SEBI cracks whip on online mutual fund distributors

SEBI cracks whip on online mutual fund distributors August 13, 2010 03:22 PM Ravi SamaladSource: http://www.moneylife.in/article/72/8211.html The regulator has asked fund houses to furnish all investor-related documents by 22nd November which  were opened via online distribution channels Asset management companies (AMCs) will not be allowed to open any new accounts if they do not possess  all investor-related documents with them. A majority of these accounts mainly belonged to online distributors  who were not ready to share investor details with AMCs. "Online distributors were not disclosing the customers' identity and were merely saying that these transactions  were happening at their level. They said they would do business based on power of attorney (PoA) but the  Securities and Exchange Board of India (SEBI) did not agree. So now, SEBI is forcefully implementing the  norm by involving trustees. This is a good move by SEBI. Know your customer (KYC) norms are mandatory  for AMCs and it cannot be masked under a distributor's identity," said a top official from a fund house. According to industry players, some distributors were executing mutual fund (MF) trades by misusing PoA  signed by investors. "This is essentially for people who are selling MFs through online channels. They have to comply with  the Prevention of Money Laundering Act (PMLA). For offline clients, we are anyway filling up the application  forms and taking all details. SEBI is doing it ensure that no suspicious money is coming into MFs. Investors can also do transactions  over the phone, so PoA is required in that case. So whether the PoA is valid or not also needs to  be checked," said K Venkitesh, national head (distribution), Geojit BNP Paribas. Moneylife had reported on 29 July 2010 on how the Financial Intelligence Unit (FIU) had revised the  guidelines for Suspicious Transaction Reports (STRs) for MFs. (See: http://www.moneylife.in/article/81/7749.html).  SEBI in its 11 December 2009 circular had mandated fund houses to halt commissions paid to  distributors who did not have complete investor-related documents. Distributors were supposed  to submit all investor-related documents to AMCs. Moneylife had reported on 22 March 2010  on how distributors were unable to submit KYC documents to AMCs. (See: http://www.moneylife.in/article/8/4340.html). The SEBI circular states, "It appears that all the investor-related documentation is not available  with the AMCs. It has been observed that due to such incomplete documentation, investors' rights  to approach the AMCs directly are restricted and investors are forced to depend on the  distributors for executing any financial or non-financial transactions." AMCs will be allowed to open a new account only when they have all investor-related documents like PAN, KYC, specimen signature and PoA. The regulator has  asked the trustees of AMCs to submit a confirmation report by 22 November 2010. Existing accounts  will have to be updated by 15 November 2010.

SEBI circular on Updation of investor related documents

SEBI circular on Updation of investor related documents

Aug 13, 2010 SEBI

Cir / IMD / DF / 9 / 2010   ,August 12, 2010

1. SEBI vide circular No. SEBI/IMD/CIR No.12 /1 86868 /2009 dated December 11, 2009 has inter alia advised mutual funds to confirm whether all the investor related documents are maintained/ available with them. Further in case the investor related documentation was incomplete, the trustees of the mutual funds were advised not to make further payment to such distributors till full compliance/ completion of the steps enumerated in the said circular and to send a status to SEBI as and when process is completed to satisfaction.

2. SEBI has not received any confirmation from the trustees of the mutual funds on the completion of the process as mandated in the said circular. Thus it appears that all the investor related documentation is not available with the AMCs. It has been observed that due to such incomplete documentation investors' rights to approach the AMCs directly are restricted and investors are forced to depend on the distributors for executing any financial or non-financial transactions.

3. In order to ensure that investors have unrestricted access to AMCs and to enable AMCs to provide prompt investor service including execution of investors’ financial or non-financial transactions, all mutual funds/ AMCs are directed that:

All new folios/ accounts shall be opened only after ensuring that all investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature are available with AMCs/RTAs and not just with the distributor.

For existing folios, AMCs shall be responsible for updation of the investor related documents including account opening documents, PAN, KYC, PoA (if applicable), specimen signature by November 15, 2010.

4. The trustees shall submit a confirmation after they receive certification from an Independent auditor on completion of the said process latest by November 22, 2010.

5. Mutual Funds/Asset Management Companies shall comply with the above requirements in letter and spirit.

6. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

Asha Shetty
Deputy General Manager
Tel no. 022-26449258
Email-ashas@sebi.gov.in

===========================================================================================================

Regards

Valady V.Barathwaaj

Chennai: +91  98418-25188

Mutual fund investors go demat, exchange volumes spurt in July

·                                 Posted: Mon, Jul 26 2010. 10:53 PM IST

·                                  

·                                 Money Matters

Mutual fund investors go demat, exchange volumes spurt in July

Mumbai: As executive director of the Securities and Exchange Board of India (Sebi) and later as chairman of National Securities Depository Ltd (NSDL) in the 1990s, C.B. Bhave dragged the Indian equity market into the paperless era.

