Sebi warns MFs against misuse of investor education funds

Taking note of the rising instances of mutual fund players improperly using the investor education funds, markets regulator Sebi today asked the industry to take corrective action or else the regulator will have to step in.
Under the Sebi rules, mutual funds have to spend 2 basis points of their assets under management on investor awareness education per year.
According to Sebi chairman UK Sinha, about Rs 500 crore have been raised between October 2012 and April 2015 but only Rs 330 crore have been used towards investor education by fund houses during the period.
Noting that some fund houses have not been utilising the money in a healthy manner, Sinha asked the industry "to take note of this seriously because we (Sebi) can't be a silent spectator for years together".

Addressing an industry summit organised by the CII here, Sinha asked the fund houses to make "sincere use of these funds" failing which Sebi may have to do its own evaluation.
Sinha noted that when Sebi officials visited 18 locations where 22 Asset Management Companies (AMCs) have held investor education programmes, it was found that only 18 per cent of them really did educate the investors.

While in close to two-thirds of instances (65 per cent of such programmes), there was no surety of the timings of the programmes, and 6 per cent of such events were purely distributors' gatherings.

However, he said majority of the fund houses are doing a good job, and expressed hope "the industry will come together and take some corrective action where real purpose of investor education fund is met."
Sinha said that merging of various MF schemes can bring down cost of ownership, and thus protect investors' interests.
He added that fund houses have launched many new schemes to keep the agency commissions and fees high and this has led to rampant mis-selling of MF schemes.