Sebi seeks public comments on Sumit Bose report

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Markets regulator Sebi today sought views from public on a high-level panel's recommendations related to curb mis-selling in mutual funds.
In recent times, there have been concerns in the mutual fund industry over high commissions doled out to agents, which seem to have resulted in instances of mis-selling.
The Securities and Exchange Board of India (Sebi) has sought public comments till October 12 of a committee on curbing mis-selling and rationalising distribution incentives in mutual funds headed by former Finance Secretary Sumit Bose.
The panel was set up by the Finance Ministry in November last year to suggest measures to curb such instances.

The committee has recommended that mutual fund houses be allowed to manage the funds which are currently being invested by insurers and pension fund managers.
It has also suggested that there can be various regulators for the same product keeping in view the different functions of the product. For instance, it wants Sebi to regulate the investments made by Ulip funds, while IRDAI to regulate the insurance part of the same fund.

Currently, Ulips are regulated by the insurance regulator IRDAI, while mutual funds are controlled by Sebi.
The panel has called for a complete phase out of any upfront fees for mutual fund distributors.

"Upfronting of commissions should be totally removed. There is a current cap of 1 per cent that comes from the fund house capital or profits. This too should be removed," the panel has suggested.
In addition, the committee has recommended removal of extra commission in B-15 centres, in a bid to create a level-playing field.
Currently, there are many fund houses which are pushing the products through upfront commissions and by paying a little extra money in B-15 to increase their sales and market share.
It has suggested that the past returns of the mutual fund scheme being sold, along with the benchmark returns, should be disclosed to the investor at the time of sale.

Customers should be disclosed a range of "past returns appropriate to the product tenure and should include returns of last six months and annualised returns since inception, and two year rests thereafter," it added.
Besides, it has recommended doing away with the current practice of disclosing overall Assets Under Management (AUM) by fund houses and restrict it to only retail AUM.
Together, all 44 mutual fund houses manage assets worth around Rs 13 lakh crore.
The committee has already submitted its report to the government and the recommendations of the committee focuses on retail financial products i.E. Mutual fund, insurance and pension covering various areas such as distribution, mis-selling and incentive structure among others.