He is now attempting an encore as chairman of Sebi, the capital markets regulator. In November, Bhave began a process to shred the paper in the mutual fund business through dematerialization, or demat.

Large distributors of mutual funds are now goading clients to hand over their paper certificates to NSDL, India’s largest depository, and hold them in electronic form instead. Industry experts say this would help distributors save postage, stationery and infrastructure costs.

There could be a long-term benefit as well: Demat of mutual funds could provide a big push to the trading of units on stock exchanges.

Ashu Suyash, managing director and country head, Fidelity Fund Management Pvt. Ltd, with Rs7,879 crore in assets, said, “This is the next part of the move to allow MFs (mutual funds) to be traded on exchanges. Without demat, the exchange platforms were not getting traction. This move will be an enablement.”

Krishnamurthy Vijayan, CEO, IDBI Asset Management Co. Ltd, with Rs1,300 crore in assets, said the demat process will help exchange platforms. “All capital market investments will be available in one statement, making life simple for investors,” he said.

Mutual fund buying on exchanges got off to a slow start, but activity has picked up in July. The daily average number of transactions grew more than 10-fold, to over 1,000 transactions worth nearly Rs6 crore in July.

In November 2009, Sebi floated the idea of trading units on exchanges to help the Rs6.75 trillion MF industry, which was on the back foot after a June 2009 Sebi order banning payment of agent fees from investor money.

However, till now only new purchases could be made through these platforms. With the introduction of demat, even old fund holdings can now be transacted on exchanges.

NSDL alone has over 10 million active demat accounts with assets worth Rs59.5 trillion. In comparison, the MF industry has over 40 million investor accounts with assets in excess of Rs6.75 trillion, most of it paper.

Surjit Mishra, executive vice-president and national head, mutual funds, Bajaj Capital Ltd, a financial products distributor, said that contrary to popular belief, a good number of MF investors already have demat accounts for their direct equity investments. “Roughly 50% of MF investors already own demat accounts. By converting their MF investments into demat form, they will get great ease in transaction and accounting.”

According to Mishra, this will improve further as people can now use the demat to sell and exit existing investments. “Without demat, only new (mutual fund) investments can be done and only those investments made through the exchange platform could be refunded. With the introduction of demat, existing investments can also be transacted. The number of transactions will go up,” he added.

Entities such as Integrated Enterprises India Ltd, a distributor and depository participant, are pushing dematerialization. “We are actively promoting the demat route,” said V. Krishnan, head of mutual funds at Integrated. According to him, the response has been good. “We have got very good response during the recent new fund offers of HDFC Asset Management Co. Ltd and ICICI Prudential Asset Management Co. Ltd. In June, we opened about 100 new demat accounts. This month the number has crossed 500 already and may cross 600 eventually.”

The growing popularity of exchange-traded funds, or ETFs, as an important class of funds is also driving home the importance of demat accounts. At least two new fund offers are for ETFs.

However, one major hitch is the direct transfer of units to client accounts. In share transactions, shares are first transferred to pool accounts of brokers before being moved to a client’s account. This gives the broker a chance to ensure that payment is received before the shares are transferred. But in a mutual fund transaction, the units are directly transferred to client account. “This puts the risk on the broker. Therefore, only pre-funded transactions are being executed at present. We have asked the regulator for the pooled account facility in mutual fund units also. Once this is allowed, most brokers would begin to show interest,” Krishnan.

  

