Sebi raises mutual fund disclosure norms, proposes alternative distribution channels
26 Mar 2014
1
The Securities and Exchange Board of India (SEBI) has framed a long-term policy for mutual funds in India, which inter alia includes enhancing the reach of mutual fund products, promoting financial inclusion, tax treatment, obligation of various stakeholders, increasing transparency, etc.
Accordingly, mutual funds have been directed to make discloses on a monthly basis on their web site and also share the information with the Association of Mutual Funds in India (AMFI) on the assets under management (AUM) in the different categories of schemes such as equity schemes, debt schemes, etc.
Mutul funds will also disclose the contribution to AUM from B-15 cities (ie, other than top 15 cities as identified by AMFI) and T-15 cities (Top 15 cities), contribution from sponsor and its associates, contribution from entities other than sponsor and its associates, contribution from investors type (retail, corporate, etc) in different scheme type (equity, debt, ETF, etc), contribution through sponsor group/ non-sponsor group distributors.
They should also disclose state-wise contribution to Assets under Management (AuM).
SEBI has asked fund houses to provide both mutual fund wise and consolidated data be disclosed on AMFI web site as per the SEBI prescribed format.
AMCs should disclose the above on their website (in spreadsheet format) and forward to AMFI within 7 working days from the end of the month. AMFI in turn should disclose the consolidated data in this regard on its web site (in spreadsheet format).
In order to improve transparency as well as encourage mutual funds / AMCs to diligently exercise their voting rights in best interest of the unit-holders, SEBI has directed AMCs to record and disclose specific rationale supporting their voting decision (for, against or abstain) with respect to each vote proposal as stated in the SEBI circular.
AMCs should additionally be required to publish summary of the votes cast across all its investee companies and its break-up in terms of total number of votes cast in favour, against or abstained from.
This should be made on their web site in spreadsheet format on a quarterly basis, within 10 working days from the end of the quarter. Further, AMCs should continue disclosing voting details in their annual report.
Further, AMCs are be required to obtain auditor's certification on the voting reports being disclosed by them on an annual basis. Such auditor's certification should be submitted to trustees and also disclosed in the relevant portion of the mutual funds' annual report and website.
SEBI has asked the board of AMCs and trustees of mutual funds to review and ensure that AMCs have voted on important decisions that may affect the interest of investors and the rationale recorded for vote decision is prudent and adequate. The confirmation to the same, along with any adverse comments made by auditors should be reported to SEBI in the half-yearly trustee reports.
Also, according to SEBI, financial inclusion also implies that the concept of mutual fund products is understood by all and are accessible to anyone who wishes to make an investment in them. Also, investors should be capable of figuring out which mutual fund scheme is appropriate for their financial objectives.
Towards this, SEBI has decided that mutual funds should mandatorily also make available printed literature on mutual funds in regional languages for investor awareness and education, both in print and electronic media.
In order to increase penetration of mutual fund products and to energise the distribution network while protecting the interest of investors, SEBI had permitted additional expense ratio of 30 bps for garnering funds from B-15 cities. This development would lead to setting up of distribution infrastructure by AMCs.
However, in order to achieve participation from all parts of the country in mutual funds, there is greater need for developing additional distribution channels.
SEBI has now directed that PSU banks which have wide bank branches network and have distribution reach in the nook and corner of the country, could play a key role in mutual funds distribution.
In order to leverage the PSU banks infrastructure, mutual funds / AMCs need to develop a system for active support to PSU banks to distribute mutual fund products through them. Such active support would also encourage PSU banks to distribute products of all Mutual Funds.
Online distribution not only increases customer convenience, but also significantly improves distributor economics. The online phenomenon is increasing rapidly and it is observed that more and more people especially younger generation prefers online transactions.
Therefore, it has been decided that all mutual funds should enhance the online investment facility and tap the internet savvy users to invest in Mutual Funds by providing an online investment facility on their web sites.
SEBI has also asked mutual funds to tap the burgeoning mobile-only internet users for direct distribution of Mutual Fund products..
Therefore, it has been decided that PSU banks, which have wide bank branches network and have distribution reach in the nook and corner of the country, could play a key role in mutual funds distribution. In order to leverage the PSU banks infrastructure, Mutual Funds / AMCs need to develop a system for active support to PSU banks to distribute mutual fund products through them. Such active support would also encourage PSU banks to distribute products of all Mutual Funds.
Online distribution not only increases customer convenience, but also significantly improves distributor economics. The online phenomenon is increasing rapidly and it is observed that more and more people, especially younger generation, prefers online transactions.
Therefore, it has been decided that all mutual funds should enhance the online investment facility and tap the internet savvy users to invest in Mutual Funds by providing an online investment facility on their websites.
Mutual funds also need to tap the burgeoning mobile-only internet users for direct distribution of mutual fund products.
