Mumbai: SEBI Monday asked mutual fund houses to make monthly disclosures about assets managed by them and explain the rationale behind exercising their voting rights in companies, as part of long term policy for the industry effective from April 1.
The first-ever long term policy for over Rs 9 lakh crore mutual fund industry, aimed to make it an attractive investment proposition for retail investors, also provides for bolstering distribution channels.
The capital market watchdog has suggested selling of mutual funds through public sector banks and online to increase their penetration.
In a circular issued today, SEBI said mutual funds would be required to disclose certain additional details about their Assets Under Management (AUM) on a "monthly basis".
This would include monthly disclosure of AUM from different categories of schemes, AUM from places beyond top-15 cities, contribution of sponsor and its associates in AUM, contribution from different types of investors (retail, corporate etc), state-wise contribution and AUM from sponsor group or non-sponsor group distributors.
Besides, the data has to put on a consolidated basis on website of Association of Mutual Funds of India (AMFI) within seven working days of the month.
This circular would be effective from April 1, 2014.
The Securities and Exchange Board of India (SEBI) said mutual funds should disclose the rationale while exercising their voting rights in investee companies.
"Asset Management Companies (AMCs) shall be required to record and disclose specific rationale supporting their voting decision (for, against or abstain) with respect to each vote proposal," SEBI said.
AMCs would be required to make disclosure of votes cast on their website on a quarterly basis, within 10 working days from the end of the quarter. Further, they would need to continue disclosing voting details in their annual report.
On an annual basis, AMCs would be required to obtain auditor's certification on the voting reports being disclosed by them. Such auditor's certification would be submitted to trustees and also disclosed in the relevant portion of the MFs' annual report and website.
SEBI said that board of AMCs as well as trustees of mutual funds would be required to review and ensure that these players have voted on important decisions that may affect the interest of investors and the rationale recorded for vote decision is 'prudent and adequate'.
The confirmation to the same, along with any adverse comments made by auditors, would have to be reported to SEBI in the half yearly trustee reports.
With an aim to increase penetration of mutual fund products and to energise the distribution network, SEBI has allowed additional expense ratio of 30 basis points for garnering funds from B-15 cities.
"This development would lead to setting up of distribution infrastructure by AMCs," SEBI said.
In order to achieve participation from all parts of the country in mutual funds, SEBI said "there is greater need for developing additional distribution channels."
SEBI has asked mutual funds to develop a system for active support to PSU banks for distribution of mutual funds.
Besides, all MFs would need to provide online investment facility and tap the internet and mobile phone users for direct distribution of products.
The regulator has asked fund houses to make available printed literature in regional languages for investor education and financial inclusion. Such regional language investor awareness campaigns would also be introduced in print and electronic media.
Currently, there are about 45 fund houses in the country, which together manage assets worth over Rs 9 lakh crore but fund mobilisation has been a tough task for them in the past few years.
Unless the funds are deployed in short term deposits of scheduled commercial banks, fund houses need not include those particular allocation for calculating sectoral exposures.
"Since the investments in short term deposits of scheduled commercial banks is allowed pending deployment of funds of a scheme the same shall also be excluded while calculating sector exposure," the circular said.
