Thursday, June 23, 2011

SEBI KYC norms burden to MF? | Mutual funds and KYC

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Securities & Exchange Board of India chairman UK Sinha said he would make investing hassle-free for retail investors by moving to a single know-your-customer (KYC) clearance for all capital market functions,and signalled at measures to revive mutual funds fortunes.The plan,though not finalised as yet,may have a sweep in the financial markets similar to what the government is aiming with the unique identification number,or the Aadhar project,to plug the loopholes in delivering social welfare projects.Once it is implemented,this will be one activity which will have far-reaching consequences, Sinha said at the 7th Mutual Fund Conference of the Confederation of Indian Industry.

It will have a consequence which is as basic and fundamental as dematerialisation when it was introduced in the country, he said referring to the mandate to hold shares in electronic form that eliminated hundreds of crores of losses due to legal problems that arose with physical shares.Sinha joins Reserve Bank of India governor Duvvuri Subbarao in calling for simplification of procedures and documentation for financial services in a country where millions live without even birth and school certificates.There are at least six separate KYC norms that need to be fulfilled now to benefit from capital markets,though all are regulated by one.Among many things,to open an account with a stock broker,the power of attorney and the applications require more than 50 signatures that leads to even disqualification when the signatures differ.I was not aware till I entered Sebi that even within the entity regulated by Sebi there are different KYC requirements, said Sinha.Our attempt is to remove those irritants,KYC is one such irritant. The regulator,previously chairman at the UTI Asset Management,also held out hopes for the mutual fund industry that has been seeking the revival of entry load on investors which the previous chairman abolished.Sinha has ruled out rolling back his predecessors decision but is open to incentive schemes.Sebi has taken note of the fact that a number of assets under management have declined and so Sebi is looking at some way to incentivise the distributor in a manner it is not costly for investors, said Sinha.We feel specially for those retail investors who may be first time investors who have not entered the market at all.Unless some incentive is given,it will be difficult to increase the penetration of the industry.

Source: Economic times