Regulations
SEBI panel to study global practices to expand MF reach

Taking note of retail MF assets accounting for as high as 74% of GDP in the US and 42% in the UK, the Indian market regulator asked its mutual fund advisory panel to study regulatory provisions in international jurisdictions to suggest ways to channelize retail savings into MFs

 
New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has asked its mutual fund (MF) advisory panel to study regulatory provisions in international jurisdictions to suggest ways to channelize retail savings into MFs and submit a report in next three-four months, reports PTI.
 
Taking note of retail MF assets accounting for as high as 74% of GDP in the US and 42% in the UK, the MF Advisory Committee (MFAC) of the SEBI, has pitched for a need to undertake various long-term and short-term measures to boost MF investment flow.
 
It has been recommended by MFAC that long term measures will be required to channelize the retail savings in a major way into investments in mutual fund schemes.
 
SEBI is of the view that further focused deliberations need to be undertaken by the MFAC for this purpose, regulatory officials said.
 
Consequently, SEBI has proposed that MFAC undertake study of regulatory provisions prevalent in the international jurisdictions and submit their recommendations by way of a report within a time frame of 3-4 months.
 
SEBI would provide all the required assistance to MFAC in this matter.
 
SEBI Chairman UK Sinha has recently stressed on the need to expand the reach of mutual funds, while Finance Minister P Chidambaram has also said that steps were required to channelize household savings into products like MFs, rather than in gold.
 
At its board meeting last month, SEBI had asked MFAC to develop a long-term policy paper on mutual funds after wider consultation with all the stakeholders.
 
The paper is expected to deal with policy objectives, measures to augment the financial inclusion objectives by increasing penetration of the industry, obligations on the industry and other stakeholders, tax and other measures to help in the growth of the industry.
 
Some of the long-term measures have already been proposed for mobilisation of household savings into MFs. It has also been felt that there are separate policies and regulatory framework for various sectors such as insurance, pension, portfolio management, telecom and even venture capital funds.
 
But, no such policies exist for the Mutual Fund industry.
 
MFAC, which comprises of members from the industry and other experts, is mandated to advise SEBI on matters relating to regulation and development of MF industry, their disclosure requirements and investor protection measures.
 
Besides, it also advises SEBI on measures required to be taken for change in the legal framework to introduce simplification and transparency in the MF regulations.
 

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COMMENTS

Nilesh KAMERKAR

4 years ago

Finally the truth has prevailed, if this is not an acknowledgment of failure, then what is it?
Like the blind men trying to figure out an elephant, we too lost sight of the bigger and whole picture.

One way of reviving the mutual fund industry is by weeding out the unnecessary complications that have been created in the last 5 years under the pretense of low-cost operations, ‘investor protection’ and additional transparency.

The MF industry was doing just fine till 2007 -2008; if we undo only ‘those’ measures which have not worked or rather have proven to be counter productive, it shall be good enough. (But . . . then nobody gets to travel abroad on tax payer’s money)

What is required is large doses of commonsense… any amount of foreign travel cannot guarantee that.

Hope, they do not come up with the ‘Simple’ idea of now hiring retired teachers and retired bankers abroad for selling mutual funds in India.

SEBI may cap fees charged by investment advisers

All investment advisers would need to register with SEBI after payment of required application and registration fees

 
New Delhi: With an aim to crack its whip on investment advisers possibly indulging in unfair trade practices, market regulator Securities and Exchange Board of India (SEBI) is putting in place strict norms for them, including putting a ceiling on fees charged by them, reports PTI.
 
All investment advisers would need to register with SEBI after payment of required application and registration fees, while the market regulator eventually wants them to be regulated through a self regulatory organisation (SRO) model.
 
While the proposals have been approved by SEBI's board, they could be soon notified by the market regulator, a senior regulatory official said.
 
As per the proposed norms, the investment advisers would be under strict vigil for any front-running, a phrase used in market parlance for trading in stocks based on prior information about trades to be conducted by a fund manager.
 
