Mutual Fund houses are learnt to be upset with the recent circular issued by the Securities and Exchange Board of India (Sebi) asking them to disclose salaries of executives who are paid more than Rs 60 lakh a year. As per the circular, the mutual funds are also required to disclose to investors the commissions paid to their distributors, including payouts in the form of gifts and sponsorships. Further, the ratio of the total purchase value and the cost of investment of a fund house should be disclosed in the consolidated account statement.
Fund managers who spoke with FE said the new disclosures would affect the competitiveness among the MF houses and would also result in conflicts between investors and them.
“The intention of Sebi to bring more transparency is no doubt laudable however I think the timing of the move is not correct. Unlike its western peers,the Indian mutual fund industry is still in an evolution stage hence I don’t think the industry is prepared for such drastic moves yet,” said CEO of a top domestic asset management company(AMC).
Another fund manager said disclosure of agent commissions would affect the relationship of the ground level agents with the investors. “In India, investors pay fee to agents for execution services and not for advisory services. Hence revealing their commissions cannot be considered in public interest. For example, the commission paid to agents is not revealed in insurance,” the fund manager said.
Even legal experts have raised concerns about the new disclosure norms. A corporate and securities lawyer said, although the circular says the additional disclosures are to increase transparency, it does not specify the issue that is being addressed.
“In this case, salaries paid to executives of fund houses cannot be considered as public interest. Mutual fund doesn’t pay the employees. Mutual fund pays the AMC and the company pays the employees. Hence the logic of the circular is flawed,” the lawyer added.
Recently, Sebi had warned mutual funds against getting into transactions aimed at bailing out corporates at the cost of investors. The regulator conveyed this message during the recent meeting with the mutual fund industry to discuss its growth road map.
The new disclosure norms come at a time when mutual funds have become the preferred route of investment for retail investors. During first 11 months of FY16, mutual funds witnessed inflows to a tune of Rs 1.68 lakh crore, Amfi data showed. The total assets under management rose to Rs 44.44 lakh crore from Rs 35.77 lakh crore during last financial. As per Sebi data, there are 47 registered mutual funds. These are regulated by Sebi Mutual Fund Regulations, 1996.