SEBI has asked AMFI’s suggestions on having compulsory demat account for Mutual Fund investors. AMFI will be providing its suggestions on June 15.
SEBI is of the view that demat accounts be made mandatory but AMFI is suggesting to keep it optional.
For your reference:
http://www.financialexpress.com/news/Sebi-wants-mandatory-demat-accounts-for-mutual-fund-investors/632791/
I have few queries in this regard.
1. After the abolition of entry loads many IFAs have already stopped selling MFs. Does compulsory opening of demat accounts spell doom for IFAs, since majority of the business will shift to brokerage houses?
2. If majority of people who hold physical mutual funds shift to demat form, then does this defeats the very purpose of long-term investment of MFs? Will MF investors become traders just like stock brokers?
3. SEBI has allowed brokerage houses to charge on every buy and sell of MF units on the stock exchange but there is hardly any commission left for IFAs. Moreover, stock brokers hardly have any knowledge of MFs. Isn’t this a double standard by the market regulator?
4 Having a demat account also requires giving a power of attorney to the brokerage house. Will this leave investor at the mercy of stock brokers?
5 Will this move help in penetration of Mutual Funds in tier two and tier three cities?
6 Does it serves investor interest?
As I understand that some of these are regulatory issues, I can ensure anonymity of your views on some of the answers. Please respond your views before 11 am on Monday as the same is to be taken up by IFA Galaxy with AMFI / SEBI and Media
Regards,
Ramesh Bhat
IFA Galaxy
70 comments:
Demat account for shares and bond market was introduced to prevent fraud and make trading tramsperant and easy. In case of MFs the assets are already held in demat account by AMCs and the account statement has only paper value
Compulsory demat account will increase cost to investor particularly investors who invest less than 50 K per annum, who invest in ELSS for tax saving and also short term investors in debt schemes (FMPs and Short term funds).They will have other opportunities to invest without the need for demat account and avoid this cost.
MF investment is not meant to be churned - this is the basic tenet on which SEBI is bringing out so many new rules and regulations. Demat acct if held with houses whose source of income is from trading volume there is a huge possibility of wrong opportunist advice.
What is required is to amalgamate all RTAs into a single platform to enable each investor have a single statement of account for all his holdings.
I think this is not a good move. Apparently SEBI is not making its decissions taking all involved parties' interest into consideration. They are not able to see beyong their nose - otherwise they will not be bringing changes in piece meal fashion.
T.Kalyanaraman
9444134224 Mob No.
Chennai
Received from
Mr. Padmanabhan Sowrirajan
padmanbhan_s@yahoo.com
Dear Ramesh,
We may strongly object this proposal of compulsory dematting of MFs by investors on the following:
1. Who will bear the demat expenses/annnual maintenance fees which are going up year after year;
2. The purpose of cheapness is defeated in the MFs investment;
3. It can be optional and not mandatory;
4. There is no need then the IFAs and the existence of AMFI is redundant.
We have to lodge our strong protest and condemn these sort of high handed approach of the SEBI through our collective body immediately.
Thanks,
Yours
s.padmanabhan
12-6-10 boston usa
Received from Mr. Venkateswaran, Trivandrum
venkatpisces@gmail.com
Hi,
i feel this should be left to the investor to decide. this is not advantageous to the investor since the current mechanism of the AMC buying bac the units is running smooth.
Demat is useful only in cases of close ended funds from liquidity point of view.
this will put the investor and the IFA at a clear disadvantage and mercy of stoc broker.
IS SEBI acting as a broker supporter ?
Best Regards
Venkateswaran
Pisces Investment Solutions,
2 B, Kenton Towers,
Above HDFC Bank Branch,
Vazhuthcaud ,
Trivandrum -695014
ph-91 471 2336536
mobile-91 9847060869
mobile -91 9895991602
Received from Ms. Vasanthi krishnamurthy
vasanthi64@hotmail.com
Dear members,
Rightly said by our friends, No Individual agents are concentrating the Mutual Fund distribution. More than 60% of IFAs shifted their concentration elsewhere. Now days there is no distributors crowds in Cams or karvy. Only senior citizens and retail investors coming to Cams for service issues, due to this entry load and other issues only confusion is left in this industry. None of the investors were serviced by the existing distributors. Now all the banks started charging the investors, in that case not all the investors interested to bear the cost. In our country retail money is not coming to the system , instead of concentrating that our regulators are doing some thing different.
Present issue Demat . If a one time investor in a mutual fund want to invest Rs. 5000 , he has to spend Rs. 1000 (20%) of his investment value for demat account opening and other charges, after that also he has to pay yearly charges. If market is not able to generate return he will loose 50% of investment in charges only. If he want to sell he has to approach the brokers, To day most of the retail investors in stocks, last their money heavily due to mis information and wrong recommendation by the brokers. In that case investors are not going to get benefit. May be brokers crowd can make money by brokerage.
It wont help for retail investor but all the MF CEO and top executives talking about retail investor, but end of the day retail investors are not going to benefit by all the changes and tne initiatives by SEBI and AMFI.
regards
Vasanthi
Received From Mr. Sankara Raman
hsrkalyani@yahoo.com
Now every investor is able to deal directly with the MF whether for buying or selling. of units.A large No. of them are small investors. They will find this demat a big botheration as they will be compelled to pay brokerage, STT etc and they will be compelled to deal with brokers.
If the Govt or SEBI 's intention is to monitor the deals , demat may be cinsidered only for holdings above Rs. 5,00,000/- per Scheme.
If demat is made compulsory for all , my feeling is all retail investors will keep away from MFs
H.Sankara Raman ( ARN 16132 )
Received from Mr.R.VENKATRAMAN
vencut@gmail.com
Dear friends,
This move if implemented will be detrimental to investors' as well as advisers' welfare.
Investors' financial burden will be increased by paying demat a/c opening charges and annual maintenance and other associated charges, for those do not have/do not wish to open demat a/c.
Investors will not receive an objective and unbiased advice being offered now by trained and specialist advisers who posses in-depth knowledge about MF products and not to mention personalized service.
Possibility of MF investing becoming speculative and being churned(by vested interests) are quite high.
