Amfi slow in using entrusted money

Putting structure in place, it's a big sum to be accountable for, it says

The Association of Mutual Funds in India (Amfi) is yet to begin spending the corpus it has received from fund houses for the purpose of investor education and awareness.

Beginning this financial year, fund houses have been asked to allocate half their investor education corpus to Amfi. Sources said Amfi is getting Rs 10-13 crore every month this way, having collected Rs 40-odd crore in the first four months.

“Just because the money is there doesn’t mean we can spend it arbitrarily. Since it is a sizable amount, the process has to be validated, as we are answerable to so many MFs,” said C V R Rajendran, chief executive officer (CEO).

A committee, he said, had been formed to decide on the allocation and was finalising the administrative set-up for this. “The committee is meeting almost every week and the allocation for various media campaigns, as well as the theme and timing of the campaign, will be decided soon,” said Rajendran.

In 2013, the Securities and Exchange Board of India (Sebi) had mandated that MFs set aside two basis points (bps) of their overall assets under management for investor education and awareness activities.

“Since Amfi is handling investor money and acting in a fiduciary capacity, the level of transparency needs to be high,” said Manoj Nagpal, CEO, Outlook Asia Capital. He feels the body should prepare a document highlighting how the money would be spent. “How will investors benefit from the campaign and how will its effectiveness be monitored? These need to be answered,” said Nagpal.

The amount allocated to investor education, he felt, should have ideally been reduced to one bps, as the sector's size had doubled to Rs 14 lakh crore from about Rs 7 lakh crore when the two bps allocation was decided. “At Rs 14 lakh crore, annual spending on investor education will amount to about Rs 280 crore. Even large corporates don’t typically spend this much on advertising,” he said.

PROBLEM OF PLENTY?

• Amfi is yet to spend the corpus it received from fund houses for investor education and awareness
• Beginning this financial year, fund houses have to allocate half their investor education corpus to Amfi
• Amfi gets around Rs 10-13 crore every month from fund houses, it has collected around Rs 40 crore in the first four months of the year
• Amfi has formed a committee to decide on corpus allocation and will soon decide on allocation for media campaigns
• In 2013, Sebi had mandated that MFs set aside 2 basis points of their overall assets under management for investor education and awareness activities

A small fund house says that dividing the budget has dented the effectiveness of its own investor education programme. “Being a small house, our total budget for this year is about Rs 80 lakh. Of this, we can only spend Rs 40 lakh now, which is not meaningful.”

“To add to that, it seems that half the amount given to Amfi will go unutilised for the first six months,” said a senior official of a large fund house, on condition of anonymity.

While the delay will hurt all fund houses in the short run, the official says he is hopeful the money will eventually be well spent. “Investors have become much more receptive to such programmes in the last year or so. And, while a lot of these programmes were earlier exercises in corporate branding, fund houses have become a lot more serious in planning these activities,” he said.

At a meeting last year on MFs, organised by the Confederation of Indian Industry, Sebi chief U K Sinha had raised concern on the quality of investor awareness campaigns conducted by fund houses. “If the corpus is not spent well, Sebi will step in and deploy it on its own,” he'd warned.