Financial Daily from THE HINDU group of publications
Monday, Apr 10, 2006
Financial Daily from THE HINDU group of publications Monday, Apr 10, 2006 |
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Mutual Funds Markets - Regulatory Bodies & Rulings Columns - Mutual Confidence Nilanjan Dey
If you have read SEBI's recent and detailed circular on rationalisation of NFO expenses and dividend distribution procedure only cursorily, chances are that you would have missed the import of some of the paragraphs towards the end. While the circular does deal with a couple of very critical issues, the significance of which could not have been more underlined, one particular para may be worth a special mention. This deals with distributors of mutual funds, the holy cows that are largely unregulated in the context of the asset management industry. The regulator has in one fell swoop stopped fund houses and their distributors from communicating probable dates of dividends. Gone, therefore, will be those carefully-drawn-up lists of forthcoming dividends that intermediaries routinely carry in their newsletters and similar publications. Sources who are aware of the way things work in the asset management industry say that such lists had lately become standard feature. They came inevitably, courtesy phone calls placed by fund houses to intermediaries, mentioning dividends that are likely to be announced in the days ahead. The people to whom those calls were placed then started telling clients about the payouts. For the record, the circular requires an AMC to issue, within one calendar day of the decision by the trustees, a notice to the public, communicating such decision (including the record date). The RD, which must be five calendar days from the issue of notice, will be the date considered for the purpose of determining the eligibility of unit holders. Here is what SEBI has actually said: "Before the issue of such notice, no communication indicating the probable date of dividend declaration in any manner whatsoever, may be issued by any mutual fund or distributors of its products". We do not have to explain more. It has to be seen how SEBI, after issuing the circular, now gets distributors to actually meet the norm. When Business Line asked intermediaries how they perceived this bit, the responses came pat. Mr Sameer Kamdar, National Head - MFs at Mata Securities, noted that the circular was somewhat novel in the sense it acknowledged, possibly for the first time, the role played by distributors, at least indirectly. "It would discourage some of the practices that had evolved over the years", he said with reference to the lists of probable dividends that were so commonly sent to investors. Other distributors agree with the spirit of his observations.
ICI meet
At the end, let me change the subject to tell you about what is being termed as the largest annual gathering of USA's fund executives and service providers. The general membership meeting of Investment Company Institute for 2006, to be held in May, will cover the launch of a research initiative on MF disclosures. Besides there will be sessions on such topics as encouraging savings and fund distribution. One of the events at the ICI meet would involve top journalists who will offer their assessment of the MF industry; they will share insights on issues ranging from fees and transparency to how investors will fare in the changing regulatory environment to the impact other investment vehicles could have on funds.
Related Stories: More Stories on : Mutual Funds | Regulatory Bodies & Rulings | Mutual Confidence
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