Concept of staying invested for long term and financial planning will go for a toss.
This move certainly will impede the growth and penetration of MF industry, as many investors who only invest in MF schemes and not in stocks, may not prefer to open a demat a/c for this purpose alone may switch to investing in other asset classes.
This move will put IFAs out of profession and in all probabilities may turn out to be the last nail in the coffin.
GOD SAVE IFAs
Regards,
R.VENKATRAMAN
98412 55088
Received from Mr. Sunil S Bhagat, ARN-9646
ssunilbhagat@gmail.com
It is very shocking to hear of this proposal.
The very nature of long term investing involves, periodic advice and asset reallocation as per realisation of the customer's goals and changing prospectives. The role of an IFA is that of a financial planner and guide and friend to the client.
By making the investment in Mutual funds through Demat the personalised role of an IFA is dimunished. The IFA if he has to become a subbroker with a national distributor and be working on the policies and objectives of the national distributor who's objectives may not be always in the best interests of the mf customer. The reason for this is that the platform they work on is speculative in nature.The broker ( who normally trades for his clients on shares) will have no time to give quality advice to the clients.
Privacy of the mf client is another issue which will be breached. One common shop or many such shops where the clients have their demat accounts will be encroached with clients who deal in shares.
This move may help in bringing down the cost of operation of a mutual fund house considerably but at the cost of quality advice from the IFAs.
It is really upto the AMCs now to strongly put their foot down collectively and oppose this move of SEBI and come in support of the IFAs who really are the beacons of the mutual fund industry and the major catalyst in investor education.
Sunil S Bhagat
ARN-9646
Received from Mr. ANANDARAMAN.R, ARN-30155, PONDICHERRY, sirusemippu@gmail.com
Dear sir,
This is unfair and intolerable by the IFA community. Already 75% of the business has steeply gone down. However we managing and trying to do the business at the level best. But, If this "Compulsory demat account" comes into existence then there is no purpose of being a mutual fund distributor and giving clients online login monthly portfolio reports services, etc.......
Pl. Rameshji, kindly look into this matter as it will be a "OMEN" to our MF business.
Thanks for giving me the opportunity to participate.
Thanks & Regards,
ANANDARAMAN.R,
ARN-30155
PONDICHERRY
Received from Mr. ALAGAPPAN THENAPPAN,
talagappan@hotmail.com
Dear Sir,
Till now what was done by SEBI was to save Investors, now this order if done is in no way to support the Investors, we can not have demat A/C for minor, Micro SIP, etc
Please tell me why Compulsory demat was brought by SEBI , inorder to save fraudulent selling, printing of share certificates, here in this Industry there is nothing like fraudulent selling since the money is given only in favor of the scheme name. The advisor gets only a penny from the AMC as brokerage (Since the AMC pays as brokerage only not as Advisory fees). Printing of mutual fund statements does not occur at all since at any point only the AMC buys back the units & the advisor does not get any brokerage for this.
Also tell me why we as an Investor should hold the MF Units in Demat since it is a long time Investment IF one is to hold a particular investment for say 10 yrs tell us the holding cost. If one has to do SIP please tell me I can even do daily SIP for a mere sum of Rs.300/ a day so kindly tell why should I pay so many Inward charges.
In retail point of view this move by SEBI will not be favour of the Investors.
Regards,
Alagappan
9841055577
Compulsory Demat for Mutual Fund Units will definitely affect the Mutual Fund business on the whole and not only the Mutual Fund Advisors. I feel that SEBI is working in the interest of some handful of either Broking Houses or some Big Players in the Financial Market and they do not see any Interest of the Investors nor the Mutual Fund Advisors.
Working in the prevailing environment is becoming difficult day by day and I have noticed the investors shying away from investment in Mutual Fund. They now a days prefer to invest either in PPF or some post office deposits. More conviniently they want to invest in Banks and similar instruments. If this show goes on then very handful of the people will be selling the product called "Mutual Fund". The very existence of the Mutual Fund industry will become extint.
I do not work in directly into Equity Markets and do advise my clients not to go directly into the equity market as the risk is much more to go directly and have always suggested them to go through the Mutual Fund route for last 22 years. I have also encouraged them to close their Demat Accounts in the past 5 years because it adversely affect their purchase price if they are a long term investor and the units are held in the Demat form. Similar will be the case of the Mutual Fund Units as these are the instruments to be held for 3-5 years atleast and that is in the interest of the Investors. But keeping the units in the Demat Form will increase the purchase price and affect the yield.
I have never sold the Gold ETFs to my clients only because that involves the Demat Account and we have no role for the after sales service in the ETFs. For selling the ETFs, the client has to go to a stock broker to sell them. He may not be knowing any stock broker. Then he will insist us to get it sold through a stock broker as we had initiated to buy the ETFs.
My submission is that Mutual Fund Units should be kept away from the purview of the Demat Accounts as this will definitely affect the entire Mutual Fund Business and the very idea of holding the Mutual Fund Units for a long term will be defeated. What will be the difference between the Equity and Mutual Fund then ?
Ramakant Mahawar
Kolkata
9831088144
Ramesh you have indeed raised very good queries and should I say valid concerns of the IFA CHANNEL. Though it is a regulatory issues we don’t need to be anonymous to express our views openly and frankly to the Regulators or AMFI For all we know it will add Value to make IFA lives simpler and hopefully better !
Here I go, where I have expressed my views in my Personal/professional capacity only
After the abolition of entry loads many IFAs have already stopped selling MFs. Does compulsory opening of demat accounts spell doom for IFAs, since majority of the business will shift to brokerage houses?
I don’t think so ! We need to remember that DEMAT is only a means of holding your investments in a form which is convenient and Safe. The business shift to Brokerage houses MIGHT not happen if the Mutual Fund Companies give a seemless and smooth option of offering a DEMAT ACCOUNT directly through them or their affiliated Broking Arm with a simple and easy to fill ONE PAGE FORM which takes the PAN as a reference point and for a “nominal fees” gives investors a DEMAT ACCOUNT .
If majority of people who hold physical mutual funds shift to demat form, then does this defeats the very purpose of long-term investment of MFs? Will MF investors become traders just like stock brokers?
