The Securities and Exchange Board of India (Sebi) is planning to introduce norms to regulate mutual fund distributors, said a top official. The stock market regulator is working with the Association of Mutual Funds in India (Amfi) in this regard and plans to effect the proposed norms from June, said Sebi’s executive director KN Vaidyanathan.
“Distributors have to be regulated and we have given the responsibility to Amfi. Every component of capital market intermediaries need to be regulated,” Mr Vaidyanathan told reporters at a Federation of Indian Chambers of Commerce and Industry (FICCI) conference here on Tuesday.
India’s fragmented mutual fund distribution industry is largely unregulated and has been in shambles since August after Sebi banned asset management companies (AMCs) from charging investors the so-called entry load that was mostly used to remunerate distributors.
The new rule gave very little incentive for distributors to sell mutual fund products. While the larger distributors have been less affected by the move, smaller distributors have taken a severe hit, with many of them even shutting shop.
Now, Sebi along with Amfi, is attempting to put processes in place to train and certify distributors.
“The examination which we (Amfi) initiated in 2000 is now undergoing a change. The exam will now be conducted by the National Institute of Securities Market (NISM),” said AP Kurian, chairman, Amfi. “NISM will now conduct all examinations for market participants in the securities market,” he said.
There are around 65,000 mutual fund agents across the country who have Amfi registration numbers (ARN).
The need to train distributors was mentioned in the Swarup Committee’s consultative paper on investor awareness and protection. The paper emphasised on the pressing need in the market for a regulatory structure for mutual fund, insurance and pension sellers and advisers.
There are 30 lakh plus insurance and mutual fund agents and bank officials (as per Swarup committee estimates) which sell retail financial products in India. Separately, at the FICCI event on Tuesday, Sebi chairman CB Bhave stressed on the need to cut costs in securities market transactions and also said sellers of derivatives products should not ‘indiscriminately sell these products’.
“One should see that products are sold to only suitable investors. We need to keep appropriateness in mind... We should not sell these products indiscriminately to push volumes,” Mr Bhave said.
“Cost of securities market transactions is a challenge. We need to be conscious of cost- cutting in market transactions,” he said.
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