SUBSCRIBE NEWSLETTER
  • Change Language
  • English
  • Hindi
  • Marathi
  • Gujarati
  • Punjabi
  • Tamil
  • Telugu
  • Bengali
  • MF News SEBI finds irregularities in fund houses practices

    SEBI finds irregularities in fund houses practices

    The market regulator has asked fund houses to take corrective actions to check these irregularities.
    Nishant Patnaik Jul 24, 2018

    SEBI inspection carried out between April 01, 2014 and March 31, 2016 reveals that many fund houses did not ensure compliance with the mutual fund regulations.

    In fact, SEBI has found many irregularities in practices of fund houses. However, most of these violations are operational in nature.

    In a letter sent to AMFI, SEBI has pointed out these irregularities.

    • Fund houses declared dividend and fix record date without taking approval of their trustees
    • AMCs had paid trail commissions to distributors on assets with incomplete KYC
    • Fund houses delay crediting of expenses charged in lieu of exit loads
    • Delay in uploading NAV of schemes on AMC website
    • Unfair valuation of unlisted equity shares
    • Instead of putting email id of investors, fund houses have put invalid email IDs of AMC and R&T agents
    • Using previous day NAV if an investor opts for redemption from Gold ETFs in cash mode
    • Not remaining true to label
    • Close end schemes investing in papers having maturities beyond the maturity of the scheme
    • AMCs have categorized investors of T15 cities as b15 cities to charge additional TER
    • Charging inappropriate expenses from investors in TER, one such example being charging for Investor Education Awareness (IEA) expenses
    • AMCs did not apportion advertisement expenses properly to all schemes
    • Borrowing of funds other than those allowed under MF regulations
    • Transfer of investments from one scheme to another due to error in execution
    • Trustees not carrying out periodic review of the performance of schemes
    • Not updating trustees on transactions of fund houses with associates
    • Indirectly charging investment and advisory fee on short-term deposits, which is not allowed.
    • Not having a system in place to prevent investment from SEBI debarred entities

    SEBI has asked fund houses to take corrective measures to ensure compliance with the SEBI MF regulations. SEBI further said, “SEBI takes a view in different matters based on the nature of violations, quality of evidence, loss to investors, repetition of violations and other mitigating factors. Also, any repetition of the violations or non-compliance with the provisions of MF regulations and circulars would be viewed seriously.”

    Have a query or a doubt?
    Need a clarification or more information on an issue?
    Cafemutual welcomes all mutual fund and insurance related questions. So write in to us at newsdesk@cafemutual.com

    Click to clap
    Disclaimer: Cafemutual is an industry platform of mutual fund professionals. Our visitors are requested to maintain the decorum of the platform when expressing their thoughts and commenting on articles. Viewers are advised to refrain from making defamatory allegations against individuals. Those making abusive language or defamatory allegations will be blocked from accessing the web site.
    14 Comments
    Prashant · 5 years ago `
    This goes to show how soft SEBI is towards AMCs. So many violations and just a warning. Also eventhough AMCs are violating so many norms SEBI still prefers to give them more profits by reducing commissions and increasing TER in regular and even in direct plans where there is no commissions. As a distributor we have to be more responsible to an extent that we have to let go of our so many years income earned through hard work and dedication without misselling like banks and AMCs themselves but as manufacturers they can get away with anything and everything. It is high time that brokerages are to be left to market forces and not micromanaged by regulators. And they should micromanage the salaries and perks given to all the employees of fund houses.

    Shame shame shame
    Vivek · 5 years ago `
    Very shocking insights. Thanks for bringing this up
    Vikas Gupta · 5 years ago `
    There are a lot of other irregularities too. I can jolt down few. AMCs are using the investors' fund without giving them the respective NAVs. I have experienced the same in 2 fund houses Axis & IDBI & Both of them along with Karvy don't even bother to respond to the emails. There is one more AMC Invesco who is not giving credit of investors money on t+1 basis in Liquid/Ultra short category. Coincidentally, They all have the same registrar.
    rajeev kanotra · 5 years ago `
    why they(SEBI) are not disclosing names of AMC's violating rules laid for them, so that IFA's/MF Distributors can guide their clients accordingly.
    suraj Jatwani · 5 years ago
    Do u still required name of amc's. Every one know the name of that amc's.
    Reply
    Vishal rASTOGI · 5 years ago `
    Plz. name the AMC's under the scanner .......!
    Amit Gulati · 5 years ago `
    AMCs will keep on doing such things and SEBI will keep on using such excuses to further cut down on our brokerage. The whole objective is to eliminate IFAs.
    Tuhin Chakrabarti · 5 years ago `
    SIP's not debited from Investor's Bank Account on proper date but units alloted. Fund statement showing the units. And when we mention them they said "please keep the available balance in your account, they will debit the due instalment any day". I have the folio no. details also of KARVY & CAMS. If asked for I can provide them.
    Krishnan Iyer · 5 years ago `
    Nothing Mutual about it. Sahi hi
    NA · 5 years ago `
    Now some are giving 20 - 25 bps under the table in direct plan also if the amount is in crores.
    Shashank Rane · 5 years ago `
    This goes to show how Mutual Funds sahi hai is misleading in some ways or others.Investors invest their hard earned money in these AMC's and these people do these kind of things
    Sangeeta Dasgupta · 5 years ago `
    Thank you Cafemutual for bringing this out. Somehow, I feel that AMC's are resorting to unfair practices and SEBI is allowing them to get away with that with only warnings.

    With huge inflows coming into MF's in the last 2 years, yet the returns on schemes..even the most reputed schemes with huge AUM's, the returns are lower. I have lost quite a few HNI clients who are savvy equity investors to the claim that Direct equity investment in the same stocks as the portfolio of such schemes yields better returns by manifold than what the MF returns yield.

    Also, can anybody justify the expense incurred on sponsorship of the FIFA world cup for a full month by the Mutual Fund Sahi Hai campaign, at the cost of lowered commission doled out to IFA's by AMC's??

    The media only reports commissions earned by National Distributors running into crores, but what about the Independent Financial Advisor whose Cost of Acquisition is increasing by the day, but Commissions on the downtrend thanks to bearing the burden of reduced TER?

    The impact of reduced TER has been quite drastic for IFA's and there is apparently no impact on bonuses n increments of AMC staff, coupled with increased inflows in Direct plans which itself contributes to AMC savings in the Commission kitty of AMC's

    Prashant · 5 years ago
    You are absolutely right and SEBI is hands in gloves with AMCs and AMFI which is an open secret now. They just want maximisation of profits at our cost. Decreasing regular schemes TER and increasing direct TER means they are now confident they with or without us they will get the business and if not I think they are satisfied with their direct inflows which they know they will get anyhow.

    Shame on us to stay divided on this most important issue and not fighting back. Just by writing here is not going to do anything.
    Reply
    Manish · 5 years ago `
    There are endless irregularities at AMC's end if I add to it then one more such irregularities or unfair practice is that the AMC,s are forcefully paying the advance commission and Trails to IFAs to save and cut of commissions of IFAs and they are not giving an option to IFAs to choose whether they want the advance commission and Trails or not. This is also a serious concern which SEBI must look into it.
    Login or Sign up to post comments.
    More than 2,07,000 of your industry peers are staying on top of their game by receiving daily tips, ideas and articles on growth strategies. Join them and stay updated by subscribing to Cafemutual newsletters.

    Fill in the below details or write to newsdesk@cafemutual.com and subscribe to Cafemutual Newsletter now.