Tag: Mutual Funds (MF)

Explained: SEBI’s new rules on mutual fund investments through pool accounts from July 1

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Securities and Exchange Board of India’s (SEBI) regulation banning the use of brokers’ pool accounts for mutual fund transactions will come into effect from July 1 after a deadline extension.

In a circular issued by SEBI last year, it prohibited the pooling of funds for mutual funds transactions from April 1.

However, the deadline was later extended to July 1 to facilitate an efficient technology overhaul and its smooth transition to serve the growing investor needs after many complained of failing SIP transactions.

From July 1, all non-exchange transaction platforms including mutual fund transactions utility have already implemented this strategy. There have been some glitches and issues, but the situation is improving, and this may become error-free in the long run.

Here’s all you need to know about SEBI’s new rules.

What is a pool account?

A pool account is a kind of electronic wallet facility provided by the brokers. It is essentially a bank account where the broker pools money from the individual investors to buy MF units in a particular scheme.

What is going to change?

From July 1, mutual fund investment transactions cannot be made through a pool account. As per the SEBI regulation, the money must go from the investor’s bank account to the bank account of the mutual fund house directly.

SEBI has ordered mutual fund firms to make sure that no mutual fund distributor, online platform, stockbroker, or investment advisor accumulates money from investors in a bank account (pool account) and then transfers it to the fund house to buy units for investors. This is being implemented to guarantee that the funds are not misappropriated.

Regarding the new rules, mutual fund investors and distributors have raised some issues such as delayed confirmations about allotment of units, inability to pay using cheque, RTGS and NEFT, and SIP transaction failures among others. However, these problems are expected to be resolved shortly.

How will it impact mutual fund investors?

The above-mentioned problems can cause trouble for MF investors. However, MF Utilities, which is an industry-promoted, widely used platform for transacting units has clarified that the registrars and transfer agents systems are now better equipped, and the situation has improved. There is no delay in the allotment of units where the rules are followed. Checks with distributors also indicate that the delay in confirmation of transactions was of up to six days earlier this month which has come down to a day or two, according to a report by Moneycontrol. 

For MF investors using SIP (Systematic Investment Plan), all the SIPs will stop where your broker used to transfer funds from your broking account balance to the mutual fund house as per the new regulation.

SIP investors will need to sign up for fresh National Automated Clearing House (NACH) mandates in favour of the clearing corporation, which can be done online.

Also, investors need to make sure that their details such as their mobile number and email are correct at the fund folio level. This is essential as the regulator has mandated double factor authentication (2FA) using a one-time password (OTP), sent to the email and mobile phone number of the investor.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Mutual funds: SEBI extends deadline for compliance with certain directions to July 1

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Providing more time to fund houses, SEBI on Thursday extended the deadline for implementing certain directions for mutual funds, including those pertaining to usage of pool accounts for transactions, to July 1.

In October 2021, SEBI had said that stock brokers and clearing members should not accept payment through one-time mandate or issuance of mandates or instruments in their name for mutual fund transactions.

Earlier this month, the regulator said one-time mandates in favour of SEBI-recognized clearing corporations could be accepted from April 1 and now, that deadline has been extended. “On or after July 1, 2022, new mandates shall be accepted only in favour of SEBI-recognised clearing corporations and those mandates shall exclusively be for subscriptions to units of mutual fund schemes and not for any other purpose,” SEBI said on Thursday.

Also Read: SEBI issues timelines for rebalancing portfolios of mutual fund schemes

The deadline for discontinuation of usage of pool accounts for transactions in the units of mutual funds, Two Factor Authentication (2FA) for redemption and other related requirements have been extended following a representation from Association of Mutual Funds in India (AMFI).

“On examination of the representation of AMFI, in the interest of the investors, it has been decided to extend the date of applicability of ‘circulars’ including the clauses relating to 2FA for redemption and source account verification to July 1, 2022,” the watchdog said in the circular issued on Thursday.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Demat account holders doubled in 3 years to 7.38 crore till Oct

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Demat account holders more than doubled in the past three years till October 31 to 7.38 crore,  Minister of State for Finance Pankaj Chaudhary said on Tuesday.

Registered investment advisers increased from 1,298 as of June 30, 2020, to 1,324 by October 31, 2021, the minister said in a written reply in Lok Sabha.

The ratio of mutual fund investors and Demat account holders to the Registered Investment Advisors (RIA) in India is nearly 76,510:1, the minister added.

