Sebi Move Will Boost Investor Faith

Excerpts from the interview:

Business Standard: In the light of the recent directives from Sebi asking for greater disclosure norms, do you feel the mutual fund industry has become over regulated?

A P Kurien: Definitely not. Sebi's move in this regard will go a long way in boosting investor confidence. A well regulated system is essential for the industry in the long run. Some of the steps such as details of the fund manager and restrictions on investments in group companies have been long overdue. The common investor has a right to know the background of the person who is managing his hard-earned money. Also, by restricting the amount that can be invested in group companies, Sebi has taken a very pragmatic decision.While it has ensured that promoters cannot use mutual funds as a conduit to artificially support share prices, Mfs also have the flexibility to invest in group companies that are doing well.

 

BS: Are there any areas which still need to be addressed?

APK: We are in talks with Sebi for sorting out a few minor issues. For example, providing voluminous data regarding details of the earlier schemes over the past few years is quite a daunting task. Secondly, I personally feel that not all the information in the abridged offer document is of help to the investor. We should stick to the essential facts while at the same provide the investor with all the relevant details.

BS: There seems to be a conscious effort in the industry to move away from the concept of assured return schemes. How do you perceive the scenario?

APK: With the mutual fund industry undergoing a conceptual change, it is time we said good bye to assured return schemes. Funds offering assured returns distort the playing field by providing an edge to public sector MFs.

There have been numerous instances of parent organisations having to bail out their funds by providing money to fulfill promises. On the other hand, private sector funds cannot offer assured returns because the parent organisations do not have deep pockets.

Keeping in mind the interest rate fluctuations, it is not feasible anymore for MFs to guarantee fixed returns.

BS: How would you assess the MF outlook for the coming year?

APK: The future for the industry is very bright. Mutual funds are the only vehicle through which the small investor can aspire to invest in high priced large cap stocks. In the West, one in every three households is a mutual fund owner. We hope to achieve this target in India very soon. Strict regulations, stricter compliance, and the highest professional norms will definitely popularise the idea of mutual funds among common investors.