FORMS/TOOLS/Method does not alter the HORIZON/Purpose of INVESTMENTS! To give an example if one were to buy anything as a matter of fact how & where is keeps for “custody” is matter of convenience and safety and does not the alter the intent /objective of the INVESTOR.
The second part of MF INVESTORS traders becoming a stock brokers again may not necessarily happen!
SEBI has allowed brokerage houses to charge on every buy and sell of MF units on the stock exchange but there is hardly any commission left for IFAs. Moreover, stock brokers hardly have any knowledge of MFs. Isn’t this a double standard by the market regulator?
The MF/AMC/AMFI has to work to resolve this and work out a “sharing” of charges depending on the level of engagement!
A simple DEMAT will not again alter the reality that some people will always focus of MF & others Direct Equity. The situation will over time depending on the level of skills and expertise the intermediaries themselves will either focus on one area or do integrated investments as in Financial Planning
Having a demat account also requires giving a power of attorney to the brokerage house. Will this leave investor at the mercy of stock brokers?
The Key Point here will be to IMPLEMENT a SIMPLE,SECURE,SEEMLESS way of TRANSACTING in DEMAT FORM without much hassles of operating for INVESTOR opting for DEMAT ACCOUNT.
Please refer to my point in 1 where I emphasized the simplicity of DEMAT something similar to our ECS MANDATE FORM and which can revoked( POA) any time by the investor whenever he wants
Will this move help in penetration of Mutual Funds in tier two and tier three cities?
Penetration is independent of DEMATS. It is more to do with Investor Awareness which can be taken independently. If one were to talk on a clean slate approach maybe tier two/three places may adopt this with more ease once the process is simple! ( remember the success stories of telecom industry and its penetration of MOBILES in far flung remote places)
Does it serves investor interest?
I would say it will add yet another convenient way of INVESTING.The POINT to DRIVE to the AMFI/SEBI should be to ENSURE A SIMPLE OF DEMAT OPERATIONS/OPENING ACCOUNT but integrating with existing PAN/KYC and no hassles to INVESTORS/Intermediaries. The added benefit is it will IMPROVE and enhance various ETF business which is not exploited( as an asset allocation to the INVESTORS) by the INTERMEDIARIES .
Received from Mr. Jinesh Golcha, Golcha Investments, golchainvestments@gmail.com
We seem to becoming soft targets or more like punching bags.
I think the points raised by Mr.Bhat are absolutely right and its time we make a stand.
The current environment is favorable to brokerage houses and leaves the Ifa category in the lurch.
This will make things more challenging , not that we are short of any excitement and anxiety already.
Jinesh Golcha,
Golcha Investments,
where advice meets trust
+9199944-71622
+91423-2233338
The regulatory authority thinks that they can be able to bring all financial instruments in dmat form, but they have done it in Equities succeeded. Therefore for Mutual Fund also they try to do it and they will. We the IFA have to equip ourselves according to the latest develpments and changes. Otherwise we should look for an alternative business for our survival.
We all IFAs unanimously take drastic decision that not to do business for Mutual Fund showing our agitation against the action of the regulatory authority, which is killing our IFA community by throwing arrows one by one in the recent year.
Govindarajan S.
Comments by Sri Subramanyam Shyam in his Blog
Link: http://www.subramoney.com/2010/06/compulsory-demat-account/
The Regulators have an amazing ability to amaze me. Somebody attending the IOSCO conference has written about the 7 course meals and boring sessions through which one can sleep.
Now we have a new provision coming which says all mutual funds should be held in demat form. Which means you have to open a demat account, demat all your holdings, PAY annual charges, pay transaction costs, run the risk of a demat fraud,….all for nothing.
I think it was Mr. S V Prasad (any mf veteran can help if I am wrong) who did away with the certificate and made the mutual fund holding a statement. As the mutual fund units cannot be sold, or pledged without the invovlement of the issuing fund house, the mf statement has no great meaning. It is like saying you should dematerialise your bank account statement. It is just as stupid. Yes if some people want to transact on the net then they just have to go to the fund website of a distributor website and transact. Why it should be dematted and extra costs incurred, I am clueless. Surely regulators have far more greater brains than I have and some thought would have gone into it.
Of course if it goes through (which it will given that Regualtors do not even hear, leave alone listen) it will mean more business revenues for Nsdl, cdsl, banks, stock holding corporation, etc. – and you know who pays the bill. L O L.
recommendation: buy shares of Hdfc, Hdfc bank, Icici, Kotak, …these will be the biggest beneficiaries in the first round of this nonsense.
Personally it is better to shift to direct equity if the costs go up by another small unit. God bless them.
Not sure how people like IFA Galaxy are planning to react. Though this has not direct implication for the IFA chances are most people will become so called ‘direct’ investors through demat.
Which means the aum shifts from the small guy to the big banks. Fantastic business decision by demat organisations.
Received from Mr. Manohar Kamath
kamathinvest@yahoo.com
Dear Mr.Ramesh Bhat,
I feel this no useful purpose will be served by going for compulsory demat of Mutual Fund units. We have to object the move by the regulator.
All the IFA's will have to depend on the Share Broker/Firm.
Manohar Kamath
Received from Mr. B. Suryanarayanan
b.suryanarayanan@mnylindia.com
Banks which act as distributors are lobbying for these, so that they can eliminate IFA and not the stock brokers. Banks have to be told to concentrate on the core business and not think of increasing their other income or fee based income in their balance sheet. If all of us together meet RBI governor and impress upon him may be we can acheive something instead of fighting with SEBI.
Received from Sri K Jagannadha Reddy
kjagannadhareddy@yahoo.com
Dear sir
I oppose compulsory demat a/c requirement for mutual funds
Regards
KJagannadha Reddy .. chennai...............
Mobile no 9381067551
ARN 29904
Received from Sri KAMALKISHOR VERMA
verma.kamalkishor@gmail.com
DEAR RAMESHJI,
IS MR. BHAVE NOT KNOW THE BASIC OF MUTUAL FUND & EQUITY MARKET . ?