Regards

Valady V.Barathwaaj

Chennai: +91  98418-25188

Alarm bells ring as equity mutual funds lose a massive Rs.3400 crore in July

This article appeared in www.moneylife.in/article/81/8034.html Alarm bells ring as equity mutual funds lose a massive Rs3400 crore in July August 09, 2010 08:25 PM Ravi Samalad Net outflows from equity funds reach a whopping Rs11,560 crore since entry load ban since August 2009, 30% of it in just July itself! Equity funds are witnessing continuous redemptions since the entry load ban in August 2009 but in July it has turned into a massive haemorrhage. A humungous Rs3400 crores flew out of mutual funds in July alone. Including the outflow of last month, net outflows since August 2009 stand at a whopping Rs11,560 crore. The sales of new equity schemes stood at Rs705 crore In (Mirae Asset Emerging Bluechip Fund and SBI PSU Fund were launched) while sales of existing equity schemes was Rs4308 crores in July. But last month, redemptions from existing equity schemes stood at Rs8,413 crore meaning that equity mutual funds suffered a Rs3,400 crore of net outflow in July 2010. In June investors pulled out Rs1,446 crore from equity schemes. Liquid funds have seen a healthy inflow of Rs34,303 due to improved liquidity situation while balanced funds recorded Rs43 crore outflows in July.  As on July 2010, the assets under management (AUM) of the industry stood at Rs6.68 lakh crore. Commenting on the severe outflow, Jimmy Patel, CEO, Quantum Mutual Fund said, “distributors seem to be pushing ULIPs as they are more lucrative and their new norms will be implemented shortly. Equity funds are also witnessing new sales but nothing really major as it is still very much a “push product.” Ever since the Securities and Exchange Board of India (SEBI) banned the entry load for mutual fund schemes, fund companies have been suffering from a steady haemorrhage of cash from their equity schemes. Over the last 12 months, funds have recorded positive inflows only in just two months. This is all the more galling for the fund industry, because mutual funds normally benefit from inflow of funds when the market is rising. Between March 2009 and July 2009 when the Sensex was up 88%, the fund industry saw an inflow of Rs7,429 crore. Indeed, even when the Sensex came down crashing by 39% between April 2008-December 2008, the mutual fund industry still saw an inflow of Rs1,254 crore. Therefore, the continuous outflow of cash can only be attributed to SEBI’s order of banning entry loads and forcing fund distributors to make money by ‘advising’ investors. Distributors have simply stopped selling funds. The truth is that, the ban on entry loads has dried up the distributors’ revenues and they are now asking investors to consider Unit-linked Insurance Plans (ULIPs) and company fixed deposits as the next best investment opportunity. This is unfortunate because ULIPs are no better than equity funds unless they are held for a longer period while fixed deposits are unsecured investments. But the commissions on ULIPs and FDs are extremely attractive which is why distributors are pushing them.   M. S. Suri Funda Acadamy

AMFI to tighten registration process for mutual fund distributors

August 12, 2010 05:25 PM
Ravi Samalad
Source: http://www.moneylife.in/article/72/8185.html

The industry body will tweak ARN registration and renewal norms from 1 September 2010

After announcing a sharp hike in AMFI Registration Number (ARN) renewal fees across the board in May this year, the Association of Mutual Funds in India is all set to tighten the noose on mutual fund distributors further. The existing guidelines for procuring an ARN number and renewing it will be made more stringent.

"We already have a process in place and we are tightening the same process a little bit," HN Sinor, chief executive officer, AMFI, told Moneylife. However, Mr Sinor declined to divulge any further details and said that the AMFI board has to approve the changes first. When asked if AMFI is considering reducing the fee structure, Mr Sinor said that it was not. The ARN renewal fee was hiked to keep serious players in the market in an attempt to curb mis-selling. Alarmed by the steep hike, some distributors - who were already hit by dwindling commissions - approached AMFI to consider relaxing the fee structure.

Earlier, individuals and corporate employees were required to shell out Rs250 as renewal fee which was increased to Rs2,500. For banks, non-banking financial companies (NBFCs), public limited companies and institutional distributors, the renewal fee was raised from Rs7,500 to Rs2,50,000.

Individuals who pass the AMFI examination are allotted an ARN number.  From 1st June, The National Institute of Securities Markets (NISM) conducts the certification for distributors called CPE (Continuing Professional Education).
"Their (AMFI's) idea is to have a good quality distribution setup, but the problem is that there are too many things happening so quickly. In the last one year, they have implemented more changes than what has happened in the last 15 years. I was speaking to a senior official in Singapore who advises various regulators there. They have a well laid-out plan for any regulatory changes. It takes seven years to make the kind of changes which we have done here in (only) seven weeks. All good things will take shape if they are done in the right manner. You can't get up one morning and say I want everything cleaned up overnight. The direction is right but the execution is wrong," said a Mumbai-based certified financial planner (CFP), preferring anonymity.

Currently, individuals and corporate employees are required to furnish a copy of the AMFI certificate, two photographs and the fees at the time of registration. "The current procedure is very simple. They can bring some changes in mandatory requirement of certain documents which will be an ongoing process. This practice is followed worldwide. Globally, they follow far stricter guidelines but the industry is flourishing because the distributors are also making money. Their yield (commission) is around 3% there but in India the regulators have reduced it to around 1%," added the CFP.

Rajesh Krishnamoorthy, managing director of iFAST Financial told Moneylife, "Without specifics of what AMFI will do, it is difficult to frame any opinion.

