Multi-pronged strategy soon to widen MFs reach: SEBI

Exploring possibilities of easing norms for institutional placement

The Securities and Exchange Board of India is set to come out with a multi-pronged strategy to enhance the reach of the mutual fund industry. The board has set up a panel for the purpose. “The exercise has just begun,” said Mr U.K. Sinha, SEBI Chairman, on Monday.

He said that SEBI is concerned at the reach of mutual funds is not up to its (SEBI's) expectations or the potential of the market.

In 2010-11, the net inflow in to the equity schemes of mutual funds was down by about Rs 13,500 crore. But, in the following year, it turned positive with a net flow of around Rs 700 crore. “This is an encouraging development. But, the number of folios in the mutual fund industry has gone down in 2011-12,” he said.

Besides, it is also seriously exploring possibilities of easing procedural requirements for institutional placement of shares and offer for sale. Mr Sinha said, the idea is to encourage companies to comply with SEBI's recommendation on minimum public holding.

He pointed out that there are still 181 companies in the country which are not compliant of minimum public holding norm — 25 per cent in the case of private companies and 10 per cent in the case of PSUs. So far, only three issues have come out, of which two were institutional placements and the third, an offer for sale, he said.

On the investor complaints, Mr Sinha said, since June last year, when SEBI launched computerised complaints registering system, there were 35,000 complaints registered. More than two-third of this has been resolved within 30 days. The rest of them too will be sorted out very soon, he said.

According to him, more than 50 per cent of the complaints are against companies. Most of them are about not receiving dividends or annual reports.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article3394483.ece

Anyone raising money from investors must be regulated

Companies, mutual funds, venture funds, portfolio managers. The number and variety of entities raising money from the Indian investor has mushroomed in recent years, but regulations haven't kept up. The Securities Exchange Board of India Chairman, Mr U.K. Sinha, says his objective is to fill this vacuum.Henceforth, all entities raising money from domestic investors will be registered, without any exceptions.

Systemic risk

Speaking to Business Line on a visit to Chennai, Mr Sinha explained that this need was brought home during the market crash of 2008. “We found in 2008 that large pools of (retail) money were collected and used to play the market without anybody having any idea even about its dimensions. There was no clarity on how much money was being collected under private pools.”

This is why SEBI has made its recent moves to tweak regulations for portfolio managers and alternative investment funds as well.

“Now we have decided that alternative investments such as private equity, venture capital or hedge fund — anyone collecting private pools of money from investors, should be registered and information should be disseminated. This is necessary from a systemic perspective.” The earlier venture capital regulations for instance, never mandated that such funds needed to be registered with SEBI.

Why has the minimum investment limit for portfolio managers (Rs 25 lakh) or private equity funds (Rs 1 crore) set so high?

The idea seems to be to keep uninformed retail investors away from such vehicles.

Explains Mr Sinha: “We want to make sure that the uninformed retail investor invests only in mutual funds, where regulations are water-tight. In fact, we are looking at a hierarchy of regulations, in terms of stringency. At one end, there are vehicles such as mutual funds where one can invest even Rs 100 or Rs 500.

“At the other extreme, entities such as private equity, venture funds cannot collect less than Rs 1 crore per investor. These will be subject to light-touch regulations.”

SEBI says that the final set of regulations on alternative investment funds will be ready shortly.

Asked about what the regulator is doing to develop the corporate bond market, Mr Sinha replied that the problem with the corporate bond market was one of demand and liquidity. These have been impacted by many factors, including regulations governing the institutions who hold bonds.

On the supply side though, SEBI is working on expanding the suite of products. “Hedging and risk management for instance, was available for ten-year bonds and T Bills, but we were told that such products are required for intermediate bonds with two-year terms. We are planning to do it.”

Source: http://www.thehindubusinessline.com/markets/stock-markets/article3394492.ece

SEBI sees no reason to remove entry load ban in mutual funds.

Mutual fund companies looking for a reprieve in the form of reintroduction of entry loads or other charges may be disappointed, as the stock market regulator does not appear to be looking at the option in the near term. Considering the growth in the equity mutual fund schemes in the country, there was no need to bring back the entry load, the Securities and Exchange Board of India (Sebi) hinted.

“In 2010-11, the net inflow in equity schemes of the mutual fund sector was down by about Rs 13,000 crore, while in 2011-12, the net inflow was higher by Rs 600-700 crore. This is an encouraging development considering that the number of mutual fund folios were down in 2011-12,” the Sebi chairman, UK Sinha, said, at a press conference here on Monday.

In 2009, Sebi banned the practice of charging entry loads on mutual fund products making the product pricing more transparent. Mutual fund companies have been asking for the reintroduction of the entry load that would make the business more viable and profitable.

Evading a direct reply on the demands by Association of Mutual Funds in India (Amfi), Sinha said, “When there has been an increase in inflows even after the number of folios have gone down, it will not be fair for Sebi to jump to conclusions.” Sebi had not received any representation from Amfi on the same, he added.

The spread of the mutual fund business has not been up to the expectation of the potential of the market and Sebi has started the process of consulting agencies and shareholders to enhance the reach of mutual funds in India, he informed. Based on the responses of various stakeholders, the capital market regulator would consider setting up a committee to develop mutual funds business in India.

Sebi, which is in discussion with the insurance regulator Irda (Insurance Regulatory and Development Authority) to frame the listing norms for general insurance companies, hopes that the regulation would be out very soon.

The regulator has issued licenses to 13 qualified depository participants (QDP) to bring in qualified foreign investors (QFI) to invest directly in Indian equity markets.

“The entities need license to canvass for business outside India and minimum assets of Rs 500 crore. We have given licenses for 13 QDP. When the funds would start coming in, is not known to me,” Sinha said.

Source: http://www.mydigitalfc.com/mutual-funds/sebi-sees-no-reason-remove-entry-load-ban-mutual-funds-154