MUTUAL FUND IS LONG RUN THEME & IF IT"S DAILY TRADABLE WHERE U SAVE THE INVESTOR BENEFIT; IN INDIA WHERE PAN CARD IS DIFFICULT . HOW NORMAL PUBLIC TAKE MUTUAL FUND IN DEMAT FORM.. IT IS BIG GAME OF BIG PEOPLE.
WE ARE OPPOSE THE COMPULSORY DEMAT OF MUTUAL FUNDS.
KAMALKISHOR VERMA
Note my dear IFAs this is my personal views and not the views of IFA Galaxy.
1 After the abolition of entry loads many IFAs have already stopped selling MFs. Does compulsory opening of demat accounts spell doom for IFAs, since majority of the business will shift to brokerage houses?
Yes, Especially in Tier II and Tier III cities. This move will move away the IFAs out of the industry. Remember 80 % of the Investors (including metro cities) do not know which fund they had invested they depend more on their financial advisor who is one like their family member. How an IFA who is like the family members of the investor mis-sell? As I told earlier, try to call on 100 investors over phone and make a research report, 80% will say “I had invested in XXXXXXXXXX Mutual Fund” If you ask the name of the scheme and options he will not know (even a highly educated investor). That is the faith of our Investors. IFAs are educating them in a big way when compared with a banker or an Institution who do it only to meet their target.
2 If majority of people who hold physical mutual funds shift to demat form, then does this defeats the very purpose of long-term investment of MFs? Will MF investors become traders just like stock brokers?
Yes, If investors are going to hold the Mutual Fund accounts in demat form then there will we be question of Long term will be defeated. Now most of the investors invest in Mutual Fund and also Speculate in Stocks. When the speculator lose money on intraday trade, he may be forced to sell his long term holding in Mutual Fund Investments to meet the debit in day trade. It is the time for the Stock Broker to rejoice.
3 SEBI has allowed brokerage houses to charge on every buy and sell of MF units on the stock exchange but there is hardly any commission left for IFAs. Moreover, stock brokers hardly have any knowledge of MFs. Isn’t this a double standard by the market regulator?
Most of the Stock Brokers may not have the vide knowledge of the Mutual Fund Products (Chance of mis-selling may increase) even here the ultimate sufferer is the poor investor. Respected Sri Bhave sahib please save all the investors and their hard earned money.
4 Having a demat account also requires giving a power of attorney to the brokerage house. Will this leave investor at the mercy of stock brokers?
Yes, some time if there is shortfall in the trading account the Stock Brokers may sell and cover the MF holding (as the hold the power of attorney). Even though giving POA is not compulsory most of the Stock Brokers insist for it.
5 Will this move help in penetration of Mutual Funds in tier two and tier three cities?
No it will not. Most in Tier II and Tier III city people had lost lot of money in stocks they are scared of investing in Stock market and now if it is made on demat mode it will further affect the business in these cities.
6 Does it serves investor interest?
No, not at all. I have an Investor who is a servant maid and she is investing Rs. 100 a month in Micro SIP. Let us suppose I ask her to open a Demat account by paying Rs. 500 and force her to renew by paying Rs.500 every year will she continue her SIP? Her annual Investment is Rs. 1,200 per annum and she had to spend Rs.500 for demat account every year, which is 41.67 % of her annual Invest. Is this Investor Friendly?
K Ramesh Bhat
CEO, M/s. Aniram
Received from Sri K. ANAND, 9840025903, ARN 5322
krishanand@sify.com
To : IFA Galaxy members/Mr. Ramesh Bhat,
AS FINANCIAL ADVISORS AND DEALING WITH INVESTORS ON REGULAR BASIS, WE SHOULD OPPOSE THIS MOVE. WE HAD FAILED TO STOP SEBI LAST TIME AND COULD NOT DO ANYTHING LAST TIME
(SEBI COULD HAVE MADE AT LEAST 1% - 1.50% ENTRY LOAD INSTEAD OF TAKING OUT FULLY, THEREBY WE WOULD HAVE GOT BETTER REVENUE THAN PRESENT),
NOW AT LEAST WE SHOULD PREVENT SEBI. SEBI WANTS TO DOMINATE THE MFS ON ITS OWN TERMS.
1. IF THERE IS DEMAT A/C, THERE IS NO DIFFERENCE BETWEEN MF UNITS AND EQUITY SHARES.
2. LIKE IN SECONDARY MARKET, INVESTORS IN MF UNITS WILL RESORT TO " SWING TRADING" IN MF UNITS AND THEREBY AFFECTING THE INTERESTS OF LONG TERM INVESTORS IN THE FUND. THIS IS GOING TO BAD FOR INVESTORS, AMCS AND US.
3. SO MANY STOCKS/SECTORS AVAILABLE IN THE NSE/BSE AND SO DIRECT INVESTORS IN ANY TOWN/VILLAGE WILL HAVE ACCESS.
4. INVESTORS WILL NOT DEPEND ON IFAs AND DEPEND ON STOCK BROKERS ON INVESTING IN MF.........STOCK BROKERS WILL KNOW ONLY EQUITY SHARES AND MAY GIVE WRONG ADVICE OF FUNDS.
5. MF will BECOME SLAVE TO BIG BROKERAGE HOUSES IF THIS COMES.
6. IN OPENING OF DEMAT A/C, THERE IS A COST AND YEARLY FEE IS LEVIED EVEN IF NO HOLDINGS.
ON THE WHOLE, THIS DOES NOT SUPPORT LONG TERM WEALTH CREATION IN MFS AND WE SHOULD DO OUR BEST TO PREVENT IT. WE CANNOT GET OUT OF MFS AS WE HAVE AN OBLIGATION TO SERVE EXISTING INVESTORS AND ONE OF THE BEST INVESTMENT AVENUES AVAILABLE NOW.
THANKS AND HOPE IFA GALAXY AND OTHERS GIVE A FIGHT AND PREVENT,
K. ANAND
9840025903
ARN 5322
Received from Mr. Ramanan B of Coimbatore,
b_ramanan@yahoo.com
Compulsory Demat for Mutual Funds will provide more room for speculation in Mutual Funds.
