SEBI Chief Says AMFI Must Take Action Against Individual Misdemeanor
Industry must regulate itself or SEBI will have no choice but to step in, says Madhabi Puri Buch.
The Association of Mutual Funds in India must build an ethics committee, so that misdemeanor by individuals does not go unpunished, according to Madhabi Puri Buch.
"Biggest risk to growth of MF industry is individual misdemeanor," Buch, chairperson of the Securities and Exchange Board of India, said during an event in Mumbai.
While AMFI is not a self-regulated organisation, it can still function as one, she said. "Industry must regulate itself when it comes to individual misdemeanors, or SEBI will have no choice but to step in."
In March, the markets regulator barred Axis Mutual Fund's former dealer Viresh Joshi, along with 20 others, from the capital markets in a case of alleged front-running of trades.
Joshi, along with the "arranger" and "enabler" entities, traded in different securities between September 2021 and March 2022, before placing orders on behalf of the mutual fund, according to SEBI.
The front-running activity prima facie led to unlawful enrichment, and was in violation of the SEBI Act and the unfair trade practices regulations, the markets regulator had said.
If SEBI finds individual misdemeanor, it has "no choice but to come down as a hammer", Buch said.
For the regulator, Mutual Funds is the "preferred vehicle for encouraging the citizens of this country to participate in the markets."
TER Policy Formulation
The process of policy formulation on total expense ratio involved public consultation papers, before beginning deliberations with AMFI, Buch said.
TER regulations, she said, were viewed as price sensitive.
The TER is a percentage of the daily net asset value of a mutual fund scheme and includes the charges an investor pays to a mutual fund.
Currently, mutual funds charge the TER based on a scheme-wise formula, that has been in force for several years. Here too, the limits are based on the assets under management at a scheme level. Simply put, as the assets under management in a scheme rise, the TER chargeable reduces.
Process of co-creation of policy on TER will be taken up after the consultation process, Buch said.