Hasten merger of similar schemes, Sebi tells AMCs

The Securities and Exchange Board of India (Sebi) is pushing asset management companies (AMCs) to merge similar schemes. In the latest missive, the market regulator says that it has set up an internal team to monitor the progress.

Sources said Sebi has sought reports from AMCs on the number of schemes merged and the course of action.

"We want schemes that have fundamentally similar features to be merged," said an official.

Under Sebi regulations, two schemes can be merged if the fundamental attribute of the surviving one remains the same. Fund houses before merging two schemes need to seek approval of the board members and trustees. After fund houses get necessary approvals from Sebi, they give an exit to existing investors.

Senior Sebi officials have expressed over the lack of effort by fund houses in consolidating similar schemes.

Sebi says there should not be issues in merging schemes, as the Budget has clarified that scheme amalgamation would be exempt from capital gains.

 

In February, the finance minister had announced an amendment to the Income Tax Act to provide tax neutrality on transfer of units of a scheme of a mutual fund.

The fund houses due to fear of tax liability when there is no actual sale of units used to go slow on scheme amalgamation.

In 2013, only nine schemes of the total of close to 2,000 were merged. In 2014, however, 80 ýschemes were merged. So far this year, the action has been much slower, as only 14 schemes have seen mergers.

According to sectoral sources, there are still a number of reasons which deter fund houses from merging schemes.

For one, many high networth individuals are not comfortable in shifting schemes, as mergers result in a loss to investors.

Currently, there are about 1,900 schemes across segments offered by the Rs 12 lakh-crore domestic MF sector.