Mutual Funds may be treated as shares and technical trends also will be provided like a share by many of the brokerage houses! (eventhough it's a joke)
The purpose of Mutual Funds - Long Term Investing, will not be there if it has become compulsory demat!
Tier 2 and Tier 3 cities and many small towns and cities can't participate or struggle to invest in mutual funds.
Demat of Mutual Funds should be OPTIONAL only and not to be made Compulsory!
All the AMC's should fight for the same, if the industry wants to see any growth in the future!
Rgds,
Ramanan.B
The SEBI's moves are counterproductive as under:
Dematerialisation of MF investments will defeat the Medium/Longterm nature of MF investments and it will just become another Stock/Share listed in the exchange.
I have even today clients who started investments in Templeton M/F's Blue Chip Fund (Growth)in the year 2001 July - to be precise- still holding their original investments and redeemed their appreciations over the years.
The M/F investor psychology will undergo paradigm shift if demat format is introduced, leading to day trader/swing trader like behaviour,which is not what SEBI wants as its tries to educate retail investors.
I oppose compulsory demat a/c requirement for mutual funds.
Barathwaaj
From past experience, we note that even though demat is compulsory for share trading, there are many who still have lakhs of shares in physical form, and have not yet converted them into electronic mode, due to the hassles of opening a demat account and the maintenance of the same. All this value is written off as a sad loss. There are also several demat accounts where the holders are unable to do anything about their holdings, as their maintenance dues to the demat companies run into several thousands of rupees, without even a single transaction. Demat totally defeats the very purpose of abolition of loads, to bring down the cost of investing in mutual funds. I fail to understand this logic of the suggestion of the regulators. However it would cause no harm to have it optional. Compulsory Demat. Defenitely NO NO....
Dear Mr.Ramesh,
Greetings!
I shall pass on your message to KAMFA and revert asap.
Thanks and Best Regards,
Babu
I AM AN IFA FROM SALEM, WHICH IS A TIER-III CITY. IT IS HIGHLY IMPOSSIBLE TO MAKE ALL INVESTORS TO HOLD MF UNITS IN DEMAT FORM. EVEN LARGE SCALE INVESTORS DONT LIKE IT.
LET SEBI ASK THE BACKBONES OF THE INDUSTRY - I THINK IT IS INVESTORS- ABOUT THIS. NO ONE WILL EVER BOTHER TO REPLY AS MOST OF THEM DONT KNOW WHAT IS IT.
ALSO TRY TO BRING THIS FOR ALL KIND OF INVESTMENTS SUCH AS KVP,NSC,ETC.
THERE WILL BE NO TAKERS FOR GOVT. BONDS AND HUGE IPO'S AND FPO'S PLANNED BY GOVT. ITSELF, AS THE ISSUES NOWADAYS ARE SAVED ONLY BY DII'S.
Received from Sri Kasthuri Rangan, ARN-1368
rangan.kasthuri@rediffmail.com
Dear Mr.Ramesh Bhat,
You are absolutely right in saying that this move will ring the death knell of IFAs. We should jointly express our strong opposition to SEBI. I join you in lodging our protest.
Kasthuri Rangan
ARN-1368
Received from Mr. R.SRINIVASAN, ARN-35497,
vasan_1966@yahoo.com
Dear Members of IFA,
The abolition of entry loads many of the IFAs have already stopped selling .In this juncture, the majority of people who hold physical mutual funds shift to demat form, then the very purpose of long-term investment is completed defeated. The MF investor have to trade like stock broker. I think SEBI IS FAVOURING THE STOCK BROKERS.IF YOU INSIST COMPULSORY DEMAT, ALL THE MF INVESTOR WILL REPURCHASE THE UNIT AND DEPOSIT THE MONEY AND BANK AND POST OFFICE.
IT IS SECOND BIG BLOW TO MF INDUSTRY.
REGARDS,
R.SRINIVASAN
ARN-35497
HOLDING MF UNITS IN DEMAT SHOULD NOT BE MADE COMPULSARY. IT SHOULD BE MADE OPTIONAL.
N.VISWANATHAN, ERODE
I STRONGLY OBJECT THIS . MAY GOOD SENSE PREVAIL UPON 'BABUS' of SEBI. THEY HAVE REALLY GONE 'MAD'.IT WILL NOT DO ANY GOOD TO THE INDUSTRY, RATHER, IT WILL DEFINETLY MAR THE INTERSETS OF RETAIL & SMALL INVESTORS and ALL THOSE WHO ARE STILL AWAY FROM THE MUTUAL FUNDS, BUT WISH TO PARTICIPATE IN THEIR WEALTH CREATION PROCESS.
This will only be against the retail investors for the following reasons :
1. What happened after 1994 when compulsory demat was introduced in share trading. Participation by retail investors have gone down and even if they do, it is only to speculate which is against the basis of investing in equities.
2. Retail investors are known for their emotions. They will sit on loss for years and will not sit on even a small profit and this would lead to unnecessary churning which is against the interest of the Mutual Fund objectives.
3. It will increase the cost of transaction as even small investors would be required to open demat account and would be charged for all their transactions. This is even against the objective of SEBI whose one point agenda is to bring down the cost of transaction.
4. This will only institutionalize the industry and retail investors would be at the mercy of big brokers who would not have interest in servicing them. But IFAs service the retail investors and maintain personal relationship with them and their family and even some IFAs are serving second/third generation in that family.
5. This move will only facilitate banker/brokers and again the retail investors would be more vulnerable at their hands.
At lease now AMCs should rise their voice, otherwise no one would be their to save the industry.
L.Kumaar
Member IFA Galaxy – ARN 0037.
Mutual fund investments are currently already being held in a dematerialized format. Only thing is the record keepers of the dematted units are the R&Ts today, and not the depositories.
There is no significant investor interest or regulatory/compliance interest that will be served by making MF units kept in the depositories. Hence, making depository accounts mandatory for MF investors is a waste of time, effort and money (for the investors and others).
However, we should note that SEBI has in the past ignored the complaints of the MF industry in their zeal to reform. Hence, we should find a way to speak for the investors and figure out ways in which depository accounts can be as hassle-free as possible. Here are some suggestions in this regard:
1. Keep the account opening formalities simple for MF only Demat holders. Currently, an equity account holder needs to sign in some 30 places in the account opening document for opening a brokerage account.
