2015 was a year of many surprises, some good and some bad, for the industry. As the curtains close on 2015, we chronicle the events which made the year one of the most memorable.
MF AUM scales new high: Thanks to rising inflows in equity and debt funds, the industry’s AUM crossed an all-time high of Rs. 13.24 lakh crore in October 2015. The year 2015 was very good for equity funds which received net inflows of Rs. 71,030 crore. This was reflected in the growth in equity folios which grew by 21.24 lakh in 2015.
Birla Sun Life, Tata and Reliance complete 20 years: It was a landmark year for Birla Sun Life, Tata and Reliance who entered the industry in 90s. These fund houses celebrated their 20 years of operations in 2015. Today, they have consolidated their position in the industry. While Birla Sun Life and Reliance are among the top ten fund houses Tata MF is the 12th largest fund house, in terms of AUM.
Consolidation: 2015 was a year of consolidation in the MF industry. As many as six foreign AMCs (KBC, Nomura, ING, PineBridge, Deutsche and Goldman Sachs) exited India. There are rumors of two more AMCs being on the block.
MF Utility: The much-awaited MF Utility, which was conceived way back in 2011, was launched in March 2015. It is meant to ease the paperwork and cut down costs for distributors. The platform has been funded by AMCs.
Cap on commission: After the reportedly high commissions paid by AMCs in closed end funds raised eyebrows in the industry, AMFI decided to bring restrict payouts, nudged by SEBI. After much debate, AMFI decided to put a cap on upfront commissions at 1%. However, this did not go down well with a few fund houses who did not adhere to AMFI’s new commission guidelines. Finally, SEBI chairman U. K. Sinha sent a strict warning that SEBI would frame commission rules if AMCs don’t come to a consensus on this issue. AMCs are supposed to follow uniform commission structure from 1stJanuary.
eKYC: AMCs were finally able to achieve some breakthrough by introducing eKYC service which promises to ease the cumbersome KYC process. So far, Reliance, Birla Sun Life and Quantum have launched this service. eKYC enables fund houses to complete KYC process online with direct authorization from clients on a real-time basis.
MFs on ecommerce sites: SEBI chief U. K. Sinha announced his plans to allow mutual fund transactions on ecommerce sites. A committee headed by Nandan Nilekani is tasked to provide a roadmap for this plan.
Service tax: The Budget 2015 withdrew the service tax exemption given to mutual fund distributors on commissions by putting it under reverse charge mechanism. Soon after this announcement, there was a debate in the industry over who will bear this burden – AMC, investor or the distributor. While AMCs are deducting service tax on distributor’s commissions as of now, the matter is still being contested by distributors with the Finance Ministry.
SRO for distributors: After SEBI gave in-principle approval to AMFI promoted Institution for Mutual Fund Intermediaries (IMFI) to act as the SRO for distributors in 2014, FPSB promoted Financial Planning Supervisory Foundation (FPSF), the second applicant for SRO, appealed against SEBI’s decision. The tussle finally ended in 2015 with Securities Appellate Tribunal (SAT) quashing SEBI’s decision. SAT has asked the market regulator to start the selection procedure afresh.
Sumit Bose committee recommendations: The Sumit Bose committee report on rationalizing commissions across financial products was released in August 2015. The committee recommended a host of sweeping changes for mutual funds. Some of the most talked about recommendations were reducing trail commission, abolishing upfronting of commission and lowering TER.
