INSUBCONTINENT EXCLUSIVE:
Shares of asset management companies (AMCs) such as HDFC AMC, Aditya Birla Sun Life AMC, Nippon Life India AMC, and others rose up to 3.5%
on Tuesday after the Securities and Exchange Board of India (Sebi) proposed easing regulations related to mutual fund (MF) business
operations.HDFC Asset Management Company shares rose as much as 3.3% to touch a high of Rs 5,162.30 during the session
Nippon Life India Asset Management also saw strong buying interest, climbing 3.2% to hit Rs 804.95
peak of Rs 1,327.95.In a circular issued on Monday, Sebi proposed relaxing the broad-basing requirement under Regulation 24(b) of the MF
This would allow AMCs to offer management and advisory services to non-broad-based pooled funds, subject to stringent governance standards
and regulatory oversight.Currently, AMCs are permitted to offer such services only to broad-based pooled assets
Those seeking to serve non-broad-based funds must obtain a Portfolio Management Services (PMS) licence.Sebi acknowledged that several AMCs
have raised concerns that the existing rules limit their ability to compete with other intermediaries offering similar services
an expansion of permissible activities for AMCs and their subsidiaries, allowing them to undertake operations ancillary to their core
These activities must fall under the regulatory oversight of a domestic or foreign regulator, ensuring that all such operations remain
within the ambit of a recognized regulatory framework, the circular added.The circular has addressed four potential conflicts that may arise
if these norms are relaxed
These include: diversion of resources and fees charged, contra-trade and front running, trading based on inside information, and
inter-business transfer of assets on unfavourable terms to mutual fund investors.AMCs will be required to ensure that resources allocated to
pooled non-broad-based funds are proportionate to the fees earned from such funds, and that mutual fund (MF) investors are not made to bear
the cost of these products
Sebi may also prescribe a range of fees that AMCs can charge from their pooled non-broad-based funds.Key personnel responsible for
investment decision-making and fund management will need to be segregated
A fund manager may be common only if the investment objectives and asset allocation are the same and replicated across all the funds managed
by that individual, the circular stated.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own
These do not represent the views of TheIndianSubcontinent)
