SEBI plans licensing of MF intermediaries

SEBI plans licensing of MF intermediaries
PRESS TRUST OF INDIA

NEW DELHI, APR 30: "We are holding meetings with the Association of Mutual Funds in India (AMFI) on how to go about for licensing of intermediaries in the mutual fund industry," SEBI Executive Director Ashok Kacker said at a seminar on Capital Market in 2001, organised by Delhi Stock Exchange here yesterday.

He said licensing of mutual fund intermediaries would be on similar lines suggested by Insurance Regulatory Development Authority (IRDA) for the insurance industry.

Currently there is no organised structure for intermediaries for the mutual fund industry and any body can act as an agent for a particular mutual fund.

The plan for licensing follows lack of awareness about the various schemes along with the various risk associated with a mutual fund scheme among the intermediaries.

"In the western countries licensing is a common concept and with the growth of the Industry it has become important for the regulator to further organise the industry," he said.

However, Kacker said, licensing would be a difficult job in the current scenario as there are a number of agents specially the Unit Trust of India (UTI) whose main source of income is through selling units of UTI and other mutual funds.

The mutual fund industry which has grown by 100 per cent in 1999-2000 with mobilisation of Rs 60,000 crore is expected to cross the Rs 100,000 crore in the current fiscal, Kacker said.

"Mutual fund industry in India is set to have a great leap and in the next couple of years one can witness the trend similar to that in US," he added.

Joint Secretary in the Finance Ministry Dr J Bhagwati said in the stock market there has been inefficient prices discovery and does not reflect the real value.

"The inefficient price discovery in the domestic stock markets is due to the large amount of carry forward positions," he added.

In India an investor can carry forward the position of their stocks by paying the carry forwad charges rather than full amount.

However, he said the volatility witnessed in the Indian stock market is not unique but is common to other developed markets.

"Volatility in Indian markets is at par with the markets in US where Dow Jones Industrial Average (DJIA) and Nasdaq composite have witnessed high level of volatility," Bhagwati said.