ESCORTS MUTUAL FUND

MF agents must disclose fees: SEBI

MUMBAI: The Securities and Exchange Board of India (Sebi) is trying to ensure that mutual fund (MF) investors get the best deal from distributors

The regulator, in a circular on Wednesday amending the code of conduct for MF intermediaries, directed distributors to disclose to clients all information, involving commissions received for competing schemes of various MFs, of which the scheme was recommended.

The move is an extension of the recent changes by Sebi in the fee structure of distributors. As per the changes, investors need to pay directly for the quality of services by the distributor, unlike previously, when MFs compensated the distributors. In June, Sebi had asked fund houses not to deduct marketing and distribution expenses from investments made by investors.

“Intermediaries will not rebate commissions back to investors and avoid attracting clients through temptation of rebate/gifts. A focus on financial planning and advisory services ensures correct selling and also reduces the trend towards investors asking for passback of commission,” the regulator said.

Besides, distributors of MF products have been restrained from indicating or assuring returns in any type of scheme, unless the scheme information document is explicit in this regard. Sebi has also asked registrars to maintain necessary infrastructure to support the asset management companies in maintaining high service standards to investors.

“...ensure that critical operations such as forwarding forms and cheques to AMCs/registrars and despatch of statement of account and redemption cheques to investors are done within the time frame prescribed in the SID/SAI and Sebi mutual fund regulations,” the Sebi circular said.

The chief marketing officer with a large domestic fund house said, “These changes in disclosure fee will result in distributors concentrating on selling just 4-5 mutual funds rather than schemes from 25-30 fund houses.”

http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/MF-agents-must-disclose-fees-SEBI/articleshow/5048925.cms

Mutual fund agents, distributors get new Code of Conduct

MUMBAI: Apex sectoral body AMFI has issued a fresh code of conduct for mutual fund intermediaries like agents and distributors, mandating them to disclose all commissions received from different schemes.

The revised code of conduct was issued by the Association of Mutual Funds in India (AMFI) following market regulator SEBI's circular asking the mutual fund distributors to disclose all the commissions payable to them from various schemes.

In a statement today, Sebi said all intermediaries of mutual fund companies would have to follow the code of conduct strictly.

"If any intermediary does not comply with the code of conduct, the mutual fund shall report it to AMFI and Sebi. No mutual fund shall deal with those intermediaries who do not follow code of conduct," Sebi said.

Reacting to the move, mutual fund tracking firm Value Research Online CEO Dhirendra Kumar said, "It puts onus on the Mutual Fund. Since intermediaries are not accountable to SEBI, mutual funds would have to ensure that they (intermediaries) are brought to task."

The code also requires intermediaries to adhere to guidelines issued by Sebi, highlight risk factors of each scheme, abstain from indicating or assuring returns, maintain confidentiality of all investors deals and ensure that all communications are sent on time, among others.

http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Mutual-fund-agents-distributors-get-new-Code-of-Conduct/articleshow/5047949.cms

Fund houses try to lure investors with gold ETFs

Four mutual funds planning to launch schemes.
Sharvari Patwa
Mumbai, Sept.23 Many mutual fund houses are planning to launch gold exchange traded funds (ETFs) to cash in on the buzz around gold.
At least four fund houses are planning to launch gold funds or gold ETFs. HDFC Mutual Fund and ICICI Prudential filed draft offer documents with SEBI in September. Religare Mutual Fund is expecting SEBI approval for its gold ETF. Principal PNB Mutual Fund is planning to apply to SEBI for a gold ETF to be launched in three months, said Mr Sudipto Roy, Business Head of Principal AMC.
Gold prices were at Rs 15,865/10 gm on Wednesday closing. According to a senior industry analyst, it is only the euphoria around gold that might be prompting fund houses to launch these gold ETFs as fundamentally one does not enter a market that might be in danger of peaking. “For example, in 2007, when the market was already at the peak, we saw a large number of equity funds being launched although it was not the right time to enter the market at such high peaks,” she explained.
Gold prices have been going up in the past few months and fund houses are looking at this as an opportune time to launch gold ETFs, said Mr Krishnan Sitaram, Head of Crisil Fund Services, CRISIL. This would not only complete the product suite of these fund houses but is also a way of tapping the current investor interest in gold, he added.
While there is a section of analysts who feel investors would stay away from investing in gold ETFs at this level, some, such as Ms Lakshmi Iyer, Head of Products of Kotak AMC, feel that there is a case for investors to enter even now as gold prices could increase further. “Maybe they could wait for price dips at some intervals and then invest,” said Ms Iyer.
However, some mutual fund houses are putting their gold plans on hold. Tata Mutual Fund that had plans for a Gold ETF has shelved them. “Gold has already touched a peak and now there is lack of appetite in the market. At this point of time it doesn’t seem appropriate to launch a gold ETF,” said a Tata Mutual Fund spokesperson.
Fresh inflows into the six existing gold ETF schemes were minimal this August, around Rs 16 crore, against Rs 45 crore in July, and Rs 34 crore in June. But the assets under management of these schemes have risen since June from Rs 844 crore to Rs 904 crore in August, largely due to the rise in gold prices.

