Sebi does a U-turn, amends minutes of mutual fund panel meet

The 2% charge, to which members had objected, does not figure in new document

The Securities and Exchange Board of India has amended the minutes of the meeting of the Mutual Fund Advisory Committee (MFAC). Officials circulated amended minutes of the July 17 meeting after some members protested that certain items mentioned in the minutes were neither on the agenda nor discussed at the meeting.

The move puts to rest the confusion over the proposals that would be taken up for consideration by Sebi at its board meeting on August 16. “They have sent us amended minutes. There are substantial changes in the paras talking about expense ratio,” said a committee member.

According to people familiar with the development, the controversial portions in the original minutes have been removed. This includes the two per cent charge that some members had objected to.
 

CHANGING COURSE

• June 28: PM says MFs need to be revived
• July 2: MFs meet FinMin officials
• July 17: MFAC meets to discuss measures
• Early August: Minutes of the meeting circulated; these include a 2% charge for marketing at centres outside the top 15 
  MFAC members say the measure was not discussed; Sebi amends the minutes
• August 16: Sebi board to meet

Other parts of the minutes that referred to measures recommended, such as flexibility to use the expenses for various purposes and tax concessions, remained unchanged, the member said.

The minutes of the meeting circulated earlier contained an item suggesting that the asset management companies could be allowed to charge an additional two per cent towards marketing expenses at centres outside the top 15 cities.

Such a measure of an additional two per cent charge, which could make the mutual fund schemes as expensive as other high-cost products like unit-linked insurance plans, had not been discussed at the meeting, according to members.

Some industry players had interpreted this two per cent charge as the return of entry load — an upfront fee of up to 2.25 per cent the mutual funds charged and passed on to distributors as commission. This practice was banned by Sebi under the then chairman C B Bhave in 2009. Even the current establishment had hinted it was not in favour of a reversal. MFAC members had unanimously opposed the entry load’s return.

Distributors continue to be hopeful that something good would come out of the Sebi board meeting. “Mutual funds have become a no-pull product because of the current market conditions. They have also become a no-push product due to lack of incentives for distributors. The Sebi measures should help bring back the push,” said J Krishnan of Integrated Enterprises, a corporate distributor.