The regulations follow several instances of certain equity research and investment advisory entities, including some overseas firms, issuing negative reports about Indian stocks and they have been accused of unfairly influencing the share prices and charging huge fees for sharing their reports.
 
To address any conflict of interest, investment advisers would be required to segregate their other businesses from their activity as an investment adviser and disclose all commission and rewards that they receive from their clients.
 
Also, investment advisers may charge fees subject to the ceiling specified by SEBI.
 
They would also have to disclose conflicts of interest arising from any association with a product provider, including any material facts that might compromise its objectivity or independence in carrying investment advisory services.
 
The investment advisers would also have to disclose to the investor its holding or position, if any, in the financial product which is subject matter of recommendation.
 
If any conflicts of interest cannot be avoided, the investment advisers would have to ensure that its clients are fairly treated and they would be barred from divulging any confidential information about their clients.
 
They would also have to abide by a code of conduct and conduct risks profiling and risk assessment of the investor.
 
Besides, they would be required to maintain written records relating to investment advisory services for a period of five years and conduct yearly audit in respect of compliance with regulation.
 
Also, they cannot employ any device or scheme to defraud any client or prospective client.
 
Those aspiring to become an investment adviser would need to have an experience of at least five years in activities relating to advice in financial products or fund or asset or portfolio management, besides other educations qualifications.
 
The investment advisers would need a certification on Financial Planning or fund or asset management or investment adviser or any such certification, while existing investment advisers will be given two years time for such certification.
 
Investment advisers who are body corporate shall have a net-worth of not less than Rs25 lakh, while individuals or partnership firms shall have net tangible assets of not less than Rs5 lakh.
 
A body corporate offering investment advisory services shall ensure that such activity is segregated from other activities through a separately identifiable department.
 
Also, advice exclusively on non-securities market which is regulated by sectoral regulators would be outside the scope of SEBI regulations. Advice on the portfolio which contains securities or investment products, however, shall be covered.
 
The SEBI norms would also cover the financial planning service, while representatives of investment adviser which are body corporate and the fund managers who are employees or advisers of mutual funds or asset management company or alternative investment funds are also required to register.
 
A bank which has been permitted by RBI to undertake investment advisory services through a subsidiary or a separate division, would need to seek SEBI registration.
 
Those exempted from the purview of SEBI regulation include a person giving general comments in good faith in regard to trends in the financial or securities market or the economic situation and where such comments do not specify any particular securities or investment product.
 
Investment advice given without any consideration through newspaper or other media forum widely available to the public would also be exempted, while the exemption would also apply to any insurance agent, broker, pension advisers, mutual fund distributors, advocates, solicitors, law firms, chartered accountants, portfolio managers and merchant bankers.
 

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RBI cautions public against fraudulent mails

The fraud mails sent in RBI's name also informs bank account holders about the RBI setting up a new 24x7 Centralised Monitoring Centre to monitor financial transaction flow from the internet banking account, which is not true

 
Mumbai: The Reserve Bank of India (RBI) has again cautioned public not to respond to fraudulent mails asking for their internet banking account details, reports PTI.
 
"It has come to the notice of the RBI that a fraudulent email has been sent and signed in its name as 'Reserve Bank of India'.
 
"The mail has referred to provisions of Banking Regulation Act... The email then gives a link asking bank account holders to update their account information for updation in their database," RBI said in a statement.
 
The mail also informs the bank account holders about the RBI setting up a new 24x7 Centralised Monitoring Centre to monitor financial transaction flow from the internet banking account.
 
"The RBI clarifies it has not sent any such mail and has not set up any 24x7 Centralised Monitoring Centre to monitor financial transaction flow from the internet banking account," it said.
 
Members of the public receiving such emails are cautioned not to open the mail or attachment and/or try to download it on their computer or provide their data on such links as it may lead to their data being compromised, it added.
 

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