2. Do not institute a new KYC process for these investors. The existing one, with its arcane processes, is fine enough.
3. MF unit holders do not require a trading account now. They should not in the future as well. Otherwise it will mean more time lag for redemption and dividend proceeds to come to their bank account.
4. Today, the demat units are held by the R&Ts and the cost is borne by the MF companies. That should continue - that is, the investors should not have to bear any new costs in this regard.
5. The existing service points for MF investors - the CAMS, Karvy front offices, the MF offices etc should continue to work as is. The investor should not be forced to use trading terminals as the only way to transact in MF units.
Essentially, if the SEBI wants to move the holding of MF units from R&Ts to the depositories, it should be done in a way that is least impactful to the investors. It is essentially an operational and book-keeping detail and should be implemented that way.
Also, to add to the points above, there is the issue of NRIs as well. Today, if an NRI wants to invest in a mutual fund in India, all they need is a PAN card, NRE/NRO account and a proof of Indian origin. However if they want to invest in equity market, the process is much worse with the need for a special PIS account in the bank to channel their funds.
Making MFs trade like stocks using current stock-trading methods and demat accounts will effectively spell the end of NRI investing in mutual funds in India.
Received from Sri L.KANNAN, 9841004967
kcpsllk@yahoo.com
I oppose compulsory demat a/c requirement for mutual funds.
REGARDS,
L.KANNAN
+91 9841004967
Demat of Mutual Funds should be OPTIONAL ONLY and not to be made Compulsory.
Regards,
Ashish Golechha
ARN_19343
Received from Sri. Alok Khanna
khannalok@hotmail.com
Dear RameshJi,
1. This is very much of the fact that the left over advisors are finding difficult to sell further if the regulator imposes such rules in future, when we are unable to reach tier II or tier III cities under present circumstances.
2. It is quite cost attracting too for all the investors who invest for long term and then they have to pay for sellout or annual maintenance charges, this will certainly keep them away from making investments in MF.
3. Yes it is true making investors hold their investments in Demat form is a compulsion in comparison to what Mr. Bhave did with physical certificates of shares, if you jot down one by one the benefits of dematerialization of shares there isn’t one benefit as to why one should be keeping their investments in Demat form. Because in MF case the statements of account are not certificates hence there is no need to save them from fire or floods or there is no fear of getting them misplaced as they are already electronically handled by the registrar, one has to just tell the folio no and that is all.
4. Investor needs to check with another institution in case of SIP’s-Bank Debit>AMC >Demat Account. It is indeed a huge benefit of NSDL or CDSL if this is going to be done, as a large chunk of money as AMC is going to be collected and on the flip side another few thousands of distributors are not going to sell that way, because now they have to service for the Demat account too.
5. Objective should be to try and make this industry flourish with such distributor friendly norms so that lot many prospective but not reachable clients could be brought down to the industry and make them benefitted, also the equity to be made more diversified. We are just carrying on with the existing clients which is not a good practice.
6. We should remember that the 5% literate public who buy online MF’s they too do not require a Demat account because they know how to handle the transactions, then for whom this rule is being made and imposed to is a great question.
I totally disagree the need of it and stand out not
Thanks and Regards,
Alok Khanna
128/50(I), K – Block,
Kidwai Nagar,
Kanpur – 208011
(O) – 05122616446
(M) – 9336337677
Received from Sri. Babu Krishnamoorthy,
babu@pelicanindia.com
My View on this matter is as follows:
If so far the avowed objective of SEBI has been to reduce the cost of owning units in Mutual Funds, then this move of Compulsory demat will only choose to increase the client ownership costs :
The annual DEMAT charges of Rs 400-600 per account would increase the cost of ownership for small investor who holds below Rs 50,000/- worth of mutual funds who are already the disadvantaged lot.
The buys and sells of MF would incur charges at the DEMAT which again is the added burden.
Make the process of investing through mutual funds a cumbersome one.
Today, an investor does not need DEMAT to invest into Mutual Funds, tomorrow with this Rule, the investor would have to have DEMAT account to even invest Rs 1000 in Mutual Fund, I do not think this will help the cause of MF, rather it would suppress the desire of small investors to invest into MFs while SEBI’s Avowed objective is exactly the opposite i.e to enhance retail penetration.
Hope my points are valid from a client perspective.
Regards
Babu
Received from Mr. Sriram, Sivasri Premier,
srirampremier@yahoo.com
Dear Bhat
Sebi taken the load and expense Ration where by he said give the benefit of Investor to comeing out Demate Account he has to Pay the cost of demate Account charges and for buying selling the cost he has to 1.5% as charge
If its show where is the benefit of investor sebi charting the investor and Distrusters. He wand increase the broker network if is so where is the Advise only miss selling will happened.
Thanks n regards.
K. Sriram
Sivasri Premier Investments Pvt Ltd.
Cell No. 9840043474
MF is a long term investment vehicle which provides stability to overall portfolio of a investor. There is no point in getting MF units in demat form. Its very easy to take decision in an AC office, try to work at Grass Root level.
MF'r r supposed to b long term instruments. One can invest even for 20 yrs and hold the instrument without incurring any additional costs.
Introduction of demat will force them to shell out atleast 300 - 500 as AMC charges.
1. First and foremost Demat can be optional not compulsory.
2. It may be the idea of Sebi to offer Free Demat accounts to the MF investors. But it will have a cost over a period of time both in terms of Annual Maintenance cost and also a cost of buying and selling units through the brokers platform.
3. Demat can only be a option for holding units but it is not a solution for SEBI to penetrate mutual fund to nook and corner of the country. Instead it can be a hurdle for investors who are not interested to hold units in demat form.
4. Demat is a facility for holding paper share certificates of companies in electronic unit form. But today there is no concept of unit certificates in mutual funds then why should one hold in demat?
5. Even after abolishing entry load the outflow from mutual fund is higher than inflows. But these compulsory changes will all the more affect the flow into mutual funds.
6. SEBI & AMFI should not act in haste as they have done earlier.
7. Quality Investor & Advisor Education is the need of the hour, I think Sebi should oncentrate on this rather than bringing in new rules.
