The Hindu Business Line : `SEBI willing to regulate distributors of mutual funds'

THE Securities and Exchange Board of India is willing to assume the responsibility of regulating distributors of mutual funds, if circumstances call for such a move in future. These distributors now have to adhere to only standards set by the Association of Mutual Funds in India (AMFI).

The market regulator is aware that a few practices followed by some distributors are often not conducive for the average investor.

Hence, it has made it clear that it would not hesitate to take up the matter, provided the AMFI itself fails to address certain critical issues.

SEBI, according to its Chairman Mr M. Damodaran, is conscious of the fact that most distributors are overly keen on selling NFOs (new fund offers) and not the existing schemes as the former yield better revenues.

This gives rise to what investment circles often construe as unhealthy practices.

"We already have a lot on our hands and may decide to consider the matter at a later stage. SEBI is building the infrastructure and would deploy the personnel necessary to observe mutual funds more closely," the SEBI chief said. He, however, clarified that the existing system will continue for the time being.

The AMFI has the expertise within its ranks to sort out the matter, it is pointed out.

The association, incidentally, represents the interests of 30-odd players in the country's asset management space.

It has no power to regulate distributors per se. MFs essentially reach out to investors through their distributors — a situation that makes a fund house the `principal' and an intermediary its `agent'.

SEBI is also aware that insurance companies have lately come up with a number of unit-linked products, which are being seen as competitive by the MF industry.

Fund houses step up distribution efforts

FUND houses have lately scaled up their efforts on distribution, the AMFI has claimed. The plan worked out by them involves establishing more points of presence and encouraging quality distributors.

The AMFI members, according to its Chairman Mr A.P Kurian, are rapidly opening more offices, covering relatively smaller centres. The past couple of years have seen a few hundred new offices come up in various parts of the country. Some players have been quite aggressive on this front, building up visibility and taking their products to newer categories of distributors.

The last quarter saw over 2,000 candidates pass the AMFI's online registration test (conducted at NSE offices), while nearly 3,000 qualified in written tests conducted in 64 centres.

The first batch of ARN (AMFI Registration Number, valid for five years) holders will need to renew their registration shortly, it is pointed out.

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