The chairman of the Securities and Exchange Board of India (SEBI), which contested the insurance regulator's supervision of unit-linked insurance plans (ULIPs) loaded with mutual fund content, on Wednesday called for a constructive way forward after the government last weekend pre-empted a court battle between the regulators with an ordinance that made the Insurance Regulatory and Development Authority (IRDA) the sole supervisor for ULIPs.
“I don’t agree that there was a war. We all operate under the laws as they exist and I think now we will operate under the new law,” C.B. Bhave told reporters at the CII Mutual Fund Summit in Mumbai.
Speaking in the backdrop of a slump in the mutual fund industry, Bhave asked the industry to craft its own policy paper that would spell out the need for their existence, with a call to take their message to investors properly and also streamline their product offerings.
The regulator said that the industry body—Association of Mutual Funds of India—should come up with a policy paper for the industry that can be submitted to the government.
“Maybe it will be worthwhile for the AMFI to debate whether it can produce a policy paper. For the ball to start rolling the industry has to take the initiative," said Bhave.
“There needs to be a policy framework for the industry that needs to define its objective, structure and what and how is it trying to achieve in the long run,” said Jairaj Purandare, executive director-in-charge, Pricewaterhouse Coopers.
Bhave also said that AMFI needs to examine for itself whether it wants to work as an industry body or as a self-regulatory organisation (SRO).
AMFI seems to be inclined to the idea of taking up the role of a SRO. “I believe that it will be good to have AMFI as an SRO because a lot of operational issues that SEBI has to look into can then be taken over by us,” said H.N. Sinor, CEO, AMFI.
AMFI has suggested as much already at a meeting of its board members. While the industry often refers the ‘no entry load’ regime — that strips them of commissions and puts them on a transaction fee regime — as a reason for mutual fund products not getting sold, the regulator asked why the industry is not able to communicate to the investor that their products offered sound returns.