Sebi Tightens Hold On Mfs, Pens New Rules For Brass
The Securities and Exchange Board of India (Sebi) has further tightened its norms for regulating mutual funds with its decision yesterday that the majority members of the boards of assets management companies (AMC) and trustee companies will consist of independent directors.
The decision was taken at a meeting of the SEBI brass and members of the Association of Mutual Funds in India (Amfi) to discuss issues pertaining to announcements of net asset value (NAV) of equity-oriented open-ended schemes on a daily basis, investment restrictions, affiliate transactions, broker exposure, and other compliance related issues.
Briefing journalists after the meeting, Sebi chairman, D R Mehta, announced that 14 mutual funds have been asked not to issue new schemes without its permission, as they were required to rectify the deficiencies revealed in the past inspection reports. The list includes mutual funds set up by GIC, LIC, Jardine Fleming, JM Mutual Fund and IDBI. Sebi officials did not reveal other names.
Mehta said Sebi had also asked all mutual funds to announce net asset value (NAV) of all open-ended schemes from July 15, 1997. According to a Sebi release, all funds will announce NAVs through Amfi which will co-ordinate with all of them to issue a press release.
UTI, however, has agreed that it will start announcing NAVs for one out of three equity oriented open-ended schemes on a daily basis from July 15 and for other schemes by September 30, 1997.
Dwelling on the agenda of the forthcoming meeting of the Sebi board, Mehta said it would discuss the issue of maximum business that could be given to a single broker with quantitative limits, reasonableness of brokerage paid, agency-principal relationship and best execution of trade.
The meeting will also take up the issue of restricting the maximum group exposure limit of mutual fund to 25 per cent of the total net assets of the fund. Some funds have also asked Sebi to exclude debt investment from the aforesaid 25 per cent. Sebi had called for data on key-personnel for all mutual funds. Out of 37 mutual funds, 29 have submitted this data. The remaining funds have agreed to submit the data by July 11.
Amfi would be sending its comments on the draft of the standard offer document circulated by Sebi definition of fundamental attributes, standardisation of key information to be given in an application form, inter-scheme investments and valuation norms for money market mutual funds by September 30, 1997.
Sebi has prescribed dates for mutual funds to submit four quarterly reports including compliance tests and portfolio disclosure, monthly statistical reports, two half-yearly reports which include report from the trustees and half-yearly unaudited accounts and two annual reports including financial statements and statistical returns.
Sebi has received compliance reports for the quarter ended March 1997 from 26 funds. The 11 mutual funds who have not submitted these reports have been given time upto July 15 and upto July 31 for the quarterly compliance reports due for the quarter ending June 1997.
Some mutuals have already dematerialised part of their holdings. UTI reported it plans to dematerialise 50 per cent of its holdings in securities which are eligible for dematerialisation in NSDL.