One signature for trading account, KYC norm and transaction fee for MF.
The Securities and Exchange Board of India (Sebi) took a big step on Thursday to make investment in capital markets easier. A revised format for opening a trading account will be introduced that will require the investor to make only a single signature. Earlier, almost 50 signatures were required.
Similarly, there will be only one Know Your Customer (KYC) requirement for transaction with all intermediaries, regulated by Sebi. For that, a KYC registration authority will be introduced. One of the important requirements of the authority will be inter-connectivity, where data can be shared across intermediaries. A customer will not be forced to go to a new agency every time he has to transact. Aadhar has been made one of the eligible parameters.
| KEY DECISIONS |
| DECISIONS TAKEN in primary markets, secondary markets and for KYC with an overall objective to ensure retail investors have an easy life UNIFIED ANDS implified KYC requirment INVESTORS NEED not run to a new agency every time he does transaction IPO FORMS made shorter and simpler b of book running lead managers mandatory in IPO form FOR TRANSACTION in the secondary markets, investors need to sign just once NEW MF INVESTORS will have to pay '100 as transaction fees to the distributors |
“The idea is that the cost of compliance for the both the clients and the brokers should be drastically brought down,” said Sebi Chairman U K Sinha.
Market participants responded positively to the development. Said Devang Mehta, Vice President & Head- Equity Sales at Anand Rathi Financial Services, “This will help bring more retail customers into the equity markets. Earlier, they were not getting encouragement and faced hassles to enter the capital markets.”
The entry load on mutual funds, rechristened as transaction charge, is back. However, there is a significant change. Existing customers will have to pay a transaction charge of Rs 100 will be allowed to be charged by fund houses. But it will be for investment of over Rs 10,000. For investments up to Rs 10,000, there will be no transaction charge. For a new customer, there will be a fee of Rs 150. Investors, who take the systematic investment plan (Sip) will also have to make a one-time payment of Rs 100 (recoverable in three or four installments). Said A Balasubramanian, Chief Executive Officer, Birla Sun Life Mutual Fund said, “Sebi’s steps are in the right direction in recognising the role of the distributor. This will help expand the market.”
But everyone is not happy. A P Bakliwal, president, Bombay Shareholders’ Association felt that imposing a transaction charge is a back-door entry of the earlier ‘entry load and was unfair on investors.
More information will be available to the investor while in an initial public offer (IPO). It will be simpler too. The size of the form has been reduced by 25 per cent . To help investors make informed decisions, the track record of the lead manager also has to be put in the form. “Basically, the attempt is to make the form and the process simple understandable by the ordinary retail investors and provide him the required information, including the information with regards to pricing,” said Sebi Chairman U K Sinha.
The IPO form will also have to mention the track record distributable profits for at least three or the immediately five years. And they have to complied with, both on standalone and consolidated basis.
The earlier Sebi guideline – past performance is not a guarantee of future performance – is actually being put to practice now. To make investing in mutual funds a more-informed decision, the market regulator has also asked fund houses to give only absolute returns instead of compounded annual growth rate or CAGR. That means that the investor will know the returns of the scheme in that particular year. This would especially help when markets are not doing so well because a scheme won’t be back to piggy back on past performance.
Distributions will also face more scrutiny. A set of guidelines have been introduced where 50 per cent of the assets under management (AUM) by the distribution industry will be covered. For example, if the AUM advised or distributed by them is Rs 100 crore, or annual income is Rs 1 crore or income from a particular AMC is more than Rs 50 lakhs, there will be a number of disclosures required from them. “Our aim is to go even for more and wider and deeper regulation of the distributor industry,” added Sinha.
