Sebi scraps entry load for MFs, cuts fees of intermediaries

The Securities and Exchange Board of India has rationalised disclosure norms for rights issues. The market regulator has allowed investors to choose commission payable to mutual fund distributors and has cut fees for financial intermediaries by 50%. It has also approved the concept of anchor investor. CNBC-TV18 was the first to report these changes on June 16.

The Sebi board which met today approved the concept of anchor investor, which are long-term strategic investors. An anchor investor has to be a qualified institutional buyer and can subscribe up to 30% of the institutional quota. The promoter group cannot be an anchor investor. There will also be a 30-day lock-in period for anchor investors.

On rights issue:

The Sebi board has also rationalised disclosure norms for rights issues. Henceforth, there will be no preferential issue for superior voting rights. Also, no listed company can issue shares with superior rights.

On mutual fund schemes:

Mutual fund investors have a reason to cheer. There will be no entry load on any mutual fund schemes from now on. Distributors will now have to disclose commission for schemes. In a landmark move, mutual fund investors will now decide on the commission payable to distributors.

Fee cut for intermediaries:

The board has decided to rationalise the fees charged by intermediaries. It plans to cut fees for financial intermediaries by 50%. Broker fees for debt deals have been cut to Rs 2.5 per Rs 1 crore of turnover.

On initial public offerings: From here on, companies planning an initial public offering will have to list on at least one national exchange.

UTI mutual funds to merge equity schemes

UTI Asset Management Company (UTI AMC), one of the largest fund houses in the country, is planning a mega merger of the equity schemes in its portfolio.

The process is likely to be kicked off in the current financial year.
Speaking to TOI, UTI MF chairman & MD U K Sinha said the organisation currently had too many equity schemes, which would be pruned by over 50%. Currently, the fund house has 96 schemes, of which equity schemes number 29.
The number of equity schemes is likely to be brought down to 10 through mergers over a period of time. Sinha said too many schemes in the market only proved that the Indian mutual fund industry still remained immature.
“Here, investors prefer new fund offerings than an existing fund. But it is just the opposite in matured markets. One should understand that the possibility of higher returns is much more in existing schemes. NFOs are more of a marketing strategy. But as all fund houses are doing that, we, too, have to come out with NFOs,” he added.
Sinha said that during the last financial year, it had merged nine schemes into three. This year, it would consolidate four schemes into two. Commenting on balanced schemes, he said that UTI has a very good bouquet of balance funds. “We have now also introduced systematic investment facility under ULIP. There is no plan to change the number or add any new scheme in this space,” he added.
Sinha said the number of fixed maturity plans (FMP) at 35 is also quite high. But he added that it is not possible to prune FMPs. “FMPs have a different maturity period and so it is not possible to merge them,” he added.
He said demand for corporate bonds is very high as banks are still very cautious about lending. “UTI has lend over Rs 5,000 crore in last couple of months. The figure for the MF industry, as a whole, is Rs 35,000 crore,” he added.
Meanwhile, UTI AMC has tied up with Coopers Wealth Creators and Tower Infotech for providing investment opportunities through micro pension initiative under UTI Retirement Benefit Pension Fund to employees and business associates of Tower Infotech.
Senior V-P and regional head (east) of UTI AMC, T K Maji, said the micro pension initiative is aimed at providing social security cover to private and unorganised sectors.