Sebi Unlikely To Review Directive To Mutual Funds

Sebi board member J R Verma said the MF industry has misunderstood the circular issued by the market regulator on keeping proper records on their investments.

He said that the directive was intended to enforce accountability among fund mangers and asset management companies (AMCs) of Mfs.

"Sebi was not trying to interfere in the day-to-day activities of MFs. We are only asking them to keep records of how an investment decision to buy a particular scrip was made, not the record of each and every trade the fund is making on a daily basis," Verma said. "We asked them to keep records of investment decisions, not trading decisions."

 

He said that the board has also given mutual fund AMCs the freedom to decide on the format of records and content of it.

He said these records could be used by AMC board while reviewing the performance of the fund and if something has gone wrong then action could be taken against the responsible people. This will also make fund manager more accountable.

He also said that MF investments should be based on sound research backing.

Verma said that Sebi is only asking the AMC to keep these records as part of the MFs disclosures norms and is not asking them to submit to Sebi. Only in worst cases Sebi would ask for the records, he said.

Verma said that some of the MFs had made a representation to the board to reconsider the directive. He said that the Sebi will look at their plea and take a final view soon.

He said that MFs possess huge amounts of public money. Sebi, as a market regulator, wanted to ensure the safety of these funds.

Verma said that the Union government and Sebi had been encouraging small investors to use MFs for investing in equities.

"If something goes wrong investors will come to Sebi. So it is our responsibility to ensure that these funds are properly managed," Verma added.