Date:31/01/2008 URL: http://www.thehindubusinessline.com/2008/01/31/stories/2008013152171600.htm

Back SEBI nod for lower fees to make MFs attractive

‘Over-extension the root cause for fall’

The new regulations seek to consolidate the common requirements for intermediaries’ registration and put in place a comprehensive framework prescribe obligations.

Shashi Ashiwal

Issue fee off: Mr M. Damodaran (right), Chairman, Securities and Exchange Board of India, and Mr G. Anantharaman, Whole-Time Director, at a press meet in Mumbai on Wednesday. SEBI has decided to bring down the costs associated with mutual fund investments, by doing away with the initial issue fee for close-ended schemes.

Our Bureau

Mumbai, Jan 30 The brokers’ margins are time-tested and margining was not at the root of the market fall of early last week, according to the SEBI Chairman, Mr M. Damodaran. Speaking to newspersons after a SEBI Board meeting on Wednesday he said: “Brokers have over-extended themselves, investors have overextended themselves. If people have over-extended , they have only themselves to blame.”

More Transparency

The board approved removal of initial issue expenses for close-ended mutual funds. It also decided to provide for permanent registration of intermediaries. However, this does not apply to FIIs and venture capital firms.

“This would bring in more transparency and better upfront disclosures to the investors in terms of the expenses charged in close- ended schemes,” SEBI said.

“Henceforth, all mutual fund schemes shall meet the sales, marketing and other expenses connected with sales and distribution of schemes from the entry load,” SEBI said which meant that entry load not charged on the close ended schemes would be applicable now.

Waiver of load for direct applicants will also be available in close-ended schemes.

MF fees

Mr Damodaran said there would be further rationalisation of fees related to mutual funds and that the objective was to make mutual funds cheaper.

The new regulations seek to consolidate the common requirements for intermediaries’ registration and put in place a comprehensive framework prescribe obligations. Currently a dozen different regulations govern different categories of intermediaries. Intermediaries were given three years registration earlier.

Short-selling

Stock exchanges are “nearly there” as far as readiness for short selling is concerned, said Mr. Damodaran. Even if the February 1 target is missed, it will only be a matter of a few more days before short selling starts, he added.

The Board also decided that only minimal incremental disclosures would be required from those companies whose equity is listed and who wish to issue debt instruments by way of public offering or private placement.

“Professor Mohan Gopal, Director of the National Judicial Academy, has joined the SEBI Board,” Mr Damodaran said.