Sebi board meet postponed yet again

Board to decide on mutual fund transaction cost.

The board meet of the Securities and Exchange Board of India (Sebi) has been postponed for the second time, as its chairman U K Sinha is in the US with the finance minister and other regulatory chiefs. The board meeting, which was first scheduled on June 27, got re-scheduled to June 30. Now, after a fresh postponement again, the new date for the meet has not yet been decided.

According to persons familiar with the development, the new date will be decided once the Sebi chairman returns from his US tour. Finance minister Pranab Mukherjee is currently on a three-day US visit to meet Secretary of Treasury Timothy F Geithner, and also to participate in the Cabinet-level meeting of the India-US Financial and Economic Partnership with Geithner.

Besides Mukherjee and Sinha, the Indian delegation includes Reserve Bank of India (RBI) governor D Subbarao, department of economic affairs secretary R Gopalan, chief economic advisor Kaushik Basu, financial services secretary Shashikant Sharma and forward markets commission chairman B C Khatua.

Meanwhile, the proposed Takeover Code is the most important matter on the Sebi board agenda. The board will also deliberate on the sensitive matter of NSDL - National Securities Depository Ltd. The mutual fund panel set up by Sinha has also submitted its report and a decision on the matter is expected.

On the Takeover Code, the regulator is expected to lower the quantum of open offer from the proposed 100 per cent. The Achuthan Committee had proposed that the open offer trigger limit should be increased from the current 15 per cent to 25 per cent and the acquirer should make an open offer for all the remaining shares ie 100 per cent. While industry players are fine with the increase in trigger limit, they want the size of open offer to be reduced in the range of 40-50 per cent.

Meanwhile, the levy of transaction costs in mutual fund (MF) is expected to generate a lot of debate. Sinha was one of the most vocal critics when former Sebi chairman C B Bhave banned entry loads in August 2009. The MF panel is believed to be of the opinion that a levy of Rs 100-150 per transaction along with some other changes could once again make distributing MF products a lucrative proposition.

At a recent conference, Sinha had said the regulator is looking into the issue of giving incentives to the distributor to increase the penetration level of the fund industry. “Sebi is looking at ways to incentivise distributors... With the number of folios declining and small town sales reducing, there is a need to incentivise the distributor. Unless some incentive is given to the distributors, it is difficult to increase the penetration of the market,” said chairman Sinha at the recent CII Mutual Fund Summit.