Fresh guidelines for MF distributors soon

MARKET REGULATOR PLANS SYSTEMIC OVERHAUL

The Securities and Exchange Board of India (Sebi) is planning to regulate the business of distribution in the mutual fund (MF) industry.

Sebi chairman M Damodaran said the MF distributors would be brought under a regulatory framework directly or a self regulatory authority (SRO) would be set up.

"Sebi wants to ensure that MF products which are offered to investors are best suited for the investors and not for the distributors," Damodaran said on the sidelines of a seminar on 'Recent Developments in Capital Markets' organised by the Bengal Chamber of Commerce and Industry.

"Any steps that would be taken in this regard would be done through a consultative mechanism. We would be going ahead with Amfi in regulating the MF distributors," he confirmed.

He said the mutual fund distributors are churning the money of the investors from one fund to another for their personal gain.

"This is resulting in distortions," he pointed out. Besides MF distributors, Damodaran said investment advisors would also be brought under a regulatory framework.

Speaking on clause 49 of the Listing Agreement relating to corporate governance, Damodaran said that in the rush to comply with the requirement, a whole lot of people have complied in form but not in substance.

"We would get into all these things to check that corporate governance norms are complied in substance," he said.