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SEBI pulls out 17-year-old idea: AMFI should regulate itself

SEBI chairman suggests that AMFI should seriously examine playing the role of a self-regulatory organisation. This idea was first mooted in 1994 and is of dubious merit because the concept of SRO does not quite work in India

The capital markets regulator, Securities and Exchange Board of India (SEBI) has asked the industry body Association of Mutual Funds in India (AMFI) to don the hat of a self-regulatory organisation, instead of acting as a plain-vanilla industry body as it is doing currently. This comes close on the heels of a rash of rapid-fire changes made by the regulator over the last one year. However, this is one idea that dates back all the way to the tenure of GV Ramakrishna.

Speaking on the occasion of the CII Mutual Fund Summit 2010 in Mumbai today, SEBI chairman CB Bhave did not mince words while discussing the current state of the mutual fund industry. After introducing a series of game-changing initiatives over the past one year, that have virtually shaken the very foundations of the mutual fund industry, the SEBI chief came up with the proposition that AMFI take up more responsibility and consider playing the role of a self-regulator for the industry.

Mr Bhave said, "One thing we would strongly suggest is to examine the role of AMFI and SEBI. All this while, AMFI's stand has been that it is not a self-regulator, but an industry body. You need to examine for yourself whether this is the right way to go. The advantage of being a self-regulator is that you can have your own rules about how the industry will operate, without having to turn to statutory laws which are so much more difficult to change. Because this is an industry, you can take this route. But for that we need some commonality of purpose and a certain coming together of minds. This is not criticism but an examination of where we need to go. You need to ask whether in order to reach where you need to be by 2015, the organisation needs to take on a self-regulatory character." It is interesting to note that this 'proposition' from SEBI has come after various attempts on its part at micro-managing the industry, which have mostly led to a lot of confusion.

The truth is that this concept of self-regulatory organisations (SROs) has never worked out well in India. Similar attempts in the past have been in vain. There are no SROs of investment bankers, brokers, depositories or stock exchanges. At one point, there was a vague idea of brokers forming an SRO but this not happened. In practice, the stock exchanges, which wield substantial powers of their own, are not willing to take on the role of even minimal regulation. They prefer instead to pass on the buck to the regulator. When asked about price-rigging in illiquid scrips, the BSE keeps mum. The concept of SRO is really on paper.

The bigger question is, is SEBI, in allowing AMFI to play the role of an SRO, willing to pass on some of its powers to AMFI for that purpose? And if it does, will the regulator stop micro-managing AMFI?

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COMMENTS

MADHUP KUMAR

6 years ago

SEBI HAS REPEATED HISTORY. MANY YEARS BACK THERE WAS AN EMPEROR CALLED MOHAMMED TUGLAQ (MOST IDIOT EMPEROR AMONG MUSLIM EMPERORS). SEBI AT ITS MOST STRONGEST LEVEL HAS REPEATED MOHAMMED TUGLAQ STORY. MOST IDIOT REGULATOR.

MADHUP KUMAR

6 years ago

FIRST WHOLE SEBI COMMUNITY SALERY SHOULD ME MADE ZERO SALERY & THEN UPON SURVEY FROM COUNTRY WHICH WILL CONTAIN -10 POINT TO + 10 POINT THIER SALERY SHOULD BE DECIDED. YOU WILL WONDER INSTEAD OF GETTING SALERY, THEY WILL HAVE TO PAY FINES TO GOVT OF INDIA FOR THIER MISDEEDS PARTICULARLY MR BHAVE.

MADHUP KUMAR

6 years ago

ONLY WAY TO STRENTHEN MUTUAL FUND INDUSTRY IS TO SHOULDER RES[POSIBILITY ON AMFI BY CREATING IT AN SRO.THIS WILL HELP TO UNDERSTAND THE PROBLEMS OF AMC'S, DISTRIBUTORS AND INVESTORS IN A BETTER WAY.
WONDERFUL IDEA.

anil

6 years ago

IRDA ne sebi ke muh pe tamacha maara. ab baari amfi ki hai . amfi IFAs se fee vasulta hai toh IFAs ke liye fight bhi karni chahiye.

