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The stock market regulator has plans to bring mutual fund distributors within its fold.
“We are seriously looking into it. We plan to start out with a limited number of large distributors,” said Mr U.K. Sinha, Chairman, SEBI, at CII's Mutual Fund summit here on Wednesday.
“The attempt is to regulate them in a non-disruptive manner, and it will be disclosure based.”
The move would make distributors accountable and promote good selling practices.
Incentives are required to pull in new investors and incentivisation of distributors should help in achieving better penetration, he added. The SEBI Chairman said that all the three mandates of the regulator — protect the interests of investors in securities and promote development of and regulate securities market — are important and the SEBI will work towards all three and ensure that they do not contradict.
He also added that SEBI's first mandate will always be towards protecting the investor.
Uniform KYC
The regulator has also decided to have uniform know-your-customer (KYC) norms for SEBI regulated entities.
“I found out that different market intermediaries regulated by SEBI have different KYC requirements only after I joined SEBI,” said Mr Sinha.
With this an investor has to satisfy the KYC requirement only once for all capital market transactions and that would be applicable across all intermediaries providing economy of effort.
He asked the fund houses to disclose the components of their business based on their origin whether they belong to institutional or retail investors.
Mr Sinha advised them to reveal the track record of fund managers; a step that could increase inflows into schemes handled by performers and also increases the need to retain performing fund managers.
Pension Segment
The SEBI Chairman said that mutual funds should seriously look at having a presence in the pension segment especially the one that subscribers choose voluntarily. He has asked for a plan from the industry on the same.
He advocated better geographical penetration using the financial advisor route and promised all help in developing a system for professional financial advisors. He urged the mutual fund industry to offer simple products to the last mile investor, someone who has never invested in the capital market.
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