SEBI inspection carried out between April 01, 2016 and March 31, 2017 reveals that many fund houses did not ensure compliance with the mutual fund regulations. However, most of these violations are operational in nature.
In a letter sent to AMFI, SEBI has pointed out these irregularities.
- A few AMCs did not justify expenses they charged to investors in TER
- Redemptions were processed from folios having incomplete KYC
- Delay in transferring unclaimed dividend or redemption to a separate scheme launched under SEBI norms
- A few AMCs lacked systems and processes to check if an investor has invested more than Rs.50,000 in cash in a financial year
- Instances of incorrect submission of periodic report to SEBI
- Investment made in NFO through switch out transaction request from existing scheme and reversal of such a transaction at the earlier NAV if NFO did not get through successfully
- Failure to liquidate equity portfolio of close end schemes on or before date of maturity
- Misleading investors by reporting incorrect data on investor complaints in annual report
- Performance of only selected schemes presented to the trustees for periodic review
- Not reporting over the counter trades in debt securities within 15 minutes of such transactions. Delayed reporting had impacted effective price discovery and valuation of such securities
- Not disclosing transaction of debt and money market securities in its schemes portfolio
- No system to ensure segregation between new investors and existing investors for levying of transaction fees
- Compliance officials delegating other employees the responsibility to process application of access person with respect to trading in securities
- Not factoring in interest accrued from fixed income securities while calculating exposure limits
- Not sending physical annual report or abridged summary of annual reports to unitholders whose email bounced back. Further, AMCs had not taken steps to update such email ids
- Not paying interest on delayed redemption proceeds
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.”
