Sebi wants MFs to lower salary of senior executives

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Concerned over the high pay packets of top executives at mutual fund houses, capital markets regulator Sebi wants them to lower their salaries and adopt a more cost-effective structure.

The Securities and Exchange Board of India (Sebi) has also directed fund houses to disclose the compensation paid to senior executives in the past few years, sources said.

The issue is likely to be discussed by the fund houses during the next board meeting of the industry body AMFI, which also acts as the front-end regulator for mutual funds.

The salary of top executives and commissions paid to the distributor account for the bulk of the overall costs incurred by a mutual fund. The senior executives with large pay packages at the asset management companies (AMCs) typically include CEOs, CIOs, sales heads, compliance officers and chief operating officers.

One particular CEO of a fund house drew a salary of as high as Rs 5 crore last year, while the mutual fund CEOs on an average get a package of Rs 1-1.5 crore.

Sebi is concerned that such a high cost structure may make it difficult for a fund house, especially the smaller ones, to survive because high salaries are already hurting their profitability.

The issue was discussed recently during the meeting of Sebi's mutual fund advisory committee. The matter would be taken forward by the industry body Association of Mutual Funds in India (Amfi) at its next board meeting on November 24.

"We have received a letter from Sebi, wherein, it has directed us to control the salary structure of senior level executives. This issue will be discussed in Amfi board meeting on November 24," a senior official at the fund house said.

"Besides, Sebi is not happy with the high cost structure of AMCs and has told Amfi to reduce it," he added.

Under existing regulations, fund houses are free to decide on the compensation structure for their staff including top executives.

Fund officials are of the view that the salary paid to the key personnel does not affect investors as the total expense ratio (TER) is regulated by Sebi.

Industry experts believe that if the salary structure is regulated by Sebi, then it may hamper the growth of smaller fund houses.