Amfi may seek self-regulatory powers

The Association of Mutual Funds in India (Amfi) may approach the Securities and Exchange Board of India (SEBI) to grant it some powers to regulate the mutual fund industry.

In a meeting last week, Amfi members, comprising mutual funds, discussed the possibility of seeking a self-regulatory organisation (SRO) status for the industry body, among some other issues including a recent proposal to raise the net worth for asset management companies (AMCs).

SEBI is the sole regulator for the 39-member-strong local mutual fund industry with assets under management worth over Rs 800,000 crore.

“It was just a discussion to see if there is any merit for Amfi to become an SRO,” said a person privy to the discussion. “The thought among members is that Amfi can handle the smaller functioning aspects of the industry, while SEBI can handle the larger policy issues,” he said.

This plan for the mutual fund industry, which was first floated in 2006, is similar to the one that stock broker members have sought from SEBI, but has been delayed because of differences between BSE brokers’ forum and Association of NSE Members of India.

“As an SRO, Amfi can look at issues such as irregularities happening at the individual mutual fund level and take corrective measures,” said a senior official with the mutual fund industry.

SEBI recently hauled select mutual funds for ‘unfair practices’, which evoked murmurs of protests in the industry. Mutual fund officials felt SEBI was getting involved in the ‘micro-management’ of the industry.

The Amfi meeting last week also discussed recent SEBI committee recommendation that the minimum net worth for AMCs should be increased to Rs 50 crore over three years from the existing Rs 10 crore. Many industry members, especially the smaller ones, felt the move would make the mutual fund business unviable for them.

“While hiking the net worth is to ensure that players are serious about the business, the general feeling among members is mutual funds are pass-through vehicles,” said the person, quoted above.

A senior official at a smaller mutual fund said the move will force many similar funds, which are equally serious about the business as their larger peers, to shut shop.

“This will reduce competition in the industry which is key to ensure better services to investors,” he said. The SEBI committee had also recommended hiking minimum net worth to brokers, rating agencies and merchant bankers.

Source: http://economictimes.indiatimes.com/articleshow/6052115.cms