The Hindu : Business : Move towards self-regulation, MFs told

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Thursday, Jun 21, 2007
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Move towards self-regulation, MFs told

Special Correspondent

‘Focus more on investor education, corporate governance’

MUMBAI: The Securities and Exchange Board of India (SEBI) Chairman, M. Damodaran, on Wednesday urged the mutual fund industry to move towards self-regulation, focus on the role of Trustees of Mutual Funds, increase focus on investor education and the importance of corporate governance in asset management companies.

In an incisive address on ‘Enabling regulations enablers for growth’, at the Mutual Fund Summit 2007 organised by the Confederation of Indian Industry (CII), the SEBI Chairman raised the issue of excellent results that the mutual fund industry had been posting in recent times. “The mutual fund industry seems to be prematurely patting itself on the back,” he said. “The question is: ‘who has made what sort of growth?’ The numbers provoke more questions than provide answers,” he said.

On the issue of self-regulation, Mr. Damodaran recalled that the Association of Mutual Funds in India (AMFI) had resisted earlier attempts to make it a self-regulatory organisation (SRO). Now, with a revised proposal, which would give AMFI more autonomy, he hoped that the association would become the first SRO in the finance industry.

Referring to the role of Trustees in mutual funds, he said the regulator would convene a meeting of Trustees ‘to remind them what they do’.

Revised norms for Trustees?

Stressing on higher level of responsibility of the part of the Trustees, he observed that it was on the strength of their names that investors part with their money. He mentioned the possibility of revised regulations for Trustees. “This is an industry which operates on trust, and if Trustees don’t measure up, something is amiss,” he said.

On the issue of corporate governance, Mr. Damodaran suggested that mutual funds could assume a slightly more pro-active role in the companies they invested in.

New MF products

The MF industry is doing a phenomenal job, with lots of products being introduced, he said. “Different classes of products, including those for smaller investors are being introduced,” he said.

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