Page 18 - Banking Finance July 2022

MUTUAL FUND

manager Deepak Agrawal were asked "We estimate that the total headroom by family members of staff. These are
to leave the fund house due to allega- for the industry will be just 2-3% of the some of the actions that various do-
tions of front-running and broker pay- $7 billion limit," said the CEO of a do- mestic asset management companies
ments. mestic fund house. This means the in- and broking firms are taking or consid-
dustry will be able to add just 800-1200 ering in the wake of front-running and
Joshi, who has almost 20 years of ex-
crore of international assets. insider-trading cases surfacing in re-
perience in the capital market, had
cent times. Many of these financial
been a part of Axis AMC since 2009. He
has held positions at ICICI Securities Mutual funds unlikely to services firms are looking to add such
conditions to employee contracts, de-
and BNP Paribas Securities before join-
get a raise in overseas in- spite grumbling that this would infringe
ing Axis AMC.
vestment cap privacy.
Joshi's employment with Axis MFwas
Indian regulators are unlikely to permit The increased surveillance is to moni-
terminated following an investigation
any increase in the limit on mutual tor who the employees are in touch
by a forensic auditor, appointed by the
fund investments in overseas assets, in with during work hours, to track any
AMC. The probe was conducted to as-
part because it could further pressure leaks of price-sensitive information.
certain whether the executives were
the rupee which is already at historic Such tools would serve as a deterrent
involved in front-running, got kickbacks
lows, said two people familiar with the against unethical practices, said mar-
and executed trades that were disad-
matter. ket participants.
vantageous to the schemes.
There is a cap of $7 billion on total in- Some finance firms are employing ana-
Mutual funds can again vestments by Indian mutual fund lytical tools to look for patterns in all
schemes in foreign funds which actu- the data recorded, akin to how the
accept money in interna-
ally hold the assets. There is a separate market regulator and stock exchanges
tional schemes limit of $1 billion for local funds that keep tabs on insider trading. In the
invest in foreign exchange-traded past few months, at least three cases
Sebi has allowed mutual funds to ac-
funds (ETFs). A collapse in the value of involving insider trading have come
cept fresh money in international
some of those schemes has led to a under regulatory scrutiny, said people
schemes to the extent of the overall
demand for higher limits to help inves- with direct knowledge of the matter.
industry limit of $7 billion. In a letter
tors bring down their average invest- In such instances, the institution itself
to industry body Association of Mutual
ment cost. could be exposed to regulatory action.
Funds of India (AMFI), the capital mar-
kets regulator said asset managers "While Sebi has been in favour of an
may resume subscriptions and make increase in the limit to help mutual Kotak MF files for Nifty
investments in overseas funds or secu- funds to garner more funds, the cen-
Smallcap 50 Index Fund
rities 'up to the headroom available tral bank is reluctant to raise the
Kotak MF filed draft documents with
without breaching the overseas invest- limit," said one of the people.
the securities market regulator, SEBI
ment utilization limit'.
for launching a Nifty Smallcap 50 Index
Some mutual funds may however not Fund houses put extra
Fund.
accept investor flows in these products
checks in place to curb in- Going by the draft scheme information
due to lack of clarity over the limits
sider trading document or SID, the scheme has
available.
been labelled 'very high risk' on the
A leading mutual fund has asked top
While there is no estimate of the re- Riskometer. The scheme will be
executives to stop using encrypted
demptions in international schemes, benchmarked to the Nifty Smallcap 50
messaging platforms such as
mutual fund officials and distributors Total Return Index and will allocate 95-
WhatsApp on their work phones. Some
speculate the headroom to accept 100% of its assets to the constituents
brokerages are installing monitoring
fresh flows could be low. This is because of the Nifty Smallcap 50 Index and up
applications on the terminals and
international schemes did not witness to 5% to debt and money market in-
phones of key employees, while an-
sharp outflows amid the correction. struments.
other firm wants to track investments
18 | 2022 | JULY | BANKING FINANCE