SEBI seeks mutual fund roadmap

The chairman of the Securities and Exchange Board of India (SEBI), 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 IRDA the sole supervisor for ULIPs, reports HT Correspondent.

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.

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“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.