officials say that norms for valuing securities while calculating NAV have been
standardised and there is little scope for manipulation now.
regulator SEBI said yesterday that violations related to front-running and NAV
manipulation will not be automatically settled through consent orders from now
SEBI circular issued yesterday says, “Defaults relating to manipulation of net
asset value or other mutual fund defaults where the actions of the asset
management company (AMC)/ mutual fund (MF)/sponsor, result in substantial
losses to the unit holders, except cases where the entity has made good the
losses of the unit holders to the satisfaction of the board.”
the regulator said that consent orders will not be entertained if any violation
is committed within a period of two years from the date of any consent order
except if the default is minor. Applicants who have already obtained more than
two consent orders will not be allowed to settle any violations through consent
order for three years from the date of the last order. SEBI will also not
entertain any consent orders till the completion of investigation.
watchers say that most AMCs now follow a standardised practise for valuing
securities. “AMFI’s valuation committee has done a great job of ensuring that
interpretation concerns are not there anymore. There is very little scope for
any manipulation now. It may not be done with the intention of manipulation.
It’s just the standardisation of practise,” says Rajesh Krishnamoorthy, MD,
iFAST Financial India.
“NAV mismatch used to happen mostly in funds
which invested in illiquid securities. It’s about following a standard operating
procedure. Some AMCs must have followed a certain procedure which might be
incorrect. If you inflate NAV then investors might redeem,” said an operations
head of a leading fund house, preferring anonymity.