http://www.thehindubusinessline.com/2009/09/24/stories/2009092451671000.htm

MF distributors told to be transparent on commissions

Our Bureau
Mumbai, Sept. 23
SEBI has directed mutual fund distributors and agents to disclose to all investors all the commissions received for the different competing schemes of various mutual funds while recommending a similar product.
According to Association of Mutual Funds in India’s (AMFI) revised code of conduct, intermediaries of mutual funds distributors have to disclose to all, the commissions (in the form of trail or any other mode) received for the different competing schemes of various mutual funds, from amongst which the scheme is being recommended.
In case of any intermediary not complying with the code of conduct, the mutual fund shall report it to AMFI and SEBI, a circular said.
“No mutual fund shall deal with those intermediaries who do not follow code of conduct,” SEBI said.
SEBI said all intermediaries of mutual fund companies would have to follow the code of conduct strictly.

http://www.thehindubusinessline.com/2009/09/24/stories/2009092451711000.htm

Mutual funds still charging entry fees on existing plans

Sebi had banned fund houses from charging investors an upfront fee, known as entry load, from 1 Aug

Mumbai: Despite a ban on entry fees, several asset management companies are still charging those who invest through systematic investment plans (SIPs) in various mutual funds by utilizing a loophole in the market regulator’s instructions.
An SIP is a service option that allows investors to buy mutual fund shares on a regular schedule, usually through bank account deductions.
The Securities and Exchange Board of India (Sebi) banned fund houses from charging investors an upfront fee of up to 2.25%, known as entry load, from 1 August. However, according to the new rules, existing SIPs have to be terminated and restarted to avail of the benefit. Many fund houses have neglected to inform investors about this, and have together earned around Rs45 crore in August from such fees.
“I have not heard about the Sebi circular. Even my agent has not told me anything,” said Manjusha Bagal, a Thane, Maharashtra-based homemaker who has been investing Rs3,000 every month since July 2008 in an equity scheme of a leading fund house.
Sebi on Wednesday issued a 16-point code of conduct for mutual fund and asset management companies that asks them to “ensure that all investor related statutory communications”, including entry and exit fees, are conveyed to investors “reliably and in time”.
“We have not informed (investors). Why should we?” Sunil Subramaniam, head, sales and marketing, Sundaram BNP Paribas Asset Management Co. Ltd, which manages Rs14,023 crore in assets, said before the latest code of conduct was announced.
According to data from industry lobby group Association of Mutual Funds in India, equity funds saw inflows of Rs4,036 crore in August and industry estimates suggest that at least 50-60% of that amount came through investments in old SIPs. Funds would have, therefore, earned entry fees worth Rs45-50 crore at the rate of 2.25%. SIPs typically charge between 2% and 2.25% as entry load. The association only collects aggregate numbers, and does not break them down by investment categories.
“If the amount involved is big, people have already done it (re-registered). But smaller investors continue to pay,” said A.K. Narayan, president, Tamil Nadu Investors Association. “These anomalies will take at least 6-12 months to get corrected.”
Some distributors have even put in fee structures that make re-registering meaningless.
ICICIDirect.com has announced a transaction fee of Rs30 on all transactions below Rs8 lakh. It does not make sense for an investor to re-register an SIP below a sum of Rs1,400 as the transaction fee would cancel out savings from the zero entry load.
At fund house Reliance Capital Asset Management Ltd, which manages about one million SIP customers, the highest in India, existing SIP investors are yet to re-register their portfolios to avoid the entry load burden.
“Almost all of our SIP customers are continuing with their existing load structure,” said Sundeep Sikka, chief executive of the firm that manages assets worth Rs1.17 trillion and collects Rs3,000-4,000 crore through SIPs every year.“Only new investors might like to opt for the new entry load benefits…because the existing customers feel that it may not make any significant difference in their investments by discontinuing the existing plans and reinvest in order to avoid paying the entry load,” he said, adding that while the company has told investors about the new norms, it has “not informed investors specifically about discontinuing their existing plans and re-register with us to avoid entry load”.
Distributors, who used to work on a commission from the entry charges, are also not stepping forward to tell customers about the new rules.
“Why should I shoot my own foot? No distributor would do it,” said a Mumbai-based distributor, who did not want to be identified.
V. Krishnan, vice-president and head of mutual finds at Integrated Enterprises India, a Mumbai-based distributor, said that a large part of the SIP clientele are passive investors and that not everyone is restarting SIPs to avoid the entry load.
K. Venkitesh, national head, distribution, Geojit BNP Paribas Financial Services Ltd, said that the majority of the flows in August were through existing SIPs as the ban put a crimp in fresh sales.
Large national distributors, however, said they are actively advising investors to shift to the new regime by re-registering but many still continue to pay entry load. According to a Mumbai-based official at Bajaj Capital, a financial services distributor, only 40,000-42,000 of its 130,000 SIP accounts have shifted to the new regime.
Anup Bagchi, executive director, ICICI Securities Ltd, which manages about 250,000 investors, said: “We had communicated our pricing structure to all our customers and proactively advised them to re-organize their SIPs to take advantage of no load benefit and our pricing structure. Over 70% have already taken advantage of our advice and have benefited.”

