Sebi chief U K Sinha speaks tough against mutual funds says, 'Show viability or leave'

Written by Express news service | New Delhi | Updated: Sep 10 2013, 15:14pm hrs
U K Sinha SebiSebi Chairman U K Sinha was the guest at The Indian Express Idea Exchange in Delhi on Monday. Express photo by Renuka Puri.
U K Sinha, the Securities and Exchange Board of India (Sebi) chairman, is in favour of non-serious players exiting from the mutual funds sector and raising the capital requirement for entry into the league.

U K Sinha while speaking at the Express Groups Idea Exchange here on Monday said he will consider enforcement measures against mutual funds to drive home the same. We have given them incentives and now want to move to enforcement measures.

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He also said, Those who are non-serious players should not exist (in the market).

Among other measures he said he will also make it obligatory upon the mutual fund players to go beyond the top 15 cities in the country in the forthcoming long-term mutual fund policy to deepen their reach across the country.

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While there are talks of raising the minimum capital for the mutual fund players from the current level of Rs 10 crore (some industry insiders say that it can be raised to Rs 50 crore), U K Sinha said that it is one of the measures that will ensure serious players are there in the industry.

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Show me the business model that can survive on such a low capital that can sustain for 5 years, said U K Sinha.

He accepted that the decision to ban entry load in 2009 has affected the industry and its growth and said that the regulator has taken steps to rectify the same and Sebi increased the expense ratio by 30 basis points for distribution of mutual fund products beyond top 15 cities.

This comes to almost the same level of benefit as was available through entry load, said U K Sinha while not denying the fact the regulator can bring back the entry load for mutual fund sales.

I would wait for the investment climate to improve and watch for some more time before taking a call on the same, he said.

Responding to questions posed by The Indian Express, U K Sinha also said that he is in support of the Financial Stability and Legislative Reforms Commission (FSLRC) report which talks of twin peaks.

U K Sinha also said that Sebi should get powers for criminal punishment which is unfortunately not there under Sebi Act. He said that Sebi penalises offenders with financial penalties amounting to several crores but that is not enough.

U K Sinha welcomes govt assurance on Securities Bill

Sebi chairman U K Sinha welcomed the assurance from the government that the Securities Bill, promulgated through an ordinance on July 17 and valid for six weeks, will get repromulgated.

The ordinance provides the capital markets regulator with the powers to go through call records critical for investigations. U K Sinha said access to call data records had helped the regulator enormously in nailing securities market crime.