive portfolio turnover ratio, say more than two times the industry average, AMCs shall conduct additional due-diligence of such distributors, SEBI said.
 
For harmonising the applicability of NAV across schemes, SEBI said that in respect of purchase of units of MF schemes, the closing NAV of the day on which the funds are available for utilisation shall be applicable for application amount equal to or more than two lakh, irrespective of the time of receipt of such application.
 

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Everybody except Congress slams diesel price hike, LPG policy

The price hike has come as a cruel joke and 'mortal blow' to the common man and farmers already reeling under inflation and drought like situation

New Delhi: Slamming the government over diesel price hike, UP allies Trinamool Congress and Samajwadi Party have demanded an immediate rollback while the opposition said the increase will further hit the common man and create "mayhem" in the economy, reports PTI.

 

"We are unhappy. We will not accept it and demand its rollback," Mamata Banerjee, chief of Trinamool Congress, the second-largest constituent of the UPA said in Kolkata.

 

"If people do not mind, I will be most happy to withdraw support (to the UPA). If I withdraw support then other parties will provide support to them. And, then ask why we left the UPA which led to its collapse. People had misunderstood us when we had withdrawn support earlier."

 

The Trinamool Congress would take to the streets for 72 hours from Friday opposing the decisions, she said.

 

Demanding an immediate rollback in diesel prices, the Samajwadi Party, which provides outside support to the UPA, said, the decision is ill-timed.

 

"We demand immediate withdrawal of the hike as it will badly hit the common man and farmers," SP leader Kamal Farooqi said.

 

Their sharp reaction came after the government decided to hike diesel prices by Rs5.62 per litre effective Thursday tonight.

 

The Cabinet Committee on Political Affairs, headed by Prime Minister Manmohan Singh, had decided to raise diesel prices.

 

It also decided to restrict supply of subsidised cooking gas to six cylinders per household in a year.

 

The BJP termed the price hike as a cruel joke and "mortal blow" to the common man and farmers and charged the government with conspiring with petrol 'mafia'.

 

"This is a cruel joke on the common man in the country. It has hit farmers hard during the peak paddy sowing season. We will not allow this hike. We will not allow this government to loot the common man like this," BJP Vice President Mukhtar Abbas Naqvi said.

 

BJP leader Yashwant Sinha said, "Diesel increase will have a cascading effect on the economy as a whole. Prices are already not under control, so this is going to contribute to overall inflation and create mayhem in the economy."

 

CPI National Secretary D Raja termed the decisions as "retrogade and anti-people".

 

"It will have an adverse effect on the prices of essential commodities which are already high. It will further increase hardship of common people. Government should not go ahead," he said.

 

AIADMK supremo Jayalalithaa accused the Government of constantly betraying the people. She said the diesel hike would result in increase of prices of essential commodities and vegetable.

 

"I demand the rollback of the hike in diesel price and ceiling in cylinder subsidy," she said.

 

"Even a family of 4 persons need the use of at least one cylinder per month. Hence they will also have to ease out the 6 cylinder norms, which is absolutely unreasonable. It goes without saying that the scam money is not with the exchequer but with others like the nexus of politicians-bureaucrats - businessmen who have pocketed the loot. Therefore it appears that the Government is left with no options but to raise the prices of diesel and do away with subsidies to augment the Government resources. They are least bothered if the common man suffers or survives on account of this price onslaught," said Dolphy Dsouza, former National Vice-President of All India Catholic Union and immediate Past President of The Bombay Catholic Sabha.

 

Admitting that it was an "unpleasant" decision of the government, Congress said it was not in favour of a hike to such an extent because it hurts the farmers and the common man.

 

Government has to take a conscious decision after taking all allies of the UPA into confidence, party general secretary Digvijay Singh said, adding that the issue should be discussed in the UPA coordination committee.

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COMMENTS

M G WARRIER

4 years ago

This is a move which affects aam aadmi already struggling to make both ends meet. What is intriguing is the recent attempts by government to compartmentalize or divide consumers to avoid direct confrontation with a class of consumers. Such an effort is evident in charging double the cost of sixth cylinder for the 7th one, differential charges for electricity for use during normal hours of consumption in Kerala, dividing employees into two categories for pension benefits (in this case without any legislative sanction) and so on. The absence of transparency in governance is going to cost the nation heavily. Credibility once lost will be difficult to restore.

REPLY

PPM

In Reply to M G WARRIER 4 years ago

UPA is not worried about the aam aadmi as they are keen to sell india in parts to foreign countries. Prime Minister is smiling today, that means, what he has done today (allowing FDI in retail ans airlines)is approved by his masters.Also, increase in diesel price and restriction in gas cylinder will divert the attention from COALGATE to Diesel /LPG.

Shadi Katyal

4 years ago

The very fact that GOI has been involved in such large subsidies that now it must start to wean the public. Diesel for farmers is a joke as it is the biggest land holder who take advantage and not a poor farmer.Even car owners enjoy this subsidy.Has it been left in provate sector from day one,we will not be seeing this turmoil.We must educate our political parties about the cost of CRUDE OIL and its effect on our budget and economy and start to learn that populism may bring votes but it leaves a bad taste when prices are increased. We in India must learn to wean away from such subsidies. We must face the reality and truth of world prices and no party should exploit for votes and harm the nation

REPLY

M G WARRIER

In Reply to Shadi Katyal 4 years ago

Subsidy is not just restricted to oil prices. When land or natural resources are 'gifted' to private sector, there is an element of subsidy. Every year, huge subsidies are given to business houses thru tax concessions.There is a reverse subsidy, when workers are not paid real wages. That is where, we have to see things in the Indian context.Even the losses estimated by CAG should be seen as subsidy given by the exchequer(read tax-payer)

Shadi Katyal

In Reply to M G WARRIER 4 years ago

This is a typical socialist answer when we donot wish to facew the truth that no Govt in the world can continue to subsidise any product for a long time unless revenues also inrease.We have lived too long on such subsidies.
the Industry is provided where it generates Revenues and employment for the people. One can complain about wages but do we have any Minimum wage set up in any state.Indusries can pay levish wages but prices of products will be higher for all of us.
Was the M

M G WARRIER

In Reply to Shadi Katyal 4 years ago

Ok Do not worry about isms. Try and understand the impact of subsidies and 'reverse' subsidies on aam aadmi. There is a Minimum Wages Act with state-wise amendments reading which a person of average intelligence like me will not be able to make head or tail out of it. You can accuse my arguments to be 'socialist', but do we not have to take care of the basic needs of the majority? Saying one thing twice, does not make the listener wiser.

Shadi Katyal

In Reply to M G WARRIER 4 years ago

This is a typical socialist answer when we donot wish to facew the truth that no Govt in the world can continue to subsidise any product for a long time unless revenues also inrease.We have lived too long on such subsidies.
the Industry is provided where it generates Revenues and employment for the people. One can complain about wages but do we have any Minimum wage set up in any state.Indusries can pay levish wages but prices of products will be higher for all of us.
Was the M

M G WARRIER

4 years ago

This UPA and its allies are making a mockery of parliamentary democracy. Some of their allies are in the opposition also! Whatever way you throw you up, sufficient number to sustain the government will make a formation and frown at you. Saw leader of one of the coalition allies lamenting that 'I am willing to withdraw support to government on this issue, but some other party will come and rescue!' A sad day for Indian democracy.

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