http://www.livemint.com/2009/09/23212100/Mutual-funds-still-charging-en.html

INSURANCE

Chola MS joins car insurance bandwagon

CHENNAI: Chola MS, a joint venture between $3 billion Murugappa Group and Mitsui Sumitomo Insurance Group of Japan, has introduced a car insurance

policy, coming with features like depreciation, re-instatement value in case of total loss and daily allowance. As part of its plans to take "customer ownership" to the next level, Chola is the first to partner with Mapfre, a Fortune 500 company based in Spain.

Launching the Chola Protect 360 and a range of plans on Wednesday, Chola MS MD S S Gopalarathnam said the new policy was brought into the 40-year-old motor insurance market based on a market study.

In the first year, the company is aiming to sell one lakh policies and double it in the next year. An indicative premium of its policies for a brand new vehicle 1800 cc at an invoice price of Rs 8.5 lakh works out between Rs 20,634 and Rs 30,750 depending on the opted policy plans — current comprehensive policy, Chola Protect Optima, Chola Protect Superior, Chola Protect Elite and Chola Protect 360.

Commenting on its tie-up with Mapfre, Mr Gopalarathnam said it was a 3-year service pact that was aimed at leveraging the latter’s roadside emergency service provider specialisation. During its two-and-half year presence in India, Mapfre has invested Rs 40 to Rs 50 crore on specialised equipment, operating with a pan-India network across 50 cities and 24x7 multilingual call centre.

The motor premium segment is expected to generate around Rs 425 to 430 crore, constituting 46% of its overall business. Currently, Chola MS has 2 lakh policies in the private car segment and 1.5 lakh policies in the commercial vehicles segment.

Some of the key features of its latest bouquet of policy plans include reinstatement value benefit,upto Rs 10,000 cover for personal luggage loss during an accident.

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/Chola-MS-joins-car-insurance-bandwagon/articleshow/5047815.cms