Since the investments in short-term deposits of scheduled commercial banks is allowed pending deployment of funds of a scheme the same should also be excluded while calculating sector exposure.
Accordingly, mutual funds have been directed to make discloses on a monthly basis on their web site and also share the information with the Association of Mutual Funds in India (AMFI) on the assets under management (AUM) in the different categories of schemes such as equity schemes, debt schemes, etc.
Mutul funds will also disclose the contribution to AUM from B-15 cities (ie, other than top 15 cities as identified by AMFI) and T-15 cities (Top 15 cities), contribution from sponsor and its associates, contribution from entities other than sponsor and its associates, contribution from investors type (retail, corporate, etc) in different scheme type (equity, debt, ETF, etc), contribution through sponsor group/ non-sponsor group distributors.
They should also disclose state-wise contribution to Assets under Management (AuM).
SEBI has asked fund houses to provide both mutual fund wise and consolidated data be disclosed on AMFI web site as per the SEBI prescribed format.
AMCs should disclose the above on their website (in spreadsheet format) and forward to AMFI within 7 working days from the end of the month. AMFI in turn should disclose the consolidated data in this regard on its web site (in spreadsheet format).
In order to improve transparency as well as encourage mutual funds / AMCs to diligently exercise their voting rights in best interest of the unit-holders, SEBI has directed AMCs to record and disclose specific rationale supporting their voting decision (for, against or abstain) with respect to each vote proposal as stated in the SEBI circular.
AMCs should additionally be required to publish summary of the votes cast across all its investee companies and its break-up in terms of total number of votes cast in favour, against or abstained from.
This should be made on their web site in spreadsheet format on a quarterly basis, within 10 working days from the end of the quarter. Further, AMCs should continue disclosing voting details in their annual report.
Further, AMCs are be required to obtain auditor's certification on the voting reports being disclosed by them on an annual basis. Such auditor's certification should be submitted to trustees and also disclosed in the relevant portion of the mutual funds' annual report and website.
SEBI has asked the board of AMCs and trustees of mutual funds to review and ensure that AMCs have voted on important decisions that may affect the interest of investors and the rationale recorded for vote decision is prudent and adequate. The confirmation to the same, along with any adverse comments made by auditors should be reported to SEBI in the half-yearly trustee reports.
Also, according to SEBI, financial inclusion also implies that the concept of mutual fund products is understood by all and are accessible to anyone who wishes to make an investment in them. Also, investors should be capable of figuring out which mutual fund scheme is appropriate for their financial objectives.
Towards this, SEBI has decided that mutual funds should mandatorily also make available printed literature on mutual funds in regional languages for investor awareness and education, both in print and electronic media.
In order to increase penetration of mutual fund products and to energise the distribution network while protecting the interest of investors, SEBI had permitted additional expense ratio of 30 bps for garnering funds from B-15 cities. This development would lead to setting up of distribution infrastructure by AMCs.
However, in order to achieve participation from all parts of the country in mutual funds, there is greater need for developing additional distribution channels.
SEBI has now directed that PSU banks which have wide bank branches network and have distribution reach in the nook and corner of the country, could play a key role in mutual funds distribution.
In order to leverage the PSU banks infrastructure, mutual funds / AMCs need to develop a system for active support to PSU banks to distribute mutual fund products through them. Such active support would also encourage PSU banks to distribute products of all Mutual Funds.
Online distribution not only increases customer convenience, but also significantly improves distributor economics. The online phenomenon is increasing rapidly and it is observed that more and more people especially younger generation prefers online transactions.
Therefore, it has been decided that all mutual funds should enhance the online investment facility and tap the internet savvy users to invest in Mutual Funds by providing an online investment facility on their web sites.
SEBI has also asked mutual funds to tap the burgeoning mobile-only internet users for direct distribution of Mutual Fund products..
Therefore, it has been decided that PSU banks, which have wide bank branches network and have distribution reach in the nook and corner of the country, could play a key role in mutual funds distribution. In order to leverage the PSU banks infrastructure, Mutual Funds / AMCs need to develop a system for active support to PSU banks to distribute mutual fund products through them. Such active support would also encourage PSU banks to distribute products of all Mutual Funds.
Online distribution not only increases customer convenience, but also significantly improves distributor economics. The online phenomenon is increasing rapidly and it is observed that more and more people, especially younger generation, prefers online transactions.
Therefore, it has been decided that all mutual funds should enhance the online investment facility and tap the internet savvy users to invest in Mutual Funds by providing an online investment facility on their websites.
Mutual funds also need to tap the burgeoning mobile-only internet users for direct distribution of mutual fund products.
Since the investments in short-term deposits of scheduled commercial banks is allowed pending deployment of funds of a scheme the same should also be excluded while calculating sector exposure.
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