AMFI will have to balance both the social norm and the business norm. The social norm being - more the number of people associated with the distribution of mutual funds, the better the chances of penetration and growth for the industry. The business norm on the other hand would be - the more the serious players in the distribution of mutual funds, the lesser are chances of investors being misled. So, I think, for AMFI, it is something like what the RBI (Reserve Bank of India) has to do - walk a tightrope - tame inflation (non-serious players), yet help economic (the mutual fund industry's) growth."

Thanks to
M. S. Suri
Funda Acadamy
For sending us this link and update

Alert: Brokerage Payment on Hold, Urgent Action Required

Sirs, The Self declaration Form ( New Format) for the year 2009-10 has been already sent in person on 30/04/2010 to CAMS collection centre, Salem branch, Salem and Karvy Distributor Service Centre, Shevapet branch, Salem and also received the acknowledgments. Almost all AMC Companies has sent a letter to me individualy stating that They not yet received the Self Declaration form for the year 2009-10 in middle of May 2010.  Again, I have contacted the same to M/s. Karvy and Cams in person before end of May, 2010 and both of them have told me that they intimated the same to all AMCs in time and requested me for need not worry in this regard. In addition that I have given one additional Self Declaration Form to CAMS only including a xerox copy of acknowledgment receipt. Again, I have received mails from some AMCs in this month that they have stopped my commission because of non receipt of Self Declartion for the year 2009-10 on or before 31st July, 2010.  I have given reply that I have been already submitted the Self Declaration Form in time to those AMCs but not accepted the same. Further, I given request to M/s.CAMS and KARVY to take immediate action in this regard and do the needful immediately. This is for your information only. Kasinathan VSalem

Equity schemes lose 8.33 lakh folios since November 2009

August 11, 2010 05:32 PM
Ravi Samalad
Source: http://www.moneylife.in/article/8/8129.html

After witnessing Rs3,400 crore redemptions in July, equity schemes shed 2.93 lakh investor accounts. Instead of expanding the investor base, SEBI is presiding over a shrinking investor population.

Despite a 9% GDP growth and a booming stock market, mutual fund investors are still shying away from equity schemes and trying their luck in debt funds. Since November 2009, three months after the ban on entry load on mutual funds, the industry has lost a whopping 8.33 lakh equity folios till July 2010. The benchmark BSE Sensex has risen 8% since November 2009. According to the latest data available on the Association of Mutual Funds in India (AMFI) website, the 40 fund houses have together lost 1.66 lakh investor accounts in the month of July.

Equity funds witnessed Rs3,400 crore redemption in July despite the launch of two new schemes.

Debt funds added 1.18 lakh investor accounts in July while Exchange Traded Funds (ETFs) saw their investor base rising by 27,467. Fund of Funds, which invest in other funds, lost 7,955 folios.

Balanced funds, which invest a part of the corpus in equity, lost 10,459 folios in July. The total investor base or number of folios as on July 2010 stands at 4.77 crore. The five heavyweights of the industry together lost 93% (1.55 lakh investor accounts) of the total 1.66 lakh slump in folios. However, HDFC Mutual Fund bucked the trend by adding 23,544 investor accounts.

"There is a fear of the direct tax code (DTC) being applicable on capital gains. Some distributors are suggesting that investors pull out the money and re-enter afterwards. There is no clarity on the DTC yet. Some people are taking their own decisions. There is also some profit-booking," said a marketing head of a fund house.

Equity scheme folios declined by 1,47,745 last month despite a slew of launches like Baroda Pioneer Infrastructure Fund, Birla Sun Life India Reforms Fund, DSP BlackRock Focus 25 Fund, ICICI Prudential Nifty Junior Index Fund, IDBI Nifty Index Fund and Taurus Nifty Index Fund.

"Most of it is being redeemed because of the frequent and confusing changes in mutual fund regulations," said an industry source. Since last August, market regulator Securities and Exchange Board of India (SEBI) has made frequent changes such as removal of entry load, changes in cost structure and also who gets the trail commissions when investors switch from one scheme to another. "SEBI's mandate is market development and investor protection and what we are witnessing is a shrinking investor base. Some serious rethinking is needed is needed about SEBI's recent actions," says a mutual fund head.

IFA Galaxy Thanks Mr. Shankar S, Credo Capital for this update

Indian funds dominate top ten Asian small-cap funds

By   SINS

Thursday, 12 August 2010, 12:38 IST

Bangalore: Out of top ten small-cap funds across Asia, seven have been snapped up by Indian funds. According to an analysis of nearly 300 Asian small-cap schemes, DSP BlackRock Micro Cap Fund is leading the chart, with an 82 percent return over the past year, reports Shailendra Bhatnagar of ET Now.

