Sebi may allow mutual funds to invest in derivatives segment

Our Markets Bureau

Mumbai, Sept 20: In its efforts to deepen the fledgling derivatives market and also make available more investment products to the mutual funds (MFs), the Securities and Exchange Board of India (Sebi) is contemplating to allow MFs to invest in derivatives segment along with the Foreign Institutional Investors (FIIs).

According to Sebi chairman DR Mehta, the Sebi move is intended to give greater depth to the derivatives market which is in its infancy. “The entry of big institutional investors like MFs and FIIs will help widen and deepen the derivatives market, he said.

Mr Mehta was addressing representatives and members of the mutual funds here at the annual general meeting (AGM) of Association of Mutual Fund Industry (AMFI).

Speaking on the occasion, Mr Mehta said it would be better if all MFs operating in the industry here record their major important investment decisions. “This suggestion is not aimed at making the record keeping mandatory, but to bring uniformity and transparency in the industry” he said.

Without refering to Unit Trust of India’s (UTI) controversial decision of investing in Cyberspace Infosys, in which the MF behemoth lost Rs 32 crore, Mr Mehta said: “Though some MFs have followed the practice of recording major investment decisions, those who do not do so, do not deserve to be helped in the time of crisis, as, after all, they are investing investors’ money”.

Further, Mr Mehta said that on the lines of insurance regulator Insurance Regulatory Development Authority (IRDA), Sebi is also planning to make AMFI certification programme mandatory for the new agents who distribute mutual fund and debt market products, with the intention to professionalise the industry, informed Mr Mehta to the gathering.

UTI has already informed to AMFI that its new agents have been asked to comply with the AMFI certification progrrame.

Mr Mehta assured the representatives of MFs in the meeting to sort out the existing grey areas about the appointment of audit committee and assured that Sebi will shortly convene a meeting of trustees with CEOs of MF Industry to clarify this point.

Under company law AMCs should have audit committees and under Sebi regulations trustees also should have audit committees.

On this point many CEOs of MFs present at the meeting sought clarification from Sebi, whether they should appoint two audit committees or not. Some of the CEOs asked for the single audit committee so as to reduce overlapping of work.

AMFI chairman AP Kurien said, “MFs will now have to disclose in a uniform manner, their half-yearly results on the AMFI website and also on their respective website. The intention behind this move is that investors can make a comparative analysis of the MFs performance”.