NEW DELHI, February 6: The Securities and Exchange Board of India has set the ball rolling for a separate act to regulate the mutual fund industry.SEBI chairman D R Mehta suggested here today that the regulation of mutual funds by a separate act would perhaps give the industry due recognition in the securities market.Mutual funds are now regulated under the SEBI Act and the Indian Trust Act, while UTI is governed by the UTI Act.
Addressing a seminar on the mutual fund industry organised by the Confederation of Indian Industry (CII), Mehta said the PK Kaul committee and the Dhanuka committee could consider the issue of a separate act for the mutual fund industry and come up with some suggestions. "A separate act will help remove the discrepancies and problems arising from the Indian Trusts Act," he added. In evolving an act, the model of the Depository Act and the SEBI regulations could be followed, he pointed out.
Fund managers point out that the proposed move of bringing the mutual funds industryunder a single umbrella is aimed at creating a level-playing field for other funds vis-a-vis UTI as far as the legal aspect is concerned. "A level-playing field is as far as legalities are concerned. There is a need to bring all of us within the purview of the same act and not what is currently practiced where we have separate acts for UTI and other funds,"pointed out a fund manager.
The SEBI chairman said the trustees played an important role and the PK Kaul Committee, which was looking into the issue, was expected to submit its report by the end of February.
Besides, SEBI has already standardised accounting policies, net-asset value (NAV) computations and valuation norms, and is now planning to standardise the offer documents for mutual funds. "We have prepared a draft of the standard offer document after discussing it with the Association of Mutual Funds in India and Price Waterhouse under the FIRE project," Mehta said. The draft would be released to the public for their comment. Mehta pointed out thatduring the first nine months in the current financial year, mutual funds raised Rs 12,086 crore. "This is the first time that the resources raised by mutual funds were in excess of the amount mobilised through the primary market. It signifies the growing confidence of investors in mutual funds as an investment vehicle." He added that Indian institutions, especially mutual funds with large investible resources, were required to provide a counter-balance in the equity market.
Addressing the participants, Tata Asset Management managing director KN Atmaramani said: "Given the interest rate volatility we should do away with assured returns." He also pointed out that there was no difference between the fixed deposit programme of a non-banking finance company (NBFC) and the assured returns of an income fund.
Highlighting the risks involved in the case of income funds which have assured returns, he emphasised the need for transparency as questions of provisions need to be looked into. He also emphasised the needto have exclusive tax benefits for investors to make equity-linked schemes a popular investment vehicle. Atmaramani was upbeat about the future of the fund industry. "The year 1998 will be a turnaround year for the fund industry as a large part of household savings is expected to turn to MFs due to a dull primary market and loss of credibility of NBFC FDs," he added.
Other speakers included AP Kurian, chairman, AMFI and MM Kapur of UTI.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
