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Sebi asks MFs to become more transparent

Friday, July 29, 2011
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Mumbai: While allowing mutual funds to charge a fresh transaction fee from investors, market regulator Sebi today also asked them to bring in more transparency about their dealings with investors and agents. At a board meeting today, the regulator heeded to the mutual funds'' long-pending demand to incentivise them for losses suffered due to abolition of entry charge on investors. It also allowed them to manage and advise pooled assets such as offshore funds and pension funds, provided there was no conflict of interest due to differential fee structure. However, Sebi asked MFs to bring in transparency in the information given by them to the investors through advertisements and other modes. "Guidelines for advertisements will be suitably modified to include point to point return on a standard investment of Rs 10,000 and other performance related disclosures. Besides, MFs would be required to give more granular disclosure of their Assets Under Management (AUM) figures, giving break up of debt/equity/balanced and also geography- wise disclosures. "Besides, the scheme performance will have to be disclosed against Sensex or Nifty or Government of India debt paper in addition to scheme benchmark. "Performance of fund managers across all schemes managed by the same fund manager will have to be disclosed," Sebi said. Also, Sebi took its first steps towards regulating the MF distributors or agents. "Selected distributors will be regulated through Asset Management Companies (AMCs) by putting in place the due diligence process to be conducted by AMCs," it said. The due diligence process will be initially applicable for those distributors having multiple point presence in more than 20 locations, having raised assets of over Rs 100 crore across industry from non-institutional investors and high networth individuals (HNIs). The distributors having received commission of over Rs 1 crore per annom across industry and of over Rs 50 lakh from a single mutual fund would also be covered in initial phase. "It is estimated that this measure will cover distributors handling about half of the total AUM in the industry," Sebi said. It also asked MFs to disclose the commissions paid to the distributors and said that the mutual fund industry body AMFI would disclose the aggregate amount of commissions paid to such distributors by the MF industry. Sebi also asked all the operations of a mutual fund to be located in India.
Source: PTI
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