Insurers bank on celebrity appeal

Vijay is the name of the character that Amitabh Bachhan has played in many of his movies. In most cases, Vijay belonged to the underprivileged class.
It’s a curious coincidence that the megastar has just become brand ambassador for an insurance product called Max Vijay, a product targeting the poor.
“We want to sell Max Vijay as an FMCG product,” says Anisha Motwani, chief marketing officer of Max New York Life.
Max Vijay is a low premium policy with a premium of Rs 10 to Rs 2,500. The product has so far covered 70,000 households and the insurer aims to take it to over three million in the next three years. The campaign, first launched in Agra, will target the Hindi heartland and then see a nationwide release.
“Max Vijay will help the common man to achieve his dream, as every rupee saved helps him to rise up the hierarchy,” says Piyush Pandey, Executive Chairman and Creative Director- South Asia, Ogilvy & Mather, the agency behind the new Max Vijay campaign.
Max isn’t the only insurer that has started leveraging celebrity appeal. Cricketers Sachin Tendulkar, Virendra Sehwag, Yuvraj Singh, and the winner of Femina Miss India 2009 Ekta Chaudhary have also jumped on the insurance “brand wagon”.
But will celebrity endorsement help in raising insurance awareness? No one is quite sure. Madhukar Sabnavis of Ogilvy and Mather says “since insurance is sold and not purchased, it’s not easy to push up sales. We do not know how successful the endorsements will be, but Bachhan did very well for ICICI Bank.”
The wait-and-watch mode to see the impact is understandable. Except for a couple of examples, celebrities have not been very successful in endorsing financial products.
Insurers, however, believe advertisements will help in attracting eyeballs at a time when higher penetration is on top of the agenda. The life insurance industry has a mere 4 per cent penetration, while it’s just 0.6 per cent for the non-life industry.
Recently, Birla Sun Life appointed cricketers as brand ambassadors. “They are actually philosophy ambassador and not brand ambassadors. We have tried to capture their aspirations and fears,” says Ajay Kakar ,chief marketing Officer of the Aditya Birla Financial services group.
Bajaj Allianz appointed the winners of Pantaloons Femina Miss India 2009 pageant, including Ekta Chaudhary, as its ambassadors.
“Celebrity endorsement creates instant recall and it becomes easier to reach the masses,” says Bajaj Allianz life insurance head marketing Akshay Mehrotra .
TapRoot India CEO Agnello Dias sums it up, saying “celebrities have nothing to do with the products they are endorsing, except a few.
The recent engagement of celebrities in the insurance space will only help them break the clutter.”
http://www.business-standard.com/india/news/insurers-bankcelebrity-appeal/371054/

BANK

Credit growth up as quarter draws to close

High-base effect behind 13.24% rise in credit flow in fortnight ended September 11.
The credit growth during the year up to September 11 fell 13.24 per cent, mainly due to the high base effect and banks pushing loans to meet their quarterly targets. In the corresponding period last year, credit flow had risen 26.1 per cent on a year-on-year basis.
Bank credit went up by Rs 18,374 crore to Rs 28,25,957 crore during the fortnight ended September 11, 2009. During the same fortnight last year, bank advances had grown by Rs 32,914 crore.
According to data by the Reserve Bank of India (RBI), the rise was mainly due to growth in non-food credit as food credit dipped to Rs 1,339 crore during the fortnight. Bank credit has grown by Rs 50,407 crore during the financial year so far as against a growth of Rs 1,29,334 crore in the corresponding period last year.
Last week, at a meeting with RBI Governor D Subbarao and Deputy Governor Usha Thorat, chief executives of banks had said that the credit off-take would grow 20 per cent by the end of the financial year. The interest rates, however, would stay steady for the next few months, but might rise towards the end of the financial year, they said.
Banks will have to disburse an additional Rs 5,16,400 crore between September 2009 and March 2010 to meet the year-on-year credit growth projection of 20 per cent. In this fiscal so far, credit disbursal has grown 1.35 per cent over the figure at the end of the previous financial year.
“A large number of sanctions are at advance stages of documentation. We have seen a surge in demand in the last one month,” said Bank of Maharashtra Executive Director MG Sanghvi. The bank is targeting a growth of 5-6 per cent over March in its loan book for September 2009. It is looking at 20 per cent growth for 2009-10.
“The growth is partly because of banks pushing loans to meet their targets for the quarter, which is coming to a close. The demand for short-term loans has pushed up the off-take as the demand for long-term loans is missing,” said Bank of India Executive Director BA Prabhakar.
The public sector lender has increased its loan book by 1-1.5 per cent in the first half but expects to grow 18 per cent by the end of the financial year. Prabhakar expects credit demand to pick up in the second half as companies engaged in procuring food and agriculture products take loans.
Meanwhile, during the fortnight, deposits mobilised by banks went up by Rs 8,122 crore to Rs 40,89,791 crore, mainly due to a sharp rise in term deposits. The demand deposits dropped by Rs 10,837 crore while term deposits rose Rs 18,960 crore. On a year-on-year basis, the deposits went up by 20.19 per cent at the end of September 11.
As a result of a significant growth in credit, banks’ investment in government securities or instruments that qualify for the statutory liquidity ratio requirements dropped Rs 21,296 crore to Rs 13,48,191 crore during the fortnight.

http://www.business-standard.com/india/news/credit-growthas-quarter-draws-to-close/371034/