Srini
Money Kare
Whatever service we have been offering to investors by way of financial planning, long term planning and wealth creation will be totally devoid once Demat account becomes mandatory. Most of the investors depend on expert advice with a frequent review of the portfolio. Can a share broker who is totally glued to the market from morning till evening give this personalised service?? About 60% of the investors are still not aware of how mutual fund works. Therefore, my humble request is that Demat format is not made mandatory. Nalini ARN28605, Chennai
Demat A/c for MF Investments should not be compulsory. Also if they want to do Optoinal
then also they give Brokership to all IFA.
So business should reflect on IFA Code not on
Broker's Name.
SEBI has allowed brokerage houses to charge on every buy and sell of MF units on the stock exchange but there is hardly any commission left for IFAs. Moreover, stock brokers hardly have any knowledge of MFs. Isn’t this a double standard by the market regulator?
swamy associates
arn 20627
Sebi removed entry load for the benefits of investors and now forcing them to pay demat charges for mutual funds. Is it a rational move??
AS IFAS, WE HAVE OPENED SIPS FOR EVEN RURAL INVESTORS. THEY JUST BELIVE OUR TIPS &INVEST AND MAKE A LITTLE PROFIT. I REALLY WONDER HOW THIS WILL WORK. D-MAT SHOULD BE ONLY OPTIONAL.RBI PLANS FOR FINANCIAL INCLUSSIONS POLICY IN REMOTE AREAS. WITH SUCH MOVE FOR D-MAT A/C,DEFINITELY BANKS MAY NOT BE ABLE TO HELP THE INVESTORS.PADMA DEV MBA, [C F P],
Demat A/c for MF Investments should not be compulsory. Also if they want to do Optoinal
then also they give Brokership to all IFA.
To IFA GALAXY Members/ Mr. Ramesh Bhat
1. While we talk about compulsory demat with Investors, about 80% of them will request redeeming all their holdings.
2.The remaining investors will put the burden on us for initiating the demat a/c opening process.
3. We, therefore, oppose the move
J. IRSHAD AHMED, ARN: 8670
The main idea behind of this move is to make the investments under compulsory demat mode so that the conventional method of transactions are reduced or stopped. Hence the investors will be forced to transact all transactions only online through NSE or BSE. This is another arm twisting strategy of SEBI, ironically which is a result of distributors predominantly retail deserting this business and also the representations made by AMCs that 4lakh folios have vanished from their management.
Finally it is given to understand that the government wants all investors to hold their investments be it mf, shares, debentures, NSC, Insurance policies, etc.,etc, in demat mode, which this fraternity will definitely witness to see the changes soon in all avenues of investments.
In the interest of the minority retails investors this should not be made compulsory and be only as optional. Today the share holders of various cos. are still holding their shares in physical format. R&T's are still servicing the same. Let in the MF industry also there be two verticals. ONe is demat and the other is the existing version.
Sathish Kumar C
ARN 1619
This may not benefit the retail investor due to the cost and also that the investor would be forced to do business through the broker with whom he has demat account. Arent MF Holdings already in demat form with the R&Ts. Why this hurry to force retail investors to buy/sell through stock brokers? This would not in the form being debated benefit either investors, advisors or even stock brokers because they do not want retail clients who do not trade. If made mandatory, then one might as well kiss the small investor good bye.
Shankar - Credo Capital
If we IFAs get a trading platform of our own, using our ARN code, I would Welcome Demat. This will solve all the present hassles of Transactions.
Arun Tikmani, BIGBULL Financial Consultancy Pvt Ltd, Bhubaneswar
Vdnkatasubramanian, IFA said
The SEBI move is to eliminate IFAs totally from this field. While removing the entry load the SEBI stated it is investor friendly. Now holding MF units how it will be cost effective to the investor. God only knows.
Venkatasubramanian,
ARN No.2303
SEBI & AMFI are going against the IFAs by providing no entry and now in demat form. I a new client want to invest Rs 5000/= he has to open a demat and invest. Investor is paying indirectly extra payment by commission to the broker. Brokers are enjoying but IFAs business?
P.Danasekaran
ARN: 63395
it is better to merge mf industry in stock broking and only concentrate on fdi. not retail participaton added in future .
SEBI moving very wrong way. First of all SEBI done so many wrong thing adain SEBI doing great mistake.
C.B.Bhave himself think as a great reformer and acting smart.
My sincere suggestion to him come out from AC chamber and look rural market create education about Mutual Fund.
Already hike the ARN card renew and fresh fees.
So think twice before implimenting this funny nonsense rule.
Adithys S Rao
Mangalore.
Cel-09449102656
On one hand SEBI want to make products cost effective for retail investor on other hand this compultion of DMAT account will ultimatly raise the cost of product
imagine an investor of SIP of Rs. 500 per month
one year investment
500x12=6000
annual DMAT maintainence charges = 250
if we consider all other charges to be 0%
then also annuall charges on investment = about 4% if my callculation is accurate
have SEBI considered this asspect also
What a fun of abolishing entry load and banning unamotized charges in close ended fund
was it the pathway of replacing them with these charges so that Government could increase its revenue
if this be the case any product that is market related should be in demat form including ulips...will anybody speak up?The regulators will not fight against the Irda as they have learnt that they have already rubbed them on the wrong side.
I strongly oppose compulsory demat a/c requirement for mutual funds.
DESIKAN RANGARAAJAN
CHENNAI
I think that SEBI is playing in to the hand of some very very vested interests. I dont think we IFA's are a weak community. We can take the might of any one here. We should take this as an oppurtunity to unite and show the world what we can do.
I have not seen any other industry / industries having so much micro management by the regulator. On one side the government talks of its citizens being employed and self sufficient. On the other side it allows such self defeating regulators to play the havoc. Let us see if they can do the same to any other industry...(read liquour, mining,etc). Many an ANDERSONs are let go and hard working people are penalised.................