The fund, managed by Vinit Sambre, has also beaten the 58 percent rise of the Small-Cap Index in BSE since 2009. During this period, Sensex has gained 20 percent, while the wider BSE 500 Index is up 27 percent.

The other six funds that have given investors returns between 44 percent and 57 percent on a trailing 12-month basis include Sundaram BNP Paribas Select Small Cap, HSBC Small Cap, JPMorgan Smaller Companies, Franklin India Prima, Franklin India Smaller Companies and ING Vysya CUB.

According to Value Research, a mutual fund tracking firm, the DSP fund as an impressive product in the entire 'small-cap universe'. The firm said that the fund holds credible and known stocks, with a high return on equity.

The close-ended nature of some of these funds enable them defy the market turbulence. As they did not face redemption pressures through the declining phase, they can invest for the longer term, said Dhirendra Kumar, CEO of Value Research.

In June this year, the DSP fund became open-ended. There are 10 small-cap funds in India, which manage roughly Rs. 3,450 crore in stocks.

According to Market experts, the rally shifted to small caps because many large-cap stocks became fully priced and relatively unattractive over the past year. Stocks like cooler maker Symphony and luggage maker VIP Industries have led the small-cap charge in the market.

Experts recommend investors to be cautious and have just 10-15 percent of their equity exposure in small-cap funds, even though they have delivered solid returns in the past one year.

Regards

Valady V.Barathwaaj

Chennai: +91  98418-25188

Please Check your Trail Commission - Lot of Mistakes by AMCs

Dear Friends,

                  I have been repetedly telling you to check the trial they r not being paid correctly by A.M.C. Now for the 2nd time in a row DSP BR A.M.C. has accepted that they hv paid me trial brokerage less this time almost Rs.3550 for this quarter. Last time it took almost 1 month time for the A.M.C. to find they have paid less brokerage, this quarter they hv taken only 10 days to find the same. 

                      Hence I request u all to check ur statements as and when u hv time.

                      More over I have strong doubts the A.M.C's are paying the per App Incentive promised by them for S.I.P's I am asking the A.M.C's to provide me the details which they r reluctant to do so.

                    Example : I am chasing HDFC AMC on the same SIP Additional upfront which they not responding properly. 

                                      I am also in Chase of Birla A.M.C to provide me SIP Incentive details (Full List for which SIP how much they paid) last 2 months, I think this wud give us a clear picture on their SIP Drive.

                       Let us all ask the respective R.M.'s about the additional brokerage & Trial brokerage.

Regards,

Alagappan

9841055577

Sundaram AMC appoints New Fund Manager

Sundaram BNP Paribas Mutual Fund has appointed Mr. Dwijendra Srivastava as Head-Fixed Income in the position of Senior Vice President. He is a Chartered Financial Analyst from CFA Institute, USA. He is also a Textile Engineer with Post Graduate Diploma in Finance.

He was associated with Deutsche Asset Management (India) Ltd. as Vice President and Fund Manager since 2007, spearheading debt schemes. He was also involved in new product development.

He will manage schemes such as Sundaram BNP Paribas Money Fund, Sundaram BNP Paribas Ultra Short-Term Fund, Sundaram BNP Paribas Flexible Fund Short-Term Plan, Sundaram BNP Paribas Flexible Fund Flexible Income Plan, Sundaram BNP Paribas Gilt Fund, Sundaram BNP Paribas Select Debt Short-Term Asset Plan, Sundaram BNP Paribas Income Plus, Sundaram BNP Paribas Capital Protection Series 1-3 Years, Sundaram BNP Paribas Capital Protection Series 1-5 Years, Sundaram BNP Paribas Fixed Term Plan P - 367 days, Sundaram BNP Paribas Fixed Term Plan R - 367 days, Sundaram BNP Paribas Fixed Term Plan S - 367 days, Sundaram BNP Paribas Fixed Term Plan U - 367 days, Sundaram BNP Paribas Fixed Term Plan AA - 14 Months, Sundaram BNP Paribas Fixed Term Plan Z - 15 Months, Sundaram BNP Paribas Fixed Term Plan Y - 18 months, Sundaram BNP Paribas Fixed Income Interval Fund - Quarterly Series - Plan A, Sundaram BNP Paribas Fixed Income Interval Fund - Quarterly Series - Plan B, Sundaram BNP Paribas Fixed Income Interval Fund - Quarterly Series - Plan C, Sundaram BNP Paribas Fixed Income Interval Fund - Quarterly Series - Plan D and Sundaram BNP Paribas Fixed Income Interval Fund - Quarterly Series - Plan E.