Avijit Roy

6 years ago

I do agree that AMFI should take on the role of a SRO at the earliest, subject, of course, to sanctions. SEBI has, in the recent past, taken some steps which, rather than streamlining the MF industry, has created a situation where Fund Houses are seriously considering exiting the business, either in totality or partially. The advisor fraternity are also in a state of serious confusion. They need to be compensated for their efforts and it makes sense for the fund houses to pay them, rather than the investors. It is true that most advisors are ill-equipped to conduct their businesses, knowledge-wise and end up being mere form-pushers than advisors. If we want to replicate what happens in a more mature financial market, we should ensure that the right type of intermediaries are allowed to do this work. AMFI has now enhanced the certification fee to Rs 5000.00 and Rs 2500.00 for renewals. I wonder how many certified advisors would renew their certifications if they have a retail client-base only. It would serve only the corporate advisors who serve corporate investors, where a fee-based payout is possible. For an advisor who deals only with retail investors, many of whom are first-time investors and would be unwilling to part with any advisory fee, it would not be a worthwhile occupation.

If AMFI has to take on a SRO role, it should also be permitted teeth to take realistic measures for the growth of the industry.

Jayesh

6 years ago

My prayer " Get well soon Bhave " finally has been heard by the GOD.
We as distributors suffered heavy loss during this period but anyway "welcome back Bhave". :)

surya

6 years ago

After so much of debate to gain power to regulate insurance,IRDA has showed finger to sebi,What can he do now?nothing..

Aparna Ramachandra

6 years ago

It is amply clear that Mr Bhave has one point agenda and that is to screw up the Mutual fund industry completely. What is it with him, why is he after the IFA's and each of his dime a dozen decisions are hasty and aimed at shooing the investor away!!! leave the industry alone and us IFA's to function in peace....

REPLY

Roopsingh

In Reply to Aparna Ramachandra 6 years ago

This is very right-he looks so worried about MF but least concerned to his main task of direct market-he never talked in these 2 years about any thing to regulate direct market methods-it looks he is more worried for other products like MF,insurance and want to limit them to such extent that exchanges remain only way of investing-may be he had plans to sell ULIPS through exchanges if he was given authority-

Kumaar L

6 years ago

Whether it is SRO or otherwise, the industry body should always take a comprehensive view of all the players involved. No doubt investors need to be protected or empowered. but by the same logic distributors /IFAs who have put in a lot of effort should survive.Any transition, it should be given sufficient time for all players to adjust and any new laws should be suitable for the people where it is implemented.

One thing that favoured the authorities is steep rise in the stock market. But even after that no meaningful inflow is there. Think if the market has not gone up. Even the handful of advisors would not have survived.

Lastly an Apple or Gold or whatever it is, if it is not reached to the people for whom it is meant, it has no value. And if it has to be reached, there is a cost involved. Whoever takes on they should understand this.

kishore ghiya

6 years ago

Sebi is absolutely right, amfi is association of MF amcs not willing to take any actions against their own members who sit on the board.Unless sebi lowers capital required to start MF to rs 1 cr or allow investment clubs same tax benefits as mutual fund industry nothing will change. To change mf industry, make it open aloow new small players to come and see the competition. Do not worry about scams by small mf players, their total amount will be much lower than that of satyam or reliance power ipo which drove retail investors away. Only competition and less regulation will change the scenerion. Pl visit USA and see how easy it is to float mutual funds or start an investment club. There are more than 1 lac investment clubs putting more money every month in us capital market than mutual fund industry.Why worry about regulating small guys when you are unable to punish satyam or investment banker of reliance power ipo.
kishore ghiya rajkot 9825217857

s c jain

6 years ago

Mr. Bhave only knows to HNI, he always work for them. He do not know small investor and distributor.Distributor is only person who is directly atteched with actual investors.Mr. Bhave should do distributor job for atleast five year in rural area to understand the mutual fund small investors