SEBI

Sebi may allow MF units to be traded on exchanges

The move includes new fund offers.
After a series of bad news such as entry load ban, mutual funds may finally get some good news from the market regulator.
The Securities and Exchange Board of India (Sebi) is now planning to enable investors to buy and sell mutual fund units through stock exchanges. Fund houses will also be allowed to sell new fund offers (NFOs) through exchanges, helping them to save on distribution costs.
Sources privy to the discussions told Business Standard that a committee under a Sebi executive director has been constituted to look at amendments to the regulations governing stock exchanges, depositories and brokers to push through the move. Another source said to start with, it would be optional for fund houses to use the platform. Trading on stock exchanges would be in addition to the proposed platform being developed by Association of Mutual Fund of India (Amfi).
The sources added that Sebi was keen on stock exchange-based mutual fund purchases and sales or redemption because the Amfi platform could take a while to be ready.
The move comes at a time when the market regulator has terminated the system of entry load and put curbs on the levy of exit load on mutual funds.
At present, investors have to approach fund houses to buy or redeem units. On their part, fund houses declare net assets value (NAV) on a daily basis and trading takes place on the basis of the previous day’s NAVs.
Under the new mechanism, fund houses have to offer two-way quotes based on the previous day’s NAV for trading.
Last year, Sebi had mandated the listing of all new fixed maturity plans on the stock exchanges, which had lowered listing fees to push through the move. At present, 83 FMP schemes are listed on stock exchanges but volumes are low.
Apart from the sale and purchase of units, new fund offerings could also be made through the stock exchange channel in addition to those through distributors.
A Sebi official said that stock exchanges would have to make minor modifications to their software to allow for trading through terminals. The move would also require dematerialising mutual fund units.
On the trading platform being developed by Amfi, a committee headed by UTI Asset Management Company Chief Market Officer Jaideep Bhattacharya had suggested the introduction of a unique identification number for each investor that would help them track their portfolio, including their value, once they log on to a website.
“Sebi’s initiative should work well for the industry,” said the CEO of one of the largest asset management companies in the country. He said cost advantages would accrue for investors and fund houses and brokers would also benefit. “The commission may be low for financial advisors but it will be good for brokers who will also be able to make more use of their terminals,” the CEO added.
Asit C Mehta Investment Intermediaries Managing Director Deena Mehta said, “Fund houses can sell new schemes and even units of the schemes floated earlier. Distributors can act as sub-brokers. This will cut costs for fund houses also.”
There were over 500,000 trading terminals across 600 Indian towns and cities and Mehta pointed out mutual funds had a presence in 150 of these locations.
She added that trading through the stock exchanges would also mean that the settlement process could take place through the clearing houses of these exchanges.

http://www.business-standard.com/india/news/sebi-may-allow-mf-units-to-be-tradedexchanges/371083/

Sebi brings new code for MF distributors

The Securities and Exchange Board of India (Sebi) has issued a code of conduct for intermediaries, including disbributors, of mutual funds.
Asset management companies (AMCs) have been told not to deal with non-compliant intermediaries. They are to report such cases to the Association of Mutual Funds in India (Amfi) and Sebi.
The code of conduct is a sequel to the Sebi order in June this year empowering investors through transparency in payment of commission and the load structure and thereby mandating distributors to disclose all commissions.
In a 16-point code of conduct, the regulator has emphasised that clients’ interests are to be protected and that intermediaries should highlight the risk factors of each scheme and avoid misrepresentation and exaggeration. Industry sources said since the entry load ban on equity schemes came into effect from August 1, some malpractices were reported at several locations. The code of conduct has been brought to check such cases. The code asks intermediaries to abstain from indicating or assuring returns to clients. The distributors are also to maintain necessary infrastructure to support the AMCs in maintaining the high service standards.
Coming down hard on commission-driven malpractices, the code asks intermediaries to avoid recommending inappropriate products solely because they get higher commissions from these. Distributors should also avoid over-transacting and churning of investments to earn higher commissions.
Intermediaries will not, according to the code, rebate a commission back to investors and will avoid attracting clients through such a temptation.
Intermediaries will not, according to the code, rebate a commission back to investors and will avoid attracting clients through such a temptation. At the same time, confidentiality of all investors’ deals and transactions should be maintained, said the statement.
All employees engaged in sales and marketing are advised to obtain Amfi certification.
http://www.business-standard.com/india/news/sebi-brings-new-code-for-mf-distributors/371047/