Sebi chief for more MF role in corp governance

Pursuing his campaign for better corporate governance, Securities and Exchange Board of India (Sebi) chairman M Damodaran today asked fund houses to take a more pro-active role in the functioning of companies.

"(Mutual funds) should assume a slightly more pro-active role in companies," he told delegates at the CII Mutual Fund Summit here.

Reacting to the statement, UTI Mutual Fund's chief investment officer A K Sridhar said: "We have been playing an active role in companies where we have investments. For instance, we have forced an MNC's Indian arm to alter their investor unfriendly decision. Sebi chief is right in saying that we should be more pro-active."

Damodaran also asked the industry body, Association of Mutual Funds in India (Amfi), to take up the role of a self regulatory organisation (SRO), which was mooted by Finance Minister P Chidambaram nearly 6-8 months back.

Damodaran said Amfi, given its skill set, can become the first SRO in the sector. "If you take Amfi as a trade body that represents asset management companies (AMC), I believe it is uniquely positioned to play this role, and they are the best placed to be an SRO," he said.

Amfi chairman A P Kurien said: "We have an open mind on the issue. We need to develop our own model and will get back to him. We will study models available abroad and try to evolve a model that will serve Sebi's objectives and address our concerns."

Damodaran also expressed concern over the lop-sided growth of the mutual fund industry, which is relying heavily on infusion of huge funds into liquid schemes by large corporate houses and said such inflows were a worry.

Pointing out that liquid funds were not the only way to grow, he said large funds of corporate houses invested in mutual funds could generate possible conflict of interest. "Something more needs to be done to get more types of money coming to mutual funds," he said.

The statement assumes significance in the wake of recent instances of fund houses getting huge inflows at the end of the month from their sponsor companies, resulting in volatile movement of funds as these money flows out within a short span of time.

The regulator also mentioned that the trustees of the asset management companies were not sharing the responsibility they are entrusted with.  Sebi will also be convening a meeting of the trustees in order to discuss the issue.

On the mandatory PAN requirement for investors buying mutual fund units from next month, Damodaran hinted that the regulator might give some leeway to ensure that the fund houses are not hit badly. He, however, did not elaborate further on the issue.