In yet another move to reform the capital market, the Securities and Exchange Board of India (Sebi) has proposed a fast-track mechanism for clearance of mutual fund (MF) schemes on the lines of fast-track issuance of capital.
Such a move is already in practice in some international markets. The regulator said it has invited public comments on these proposals till January 15, 2008.
In a discussion paper issued on Thursday, Sebi said, “To begin with, it is proposed that we may adopt the fast-track model for fixed maturity plans (FMPs), and closed-ended schemes.”
These funds invest in debt and money market instruments which are operated by fund houses through various schemes. Such schemes, Sebi said, also constitute bulk of the new offer documents being filed with the regulator. Sebi has drafted the new procedure on clearance of mutual funds schemes after going through the practice being followed in countries like the US, UK, Australia, Malaysia and Korea, it said.
Samir Kamdar, head (mutual funds), Mata Securities, one of largest distributors of MF products, welcomed the move saying, ?The Sebi move will definitely give a fillip to the MF industry. It will also help in improving the fund industry’s dynamics as MFs will be able to mobilise more money on regular basis through periodic introduction of products. On the other hand, it will help fund houses and distributors to plan the fund raising calendar through out the year.”
Under the proposed model, asset management companies (AMCs) will have to file final offer document with Sebi as against the current practice of submitting draft offer document.
After receiving the confirmation of receipt of the document from Sebi, the AMC would be free to launch the scheme. The regulator, however, will retain the right to advise amendments, “if required, in the interest of investors, to the offer document.”
The final offer document, which will be posted on the Sebi website, will have to be accompanied by due diligence certificate from the trustees and additional due diligence certificate from the compliance committee comprising chief executive of the AMC, compliance head and fund manager.
The aim of adopting the new procedure, the regulator said, is to compress the existing process without compromising on the quality of disclosures to investors.
The proposal seeks to do away with the existing procedure pertaining to disclosing the draft document for comments for 21 working days, receiving the communications from Sebi and launching the scheme within six months.