Page 23 - Banking Finance April 2016

MUTUAL FUND
SEBI's move for MFs to
disclose actual amount
stirs up the industry
SEBI's latest move asking mutual
funds to dis- mestic mutual fund business, said two
close the ac- people familiar with the discussions. If
tual amount
paid as com-
mission to
distributors
and also to provide details of
expense ratio of direct and regular
plans in the consolidated account
statement issued to investors, has
evoked strong response from the in-
dustry.
While some industry leaders posted
their comments on Twitter and ex-
pressed their discontent, several dis-
tributors and industry experts are
not only questioning the relevance of
such move but are also calling for
similar disclosures in case of other
financial products.
While there is a perception that such
disclosures may potentially influence
unqualified retail investors to take
the direct investment route and
thereby force some distributors to
exit the industry, there is also a view
that there has to be uniformity in the
levels of disclosures in case of various
financial products for which various
regulators will have to come to-
gether and decide on the same.
In a tweet, Sundeep Sikka, CEO, Re-
liance Capital Asset Management
said, "Too frequent and disruptive
regulatory changes for MF distribu-
tors can have a very negative impact
on growth of AMC industry itself."
Nilesh Shah, MD of Kotak Mahindra
AMC tweeted.
BANKING FINANCE |
Tata AMC to buy JP Morgan's domestic mutual fund
business
Tata Asset Management is in talks to Morgan Mutual Fund will be valued at
buy out the assets of JP Morgan's do- closed to Rs 68 crore. The valuation
under negotiations is lower than that
of previous domestic transactions in
the deal goes through, JP
Morgan will be the sev- the industry which have
enth global financial ser- happened between 2%
vices firm to exit the In- and 4% of the target's
dian mutual fund industry AUM.
in the last three years.
JP Morgan is in a hurry
Tata is said to be negoti- to exit the domestic
ating to pay less than 1% of JP Morgan mutual fund business,
Mutual Fund's assets under manage- which drew flak last year after the
ment (AUM) of close to Rs 6,800 crore Amtek Auto fiasco, the person said. In
as on January 30. This could not be 2015, investors in two debt schemes of
confirmed independently. Tata Asset JP Morgan Asset Management had
Management has assets worth Rs borne the brunt of credit rating down-
29,000 crore in the period. At 1%, JP grades of troubled auto component
maker Amtek Auto's debt instruments.
Sebi cautions mutual funds against bailout of
companies
SEBI has warned mutual funds against said a mutual fund executive.
cutting costly deals with companies as
banks turn off credit taps to distressed The Sebi chief did not specify if it has
borrowers. The market come across instances of such transac-
regulator has told mutual
funds not to get into trans- tions, the executive added.
actions aimed at bailing out
corporates at the cost of in- The regulator is also keep-
vestors. ing a watch on possible
'friendly transactions' by
Sebi conveyed this to mutual fund ex- funds, said a mutual fund
ecutives in a recent meeting to discuss official. "Credit has been hard to come
industry's growth roadmap. by for lowly-rated companies and many
of them are approaching mutual funds
"Sinha said that if Sebi come across to either bail them out with fresh
instances of mutual funds buying pa- credit or roll over existing securities
pers to benefit the parent or any group like commercial papers and debentures
entity, they will strictly deal with it," at the time of maturity," the official
said.
Tighter norms for MFs
Sebi has tightened norms for mutual funds exposure to riskier corporate bonds,
including capping the investment limit in bonds of a single company at 10%, to
safeguard investor interest.
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