Mutual Fund AUMs to fund watchdog
Mutual funds will use part of their Assets Under Management (AUMs) to finance the operating costs of a Sebi-proposed watchdog Self Regulatory Organisation (SRO) to regulate their agents and distributors.
As per the suggestions made by its Mutual Fund Advisory Committee (MFAC), the Securities and Exchange Board of India (Sebi) has agreed to set up an SRO to regulate the MF distribution business.
While the seed capital for setting up of the proposed SRO would be provided by Sebi and the mutual fund industry body AMFI (Association of Mutual Funds in India), some entities have also shown interest in sponsoring such an SRO, a senior
regulatory official said.
Sebi would follow a transparent process for selection of the sponsor for the SRO, he said.
Besides, Sebi is of the view that the recurring cost for the operations of SRO may be borne out of contributions from Asset Management Companies AMCs in the form of 2-3 basis points (0.02-0.03 per cent) of the AUM.
The average AUM of all the fund houses put together rose for the first time in four quarters in the three-month period ended June 30, 2012. It stood at Rs 6.92 lakh crore -- up from Rs 6.65 lakh crore in the previous quarter.
The proposed SRO could be a registered company under the Section 25 of the Companies Act, wherein all profits are ploughed back into its operations, and will regulate distributors of securities like mutual fund, portfolio management and related products.
The decisions follow deliberations by MFAC about mutual fund distributors in India
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