Page 142 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 9: Mutual Funds

14. A focus on financial planning and advisory services ensures correct selling, and also Notes
reduces the trend towards investors asking for pass back of commission.
15. All employees engaged in sales and marketing should obtain AMFI certification. Employees
in other functional areas should also be encouraged to obtain the same certification.

Caselet SEBI Favours Self-regulation for Mutual Funds

T he Securities and Exchange Board of India (SEBI) on Wednesday mooted the idea of
Self-regulatory Organisation (SRO) for the mutual fund industry.

Under the proposed plan, the Association of Mutual Funds in India (AMFI) would act as
the SRO with parts of the powers with SEBI being delegated to the apex body of the mutual
fund industry.
“Idea of SRO would help and support SEBI better in regulating the mutual funds,” the SEBI
Chairman, Mr G.N. Bajpai, said at a function organised to release the Hindi edition of the
AMFI workbook and also the launch of the certification course on the e-learning portal of
NSE.IT.
He said this would help the mutual funds to regulate themselves in a better way.
Currently the proposal was still in the conceptual stage and details would be known after
consulting with AMFI and mutual funds, he said adding that the delegation of powers
would be in phases.
The SEBI Chairman also said the market regulator was also looking at the replacement of
external auditors of asset management companies of mutual funds in the wake of
international accounting scandals.
Mr Bajpai suggested that mutual funds should expand the distribution network to small
towns and for this they should groom their distributors. He also said that mutual funds
should bring professionalism through the AMFI certification programme.
On the suggestion from the industry to allow them to manage pension funds, Mr Bajpai
said he would discuss the matter with the Government.

Source: http://www.thehindubusinessline.in
9.4.2 Recent Developments

On July 1, 2009, the Securities and Exchange Board of India has put a cap of one per cent on the
maximum amount an asset management company can retain from the exit load or the Contingent
Deferred Sales Charges (CDCs) on mutual funds for marketing and selling expenses.
"Of the exit load or CDSC charged to the investor, a maximum of one per cent of the redemption
proceeds shall be maintained in a separate account which can be used by the AMC to pay
commissions to the distributors and to take care of other marketing and selling expenses", SEBI
said in a circular. The balance should be credited to the scheme immediately.

In another notice to Asset Management Companies (AMCs), market regulator SEBI has pitched
for portfolio diversification. On June 5, 2009, SEBI asked mutual funds to bring down their
investment in money market instruments of a single entity to within 30 per cent limit by
September 5. According to guidelines, no mutual fund scheme can invest more than 30 per cent
of its net assets in money market instruments, like commercial papers, of a single issuer.

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