MFs Concern Over Sebi Regulation

The heads of debt mutual funds (MFs) have decided to submit a memorandum on 23 April 2007 to the Association of Mutual Funds in India (Amfi) on the recent circular issued by the Securities and Exchange Board of India (Sebi) regarding fund houses parking money in the short-term deposits of scheduled commercial banks. They will ask Amfi to take up their serious concerns on the circular with the regulator.
The issue concerning debt fund managers is likely to be on top in the agenda of the general body meeting, which will be held on 23 April 2007. The debt fund managers, from fund houses having a sizeable exposure in the debt market, met to examine the impact of Sebi’s new norms on the short-term deposits with the banks.

Some of the fund houses have a large exposure in the short term deposits of the scheduled commercial banks. And, they consider that three months time is too short a period for them to regularise their previous investments in the short-term deposits.

Fund managers are of the opinion that Sebi’s circular, dated 16 April 2007, of putting a cap of 15% on the net assets in short-term deposits of all the scheduled commercial banks put together is a small amount. Instead, this limit should be extended to 25%, the sources said. They are also demanding that the regulator allow fund houses to charge investment management and advisory fees for parking of funds in short term deposits in case of liquid and debt-oriented schemes. Sebi in the circular has not permitted the asset management companies (AMC) to a charge fee in this regard.