Listen to this article
Ananth Narayan G, SEBI, Whole Time Member clarified that SEBI doesn’t not regulate MFDs directly and mutual funds are responsible for the activities of MFDs. He was speaking at the 16th Mutual Fund Summit organised by ASSOCHAM in New Delhi today.
The WTM said that oversight of MFDs is important to ensure suitability and appropriateness of products, investor risk awareness and education and curbing mis-selling.
Expressing his concerns on foreign junkets, Ananth said, “Given that MFDs are paid by the producers – i.e., the MFs – and not the investor, there is a special need to ensure that the investor’s best interests are not just always protected but are also seen to be protected. It was worrisome to hear of some wealth managers running internal campaigns – with sales incentives given by the MFDs - to push specific products that offer them higher distribution fees; something that AMFI has recently tried to address. Even while sterling work has been done by the ecosystem so far, I would suggest that there is a constant need to review and debate how investor best interest can always be protected, especially since we have a long way to go on increasing the investor base.”
However, Ananth acknowledged the fact that MFDs have played a credible and pivotal role in the impressive growth of the mutual funds over the years.
Here are some other key highlights from Ananth’s speech:
- Entities like RIAs who are paid directly by investors are better aligned to the outcomes of their investors
- Low ticket SIP and sachetisation and tokenisation of SIPs will happen soon
- New asset class will serve self-aware investors having higher risk appetite
- SEBI is working to facilitate same day credit of redemption requests
- SEBI’s research reveals that equity funds are well equipped to handle redemption pressure
- AMFI should do industry wide stress tests
- The MF industry should increase risk awareness by disclosing liquidity and underlying volatility of portfolio
- Number of investors went up sharply from 2 crore in March 2019 to 4.70 crore in June 2024
- Adequate opportunity for the MF industry with 55 crore people having PAN and Aadhaar linked
- Industry should play the role of fiduciary managers of people’s money
- SEBI noted that some large fund houses proactively stopped lump sum investments and capped SIP inflows in small cap funds
