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Higher protection, simpler process for investors

Source : BUSINESS_STANDARD
Last Updated: Fri, Dec 07, 2012 21:01 hrs

pGiven that there will be an influx of novice and first-time investors into mutual funds as asset management companies AMC go all out to tap potential customers beyond top 15 cities the Securities and Exchange Board of India Sebi has put in a lot of checks and balances to enhance investor protectionppAmong the measures unleashed for the mutual fund sector Sebi has put a lot of emphasis on increasing investor education simplification of products and schemes and also has promised strict action for &lsquomis-selling&rsquoppSebi has stated that all AMCs and industry body AMFI will have to put in continuous efforts to increase education and awareness and also have to set aside a portion of their fees for investor education campaignspp&ldquoFor the first time investors can expect a concerted effort by the industry to spread financial literacy that will empower them to take educated investment decisions in keeping with age and risk profiles&rdquo says Sanjay Sachdev president & CEO Tata Mutual FundppAdded Jimmy Patel CEO Quantum Mutual Fund &ldquoSteps are meant not only to educate investors but also make investment process simpler and transparent&rdquoppIndustry participants believe if sincere efforts are put in by all the players in educating people it could help the industry post exponential growthppAlong with investor education Sebi has decided to introduce a new framework to curb mis-selling and frequent churning To reduce churn it has said the entire exit load will go back to the respective scheme which will benefit existing investors The additional expense ratio charged by AMCs for penetration beyond top 15 cities will also have to be returned if such investments are redeemed in less than a yearppTo tackle the issue of mis-selling it has been included as a &lsquofraudulent and unfair trade practice&rsquo in Sebi regulations Currently unfair practices like misrepresentation of truth and promises made without any intention of performing it fall under Sebi Prohibition of Fraudulent and Unfair Trade Practices Regulations and attract penaltyppHowever the industry feels more clarity is needed &ldquoWhile Sebi&rsquos intentions are good in the absence of &lsquowhat constitutes mis-selling&rsquo it might be difficult for a retail investor to identify define and prove a case of mis-selling However if implemented well this will instil confidence amongst retail investors&rdquo says PatelppTo further simplify schemes Sebi has decided to have a new &lsquoproduct labelling&rsquo system wherein all funds will be categorised based on their characteristics and riskiness Experts said this new system will help investors make sense of the variety of funds that are available in the market and the risk involvedpp&ldquoProduct labelling will bring uniformity in fund categorisation which will eventually confront the issue of mis-selling&rdquo says Patelpp&ldquoRight selling along with right education should play a crucial role in helping investors take appropriate financial decisions&rdquo adds SachdevppTo simplify it further for investors following Sebi directives fund houses have already consolidated their various schemes into one Earlier classifications like regular institutional and super institutional used to create a lot of confusion for investors Also big-ticket investors used to enjoy lower expenses Sebi&rsquos move will now bring all investors at par A new framework &ndashInvestment Advisors Regulations &ndash for registration and regulation of investment advisors has also been put in place Now all individuals corporate body and partnership firms engaged in the business of providing investment advice for consideration like financial planners will have to be registered and regulated &ldquoThe fringe players whose objective was to make a quick buck would make way for serious advisers who see business in providing advice in the best interest of investors&rdquo says SachdevppWhile all these measures look promising the real task for fund houses will be its implementationp


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