Mumbai: The Securities and Exchange Board of India (Sebi) has unearthed a slew of violations committed by mutual funds including transfer of losses from one scheme to another in an inter-scheme transfer without adequate rationale.
A risk based supervision carried out by the regulator has also found that in an inter-scheme equity transfer, the net asset value (NAV) calculated by some of the fund houses was on the basis of the day's closing prices instead of the value at the time of actual transfer. Moreover, some of the fund houses were also delaying the allotment of units, according to a senior Sebi official.
While speaking at a Mutual Fund Risk Management Roundtable organised by Reliance Mutual Fund and Dun & Bradstreet, Ananta Barua, executive director, the Securities and Exchange Board of India (Sebi) said that the new concept of supervision undertaken across the market by the regulator has found many violations by the fund houses.
“The new concept of supervision across the market includes thematic approach and risk based approach. Our own inspection looks at the number of complaints, the compliance test report and mutual fund trustee reports. If there is a passive violation of regulatory norms, we won’t penalise. However, if the passive violation is repeated, we will examine it on a case to case basis,” he said.
The Sebi official also asked the mutual fund industry to undertake a massive investor awareness and education programme so that individuals do not park their hard earned money with unregulated entities.
“The regulatory landscape across the globe has witnessed a sea change post 2008 financial market crisis. It is widely recognised that unregulated entities are a major source of risk to the system. Since then the effort has been to identify those unregulated activities, markets or entities, which could pose systematic risks and how to bring them under the regulatory oversight.” he added.
In a bid to mitigate risk in the mutual fund industry, Raghuvir Mukherji, head of risk management at Reliance Capital Asset Management (R-CAM) said that those activities that are outsourced to third parties would also pose risks if not properly monitored.
“Currently lot of fund houses outsource some of the non-core operations to third parties. So it is important to monitor those operations, which are not in our control,” he said.