Bheemsen Kulkarni

6 years ago

What SEBI wants, it does not know itself. What Mr Bhave means is to confuse public when you dont know how convince. He has totally put MF industry indark, he wanted do it to IRDA and it hit back and he playing like a new regional political party

sunil More

6 years ago

This Mr. Bhave has to go if mutual fund industry is to see year 2015 already the objective of mutual fund is thrown in the hands of rich people and corporate money by this person no common man interest and participation is left as IFA( individual financial advisor ) cannot afford to take pain for small investments and self regulation for AMFI is too pink picture to think about

girish prasad

6 years ago

is it due to guilt now again we can try to recomer from coma

Ranjan D Gupta

6 years ago

If AMFI really wants MF industry to grow much faster than this present sluggishness then it should take the responsibility to handle the industry as a Self Regulator.AMFI is able to veiw more closely the problems of this industry and can pave the path of rapid growth.This industry will grow if in a single sentence I want to say I should say ......The regulator of this industry must create an enviornment where AMCs, Distributors and Investors all remain happy. If everybody is happy then there is no question of impossibility to reach 15 lakh crore within 2-3 years.

Daily Market View: Headed higher?

As suspected, the Sensex was supported at around 16,000 and went up. A new short-term high is near if the world market remains bullish

The market witnessed volatile trade on the rollover of positions by traders in the derivatives segment from the near month June contracts to July contracts, ahead of the expiry of the near-month June derivatives contracts on Thursday. The Sensex closed at 17,756, up 6 points (0.04%) and the Nifty ended at 5,323, up 6 points (0.1%). The indices started the day with a sharp plunge, taking cues from Asian markets. They recovered from there in the mid-morning session, touching their intraday highs in the afternoon session. However, the market pared some gains in the remaining part of the trading session and ended flat.

Asian markets were mostly down on Wednesday on concerns over the unexpected decline in US home sales. Key benchmark indices in China, Japan, Indonesia, South Korea, Singapore and Taiwan fell by 0.19% to 1.8%. Hong Kong's Hang Seng recouped initial losses to rise 0.18% at the end of the session.

US stocks were down more than 1% in yet another late-day sell-off on Tuesday as poor housing figures and the puncture of a key technical level weighed on the sentiments of investors. The S&P 500 was down through its 200-day moving average, which had been a basis of support in the last few days. The Dow dropped 149 points (1.4%), to 10,293. The S&P 500 was down 17.8 points (1.6%), to 1,095.3. The Nasdaq lost 27.3 points (1.2%) to 2,261.8.

US economic leaders said that any measure to control the fiscal deficit in the short-term could affect long-term growth. There have already been signs of differing approaches among G-20 members about how to better insulate the global economy against a repeat of the devastating 2007-2008 crisis that caused a severe recession.

Back home, the Reserve Bank of India (RBI) said that it could increase interest rates soon as inflation is at an uncomfortable level.

Foreign institutional investors were net buyers of equities worth Rs975 crore on Tuesday. Domestic institutional investors were net sellers of stocks aggregating Rs197 crore.

Shree Renuka Sugars (down 1%) has successfully concluded a revised agreement to acquire controlling stake in Equipav SA Acucar e Alcool. As per the new terms, the company will invest 450 million Brazilian real in Equipav leading to a majority, controlling stake of 50.34%. Equipav consists of two very large and modern sugar/ethanol mills with integrated co-generation facilities in Sao Paulo in Southeast Brazil having a combined cane-crushing capacity of 10.5 million tonnes of cane per annum (44,400 tcd). In addition, Equipav has a co-generation capacity of 203MW.

Larsen & Toubro (L&T) (down 3.1%) has been disqualified from the bulk tendering process for supercritical boilers and turbine generators for NTPC.

Khaitan Electricals (down 1%) said that the Share Transfer Books will remain closed from 7th to 16th September 2010 (both days inclusive) for the Annual General Meeting for the year 2009-10. The AGM is scheduled to be held on 16th September.

Tricom India (up 6.1%) is in the final stages of acquiring Mastiff Tech Pvt Ltd and Mastiff Internet Media Solutions Pvt Ltd. These companies are leading providers of niche Internet technology solutions. The formalities for these acquisitions are expected to be completed within the next few weeks. The purpose behind these acquisitions is to strengthen Tricom's BPC operations by using Mastiff's technology team and to support its own software development clients.

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