Norms soon for foreign retail investors in MFs

Our Bureau Mumbai | Updated on March 11, 2011

Mr K.N. Vaidyanathan (left), Executive Director, SEBI, and Mr Rana Kapoor, Managing Director and CEO, YES Bank at the Bombay Management Association’s 14th Financial Services Convention Session held in Mumbai on Friday. — Photo: Shashi Ashiwal

The SEBI is looking at finalising guidelines to allow foreign retail investors to invest into the Indian mutual fund industry.

“Foreign institutional investors were always allowed to invest. The next liberalisation step is to attract other foreign investors so that our asset managers can manage different kinds of money pools,” said Mr K.N. Vaidyanathan, Executive Director, SEBI, on the sidelines of a programme here on Friday.

Streamlining process

The SEBI move comes in the wake of the Finance Minister, Mr Pranab Mukherjee's Budget announcement where he said foreign investors would be able to invest in mutual funds here.

Since foreign institutional investors, through the SEBI-registered sub-accounts and NRIs are already allowed to invest in mutual funds in India, this essentially meant that the industry would now be opened for the foreign nationals.

One of SEBI's major challenges is to streamline processes and bring about uniformity with regard to regulatory compliance. “SEBI will issue the guidelines allowing foreign investors to invest in mutual funds shortly. We are working with the Reserve Bank and the Finance Ministry,” Mr Vaidyanathan said.

On SEBI's move to permit mutual fund houses to meet marketing and promotion expenses of products (including distributors' commission) from ‘unutilised exit load balances,' he said, “The rationale is standardisation. Also, it is a move to bring about balance between the old and new players.” SEBI has said that fund houses can utilise a third of the exit load sum collected up to July 31, 2009, for meeting of the expenses.

The mutual fund industry sees the current SEBI order as a move to bring back its distributors back into the fold and revive the struggling industry.

The Indian mutual fund industry has over 40 players today who collectively manage over Rs 7.07 lakh crore.

Published on March 11, 2011

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