In order to protect the interest and stability of the domestic mutual fund industry, the fund houses should focus more on penetrating the retail segment. While addressing the Mutual Fund Summit 2009 organised by Confederation of Indian Industry (CII), CB Bhave, chairman, Securities and Exchange Board of India (Sebi) said, ?Mutual Fund industry would be making biggest mistake if it completely rely on corporate funds to build their asset under management (AUM), as it was the corporate, which went for huge redemption during the liquidity crisis in October 2008. Hence it is in the best interest and stability of the industry that MFs should diversify to non corporate segment and try to penetrate deep in to the retail segment?.
Pointing to the October 2008 crisis when the asset management companies witnessed huge redemption pressure, Sebi chairman asked the MF industry to learn appropriate lessons from the crisis and try to implement those measures that would prevent such crisis from happening. Since the corporates had parked huge amount of money in the debt schemes floated by fund houses, Bhave said, ?Blips occurred in debt schemes, not in the equity schemes where retail participation is more?.
However, he said measures have to be taken to make the debt market more liquid to generate same kind of confidence that is prevailing in the equity market.
On the MF industries demand on certain relaxation in the Know Your Customer (KYC) norms so that more number of people could invest in MF schemes, Sebi said that there is no second opinion on it and it is in the best interest of the investors to implement it.
?When it comes to the industry vs investors, we are more inclined to protect the interest of the investors,? he said. On the other demands of the MF industry on applying the same yard stick in fixing the distributors commission at par with the insurance sector, Bhave questioned the AMC?s inability to convince the investors about the low cost associated with the MF schemes compared to the insurance sector. ?Commissions are paid from the investor?s pocket. So why is the MF industry finding it difficult to convince the investors about that,? he said.
Further Sebi is also looking to change the net worth norms for intermediaries across the industry. Already a committee comprising of Sebi and market participants have been set up in this regard. ?The committee is yet to finalise the new criteria. Once it is done, Sebi will take a final decision on it,? added Bhave.