Market regulator Sebi on Thursday said it was keen to implement self-regulation in the Rs. 10 trillion mutual fund industry at the earliest and said it will soon come out with new rules for distributors and advisors.
"There is a demand for self-regulatory organisations (SROs) in the MF sector and we are very keen on that and are also hopeful of implementing the same soon," Securities & Exchange Board of India (Sebi) Chairman UK Sinha told reporters on the sidelines of a mutual fund summit in Mumbai.
Sinha also said the regulator is finalising norms for distributors and investor advisors and they will be issued shortly. The Sebi chief said that although the idea of an SRO has been challenged in court, he is hopeful of its implementation.
The Financial Planning Supervisory Foundation (FPSF), where retired Supreme Court Justice BN Srikrishna is a director, has taken Sebi to court over the SRO matter. It contends a possible conflict of interest if an industry group that has been protecting the interests of MFs appoints a company as an SRO to regulate its distributors and agents.
Srikrishna chaired the Financial Sector Legislative Reforms Commission, which recommended sweeping changes in financial sector regulations.
Sinha also said pension funds should come into the mutual funds sector and tax benefits should be offered for investors in real estate investment trusts and infrastructure. The size of the pension market, estimated at over Rs. 1.5 trillion in 2010, is expected to rise to over Rs. 2 trillion in 2015 and over Rs. 4 trillion by 2025.
Sinha said that Sebi had asked the government to provide clarity on tax benefits for new products like REITs (real estate investment trusts) as also for infrastructure investment trusts and debt securities.
"Sebi will soon finalise norms for REITs, but is awaiting clarity on taxation issues," he said, adding that the regulator wants such trusts to get tax pass-through status.
Addressing the MF summit organised by the Confederation of Indian Industry, Sinha said there are "certain anomalies in withholding tax on debt securities" and he expressed hope that the government will soon provide clarity and tax pass-through status to REITs.
"We have recommended to the government for tax breaks for REITs investors and hope the government will consider the same," he said.
Sinha also said that Sebi approved a long-term policy for mutual funds, which includes enhancing the reach and promoting financial inclusion, tax treatment and obligations of various stakeholders, among other things, to achieve sustainable growth of the industry and mobilisation of household savings.