Sebi may put 10% cross-shareholding cap in mutual funds
State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) and Life Insurance Corporation (LIC) are having their own mutual funds and at the same time they hold 18.24 per cent stake each in UTI AMC.
To avoid the potential conflict of interest, markets regulator Sebi is considering to put a 10 per cent cross-shareholding cap in mutual funds, senior officials said.
The new measure may have an impact on the shareholding pattern of UTI Asset Management Company (AMC).
State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) and Life Insurance Corporation (LIC) are having their own mutual funds and at the same time they hold 18.24 per cent stake each in UTI AMC.
The issue would be taken up at the board meeting of Securities and Exchange Board of India (Sebi) tomorrow, they added.
Under the proposal, any shareholder owning at least 10 per cent stake in an AMC will not be allowed to have a 10 per cent or more stake in another mutual fund house operating in the country.
Further, a sponsor of a mutual fund, its associates, group company and its asset management company will be restricted from holding 10 per cent or more stake in a rival AMC.
In addition, such entities will be barred from having a representation on the board of another mutual fund house.
The new norms are aimed at avoiding any conflict of interest and help in strengthening the governance structure for mutual funds.
In addition, Sebi may come out with a new framework for Investment Advisor in order to segregate advisory and the role of a distributor.
However, mutual fund distributors while distributing the investment product can explain the features of the product to client.
To prevent the conflict of interest that exists between 'advising' of investment products and 'selling' of investment products by the same entity/person, there should be clear segregation between these two activities, the officials said.
Existing registered investment advisers who are offering distribution services through a separate division would be given an option to choose between providing investment advice and distribution service before March 31, 2019.
"From April 1, 2019, any person, including their immediate relatives or holding or subsidiary or associate entity shall offer either investment advice or distribution services," an official said.
Further, the board may come out with a fresh consultation paper in this regard.
Sebi had first issued a discussion paper that outlined the road map of distribution and advice in October 2016 and a revised consultation paper was issued in June.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Power of Compounding: How many years will it take to reach Rs 3 crore corpus if your monthly SIP is Rs 4,000, Rs 5,000, or Rs 6,000
Power of Compounding: Salary Rs 25,000 per month; is it possible to create over Rs 2.60 crore corpus; understand it through calculations
Reduce Home Loan EMI vs Reduce Tenure: Rs 75 lakh, 25-year loan; which option can save Rs 25 lakh and 64 months and how? Know here
Top 7 Large and Mid Cap Mutual Funds with Best SIP Returns in 5 Years: No. 1 fund has turned Rs 15,000 monthly SIP investment into Rs 20,54,384; know about others
New Year Pick by Anil Singhvi: This smallcap stock can offer up to 75% return in long term - Check targets
PSU Oil Stocks: Here's what brokerage suggests on these 2 largecap, 1 midcap scrips - Buy, Sell or Hold?
03:05 PM IST