Market regulator Sebi (Securities and Exchange Board of India) has made the listing of all close-ended Mutual Fund (MF) schemes mandatory. There will also be no early exit on close-ended MF schemes.
It also has extended the IPO validity period to one year in its board meeting. Sebi Chairman CB Bhave said companies can use IPO funds only after allotment of shares. Shareholders with demat will get rights share in demat form.
Sebi will also adopt code of conduct for SEBI board members.
Sebi chairman C B Bhave said the October incident has thrown up a lot of issues. ''These three issues were issues where the Board thought that we could decide straightaway. There are a host of other issues that have been raised which referred to Mutual Fund Advisory Committee and then put out for public comments and then we would take it to the Board. These are not the only issues that we are going to address.''
A verbatim transcript of Bhave's comments at a press conference.
On overall mutual fund regulations:
If you look at the October experience we didn't face any difficultly with regard to equity schemes even though the market had come off so much. We wouldn't want to tinker unnecessarily with something unless an issue comes up. So just now the focus is more on what happens with debt scheme.
On issues discussed:
Actually you all are aware of those issues. For example there is an issue about whether we should segregate the schemes for corporates as oppose to schemes for individuals. There are also issues about if a scheme is called a liquid scheme then what should be the kind of underlying assets that it should have because the liquid scheme by nature means that you can have an easy entry and exit. So there are lots of issues that are being discussed. We have requested the Association of Mutual Funds of India to prepare an industry paper on this and the issues that are raised in that paper plus what issues have come to our notice – those will all go to the Mutual Fund Advisory Committee and then they will put it out in the public domain.
On investor compensation:
We are trying to conclude this process by seeing whether disbursement amount can be collected from the various entities which had been found to have committed irregularities in the market by SEBI. We have no decision as yet on when we will actually be disbursing those amount but they have been collected in order to be able to compensate investors. So the issue will be identification of the investors and that amount should be sufficient to be distributed. One cannot just take a small amount and then try to distribute it over thousands of investors. We will have to take a judgement on that.
On cases pending:
All the people would had been found to prima-facie committed irregularities are all known to you. So all of them are being issued notices and some of them will come for consent order, some of them may not. It depends on how the legal process proceeds.
On Differential Voting rights:
There is no question of any surveillance on that as differential voting rights is a part of the company's plan, unless some one has misused some provision or violated some law, I am not aware of any case where people have supposed to have violated the law.
On the Mutual Fund Industry:
I don't have an immediate feedback on this but what we intend to do is to proceed the feedback that had come and take it again to the advisory committee.
I don't prefer to have a relook at the structure, the point of that meeting was that we should have a dialogue with all the people who are concerned with the mutual fund industry, and there are many major companies of that industry, so one part was that we haven't decided any committee on which the various interests are represented and we will have a dialogue with different companies of the industry.
On Market Recovery:
Nobody knows when exactly the market will go and in which way, nor do people know how highest the market will go to nor we know which is the lowest it will go to. To predict that on this day the market is going to go up is like saying I know it is going to reach its lowest on that day. I don't think it is within the capability of any body, this is just an estimate that India will be amongst the first markets to recover whenever that recovery happens.
Too many important factors involved in that so we can't really say, the basis for optimism is that we are one of the few countries which are still growing. It is seen world over the problem is not that it will be 6-7%, the problem all over the world is that whether it is going to be negative.
We can't really say as we are part of the world system its very difficult to say what will happen we would expect to see encouraging trade a lot of leverage is going on in the market, investors who had leveraged had to sell in the market because they had to return the money that they have borrowed as their asset value was going down. So to that extent, the equity is going into the hands of those investors who are talking slightly longer term view of the market.