Sebi unveils stringent disclosure norms for mutual fund industry

NEW DELHI: To bring in greater transparency in the Rs 9 lakh crore mutual fund industry, market regulator Sebi has asked the players to make monthly disclosures about group investment in their assets under management.

Besides, it has said that MFs should disclose the rationale while exercising their voting rights in investee firms on quarterly basis. This is aimed at encouraging fund houses to participate in corporate governance of such companies.

Market participants supported the decisions taken by Sebi's board yesterday as these measures would help in attracting retail investors.

The measures are part of the capital market watchdog's long term policy for mutual funds to make them an attractive investment opportunity for retail investors.

The Securities and Exchange Board of India has decided that MFs should disclose their Assets Under Management (AUM) for different categories for schemes on a monthly basis on their websites.

Besides, the data has to be put up, on a consolidated basis, on the website of industry body -- Association of Mutual Funds of India ( AMFI).

Also, AUM from different categories of schemes such as equity and debt schemes, from B-15 cities, contribution of sponsor and its associates in AUM of schemes of their mutual funds as well as AUM garnered through sponsor group/ non-sponsor group distributors should be disclosed.

"There will be also disclosure about how much money they (mutual funds) raised from group companies and otherwise. So, these are all measures supposed to bring about more transparency in the working of the mutual fund industry," Sebi Chairman U K Sinha said.

Reliance MF President and Chief Executive Sundeep Sikka said: "We strongly support Sebi's decision for greater disclosures as these steps will not only help minority shareholders but also help in attracting retail investors.

"We are in the favour of disclosures regarding investments by group companies in mutual fund schemes."

Another market participant, Quantum MF CEO Jimmy Patel said: "Monthly disclosures about AUM their for different schemes by fund houses will help in greater transparency."

He further said that "quarterly disclosures about voting and abstaining from such move are aimed towards corporate governance norms".

The issue of investments by group companies in MF schemes has gained importance after leading player Reliance Mutual Fund recently made a voluntary disclosure of such investments and hoped that others would follow suit.

Earlier this week, Religare Invesco MF became the second fund house to make such a disclosure. While group investments of these two fund houses are relatively small (about 3 per cent for Reliance and about 1 per cent for Religare MF), such investments are 15-20 per cent for some other MFs.

Going by industry estimates, all the fund houses together have investments totalling over Rs 1 lakh crore in their collective asset base of about Rs 9 lakh crore.

Sebi said: "...voting data along with rationale supporting their decision (for, against or abstain) be disclosed on quarterly basis on their website.

"This is to be certified by auditor annually and reviewed by board of AMC (Asset Management Company) and Trustees," the Sebi said.