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SEBI to question fund houses for non-performance of MFs

UK Sinha said it will probe mutual funds for non-performance of schemes and for non-compliance with stated investment objectives

June 21, 2012 4:08 IST | India Infoline News Service
Market regulator SEBI (Securities and Exchange Board of India) will question fund houses and fund managers for non-performance of mutual fund schemes. The mutual fund industry, beset by net redemptions by investors and adverse global and local market conditions, shrank by 1.6%i n terms of assets under management (AUM) during FY11-12.

SEBI Chairman UK Sinha said it will probe mutual funds for non-performance of schemes and for non-compliance with stated investment objectives. He further added, the regulator would also conduct inspection on AMCs (asset management companies) for not following rules with regard to the fund objectives.

Mr Sinha was speaking at the CII Mutual Fund Summit 2012 in Mumbai on 21st June. The theme of the Summit was ‘Indian Mutual Fund Industry: Is there a Silver Lining?’ Concerned over non-performance of some schemes over a long period of time, Mr Sinha said that fund houses need to examine the matter and consider the merger of some schemes.

He added that there were at least 18 fund houses where schemes have underperformed to beat the returns of their benchmark indices. Also, losses of certain mutual fund schemes were being transferred to other schemes. The mutual fund industry is primarily debt-oriented with debt funds (including liquid funds) forming 64% of the AUM. As in the past, increased equity participation is the need of the hour for the mutual fund industry.

The regulator is also in the process of framing norms for investment advisors. Indian financial regulators have been working on a comprehensive set of regulations for investment advisory services. Last year, the regulator had circulated a concept paper on investment advisory regulations.

Mr Sinha said that SEBI had recently met Financial Stability and Development Council (FSDC), which has broadly accepted SEBI’s suggestions on investment advisory, and the market regulator will shortly introduce the final set of rules. The regulator is also working on guidelines for initial public offerings.

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