Self-regulation is always better than external regulation. With the former, industry participants have control over establishing good practices, while with the latter they have no control. In fact, because regulation often tends to be overbearing, the cost of failing to self-regulate can be high. India’s mutual fund industry is discovering this the hard way.
Many funds indulged in fancy structured products and have ended up with egg on their face. It was natural that the regulator, the Securities and Exchange Board of India (Sebi), would react. While industry participants are publicly praising the regulator for its new regulations, saying it will increase investors’ faith in the industry, some are privately saying that the regulator has overreacted.
