The 16-member mutual fund advisory committee of the Securities & Exchange Board of India (Sebi), headed by S A Dave, at its meeting on Monday reportedly told fund houses to focus on managing the debt funds and not the net asset values (NAVs).
Sebi has asked mutual fund houses to ?evenly? charge its expenses to its short-term and liquid funds. It has been found that several fund houses, in order to keep the NAVs stable, frequently change their expense ratio. Expenses are usually charged to the fund daily based on an average weekly assets under management of the fund under consideration.
?Sebi, in its review, has found many fund houses have been changing the expense ratio frequently in debt schemes. So it was decided that they would, henceforth, charge a uniform expense ratio while calculating the NAV of short-term and liquid funds,? said a committee member of condition of anonymity.
In the case of liquid funds, even a 5-10 bps difference in returns could make investors shift assets and therefore many funds have been known to forgo some portion of management fees to boost NAVs. Banks and corporates usually park their money in the short-term and liquid funds.
?The issue of investment in equity options was also reviewed in the meeting and it was decided that fund houses have to increase transparency in the disclosures norms,? said a member of the committee who was present in the meeting.
The Association of Mutual Funds in India and Sebi will jointly chalk out the plans to bring regulations for distributors selling mutual funds. ?In coming days, the market regulator will invite distributors selling mutual funds and then decide on the regulations,? said a member. Fund houses are also under the scanner for paying higher upfront commissions along with foreign trips to distributors and boosting their sales.