Mutual funds’ largesse under SEBI scanner

Updated on Apr 25, 2010 09:28 PM IST

Mutual fund houses have come under the scanner of market regulator SEBI for allegedly lavishing their agents and distributors with incentives like cash payouts and foreign junkets in return for higher sales.

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PTI | By, New Delhi

Mutual fund houses have come under the scanner of market regulator SEBI for allegedly lavishing their agents and distributors with incentives like cash payouts and foreign junkets in return for higher sales.

Instances of distributors of various fund houses being showered with cash incentives as also trips to exotic locations in India and abroad have come to light, especially since the scrapping of entry-load charges from investors putting their money in mutual funds, a top Securities and Exchange Board of India (SEBI) official said.

Besides finding such practices unethical, SEBI is also examining whether these incentives are being funded by investors’ money in the name of fund expenses, the official noted.

Strong remedial actions are said to be under contemplation for such practices and the market regulator might come out soon with appropriate guidelines in consultation with the industry body, Association of Mutual Funds in India (AMFI) to tackle these issues, an industry official said.

A senior official at a leading fund house, however, defended the incentives saying such practices are prevalent across various industries, such as pharmaceuticals and consumer goods where distributors are treated with much more expensive gifts and more frequent foreign trips.

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