Neelesh
Bangalore
When things are going smoothly why do our regulators create confusion? Where is the need for demat a/c for MFs, PAN card is a must at the time of purchase. It is easy to track the frauds etc. Why tax the small investor by making him pay demat a/c opening charges,Rs 700 - 1000, + AMC every year. Even Demat opening requires a PAN card, does not make any sense to increase the expense of the small investor. SEBI's 1st priority is to see that the small investor gets more returns, & not more expense.
It seems that imaginations are worse than the reality.
I believe that there is going to be compulsory demat of units and not the trading.
This will have grate relief to us where the AMC ask idiotic documentation and lengthy & costly procedure under the pretext of investor safety.
Trading cannot be made compulsory as SIP, STP, SWP needs the offline platform.
(Still triggers, auto payouts of appreciation are not popular.)
Moreover NSE BSE is not interested the MF trading as it can never generate the volumes and they are only interested in generating volumes and in turn revenues!!
I believe instead of worrying lets wait exactly what is happening. Yes we should be ready with our strategies for any changes, but don’t worry MF is the business where individual consultation is the most important ingredient which no atomized system can provide. See the dynamic schemes coming out as debt + gold ETF, dynamic allocation of equity in MIP to name a few. Forget the bouquet of foreign funds..
These are the steps probably of reducing the cost at every level, but I doubt will not be able to kill us
Regards,
Sandeep
Any investment by an individual should be simple, easy to enter and when money needed easy to take back
But to invest in mutual fund the list of documents needed are
a. pan card
b. know your customer(kyc for that
1. photo identity proof
2. address proof
c. demat account
1. address proof
2. photo id proof
3. statment from bank
4. cancelld cheque
d. Trading account against demat account
1. address proof
2. photo id proof
3. demat account proof
hope the Sebi will stop with this proceeder and the Amfi will take care and improve the mutual fund sale.
kalyanam
ARN 5968
9800 62069
zenkalyan108@gmail.com
My views are:
It will not really work for Mutual Funds since MF industry is still in infant stage and the time is not right because the awareness level is quite low. The entire industry depends on quality service and advise. The entire IFA community will be eliminated due to the implementation of DEMAT option. To my opinion the DEMAT option should be optional and not mandatory. Why DEMAT option is compulsory for MF industry ? How about Insurance and other Financial instruments? The entire IFA community and their families who fully depend on MF advisory and distribution business will be in trouble if it is implemented.
TV VARADARAJAN
ARN-1127
Chennai.
SEBI wants the AMC's to penentrate even to small retail investors for which they had laid so many norms.But how'll this compulsory demat help the retail investors who are even hesitant to even apply for a PAN card?And again putting it into DEMAT will again increase the chances of misselling ,churning ,etc.,
G.Arputharaj
ARN-38069
Aditya Capital Market
Received from Sri H.Sankara Raman ( ARN 16132 )
hsrkalyani@yahoo.com
Dear Colleagues,
Abolition of Entry Load is a different matter . It benefitted the investor who had the option to directly invest with the MF. Later on Entry Load was abolished for all investors who either make direct investments or make thru authorised distributors.
It cannot be denied that ADs give valuable service to MFs and also to the investors . If the MF schemes should reach more and more retail investors , the agents only can propagate and make the public to come forward and invest in MFs. This is a fact and I am not making this statement with selfish interest . It is for the MFs to realise this and encourage the Agents.
But making Demat mode compulsory for all investors is a nuisance for retail investors. They will be compelled to deal through share brokers.
In the case of shares it is a different story . MFs will lose the retail segment and SEBI is not the loser . Perhaps SEBI thinks it is enough if HNIS, Banks , insurance Cosand investment cos. portfolio managers invest in MFs.
If SEBI wishes to control large investments in MFs demat can be made compulsory beyond some limit.
The moment demat becomes compulsory, I feel , many small retail investors will redeem MF holdings .It is not clear how the MF will redeem and pay the investor directly if the holding is in demat form .
May be all MF investors should transact thru Stock Exchanges only and thru share brokers.
SEBI , MFs, AMFI etc are manned by stalwarts and knowlegeable persons in their fields and they know better.
H.Sankara Raman ( ARN 16132 )
Received from G Sathiyamurthi, ARN :8587
CELL NO.9894803399, rtngsmurthy@yahoo.co.in
Dear Shri. Ramesh Bhat
I strongly object to the Sebi proposal for compulsory Demat for Mutual Fund Investments.
We at ifa galaxy Members should fight to drop this move.
G Sathiyamurthi
ARN :8587
CELL NO.9894803399
&
S Komathi
ARN :44978
Cell No.:9894803344
I request you to send all SMS for both to Cell Nos.
Received from Sri Muralidharan G,
muralidharan_gtri@yahoo.co.in
Dear Mr. Bhat,
Investing in Mutual Fund is purely based on need and it is a tool for long term wealth creation. Still there are many advisors who are custmer oriented, they do bussiness only on need based after assessing the various parameters like investors icome level, risk taking ability, tax implications etc., But unfortunately still majority of investors having the mindset of treating the mutual fund advisors as only an agent and investor dependent and he is helping the agent for his livelihood.
Many investors never think that Mutual fund advisors(really dedicated to this bussiness) are helping investors to achieve his longterm investment goal.Further they compare mutual fund advisors to a post office agent if we ask for fee for the advise or services.
In such scenerio, it is important on the regulator part to create an awareness among the mutual fund investors how an advisor role is most important when compared to other agents. Ofcourse I honestly admit and accept if SEBI ask IFA's to undergo any training or course to strengthern the knowledge in the area of Mutual Fund.
Mutual fund as an investment vehicle, becuase of its lower penetration in the market, mainly retail investors need to be educated which can be done through qualified IFA's only for which he has to be properly remunerated. Regulators should keep in mind and value the mutual fund advisors. Abolition of entry loads have drasticaly reduced the revenue of advisors and many advisors quit this business.
Having compulsory dmat account to invest in mutual fund would definitely not serve the very purpose of Mutual Fund investment and it indirectly ask IFA's to quit this business.
I strongly oppose this and it is the right time to show our strength and unity.
Muralidharan. G
98402 11485
Dear Ramesh bhat,
I strongly oppose this and it is the righttime to show our strength and unity.
Regards
V.Srinivasan
Anuradhasrinivasan
Seenu investments
Tiruvaur
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