Securities and Exchange Board of India chairman U K Sinha on Friday warned asset managers, such as mutual funds, against selling risky and complex products to uninformed investors, particularly at this time when market are uncertain.
''In India, very complex products are being sold to uninformed investors. If products with complex derivative components are sold to a 60-year-old investor, he is exposed to a risk he is not suitable for. This is a serious problem,'' Sinha said while addressing an investment conference in Mumbai.
''We have to be serious about the suitability of products according to the risk appetite of the investor. This is not a time to seek explosive growth, but to consolidate portfolios for investment advisers,'' he said.
He said the credibility of financial regulators is being challenged across the world. ''The biggest challenge now is to build trust and restore confidence. In such times, our role becomes much more complex as a regulator and we don't want to encourage you to take short-term risky measures. We will not allow mistakes,'' Sinha told the financial company executives.
He also urged fund managers to increase the focus on retail products such as pension funds to increase penetration at the retail or household level, which remains very low in India.
Sinha called for restoring the shake confidence of investors. ''The credibility of all us is getting challenged. The whole trust and faith has been belied. The major challenge will be to restore that confidence and credibility,'' Sinha said.