According to the information provided by regulator SEBI, currently there are nearly 2.75 crore mutual fund (MF) investors in India.

The Association of Mutual Funds in India (AMFI) report for November showed the Indian mutual fund industry has reported a record increase in average assets under management (AUMs) and Net AUMs, powered by an increase in Net Flows and a robust increase in monthly systematic investment plan (SIP) contributions.

Despite extreme market volatility caused by fears of a third wave and the Omicron variant of COVID-19, November saw net flows to the tune of Rs 46,165 crore and a record SIP contribution of Rs11,004.94 crore. This has led to a record high in AAUMs (Rs38.46 lakh crore) and NAUMs (Rs37.34 lakh crore).

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Budget 2022: Cut retail taxpayers, NRIs some slack, says AMFI

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Association of Mutual Funds (AMFI) in India has offered its suggestions for the upcoming Union Budget 2022-2023. Among several points, the industry body has called for “mitigating hardships” of retail taxpayers and NRIs. Other suggestions include putting MF unit-linked insurance plans (ULIPs) on the same playing field in terms of tax treatment, and the introduction of low-cost, lower-risk tax-exemption-linked debt-linked savings schemes (DLSS).

The AMFI report brings up six major areas that need to be addressed:

•  Need to bring parity in tax treatment for investments in different financial sectors.
• Suggestions to mitigate hardship to retail taxpayers.
• Suggestions to mitigate hardship to NRI taxpayers.
• Suggestions to encourage deepening of capital market through MFs.
• Proposals for development of the mutual fund industry.
• Request for clarifications from CBDT.

In total, the report contains 23 suggestions or requests for clarification.

Also read: Crucial factors to consider before investing in mutual funds

The AMFI report states that one of the changes that should be made in the upcoming budget is the rationalisation of a uniform surcharge rate of 10 percent on TDS in respect of NRIs for the amount paid by mutual funds. Currently, NRIs are charged a surcharge of 10-37 percent depending on their income from mutual funds.

The report also adds that the budget should increase the threshold limit for withholding TDS on income from mutual funds from Rs 5,000 to Rs 50,000 p.a., to bring it in line with the threshold limit of fixed deposits, which currently sits at Rs 40,000.

The entire AMFI report can be accessed here.

Also read: Understanding mutual fund taxation

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Flurry of NFOs in 2021: Expert view on the best products

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Year 2021 has been one of new fund offerings (NFOs). There were about 70 NFOs in the mutual fund world in FY22 and for the calendar year the count touched over 100.

To make sense of this big flurry of NFOs and talk about the good products out of these 70 odd launches, which investors can look to add to their portfolios, CNBC-TV18 spoke with Ashish Shanker, MD and CEO, Motilal Oswal Private Wealth.

Shanker said the bulk of the NFOs have happened in the equity space and a few in the international space, which tells us what investors want. Since fixed income returns have collapsed, more investors are looking towards equity to get that extra return in their portfolios and most of the mutual funds are following that trend. Moreover, these NFOs are happening parallel to the IPO frenzy, he said.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Mutual Fund Corner: Best investment options for NRIs in India

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In this episode of Mutual Fund Corner, Salonee Sanghvi, founder of My Wealth Guide talks about solution-oriented schemes. It is not a very big category in itself, but it is becoming increasingly more important.

Sanghvi said, “If you ask most people in their 20s, or even 30s, a very few would be thinking about retirement, let alone plan for it. There is a tendency to ignore goals that are usually far into the future, assuming that we have enough time to plan and fund it. So for this express purpose, that is a separate category of solution-oriented funds namely for retirement and children’s funds.”

“So why should we be talking about retirement in the first place? The working culture has changed substantially over the years, the number of working years has actually reduced as people joining the workforce later, and want to retire sooner to dedicate that time to other pursuits. So planning for long-term goals becomes an imperative one that people cannot afford to ignore.”

“So this is exactly where your retirement and children’s funds come in. As you mentioned, it is a very niche category with an AUM of only 27,000 crore. They are open-ended mutual funds, so they have a lock-in of about five years, or until the investor either retires or if it is a child the child reaches maturity.”

Also later on the show, Mrin Agarwal, financial educator & director of Finsafe India Private Ltd, will talk about the various options that NRIs have for investing in India.

Agarwal said, “There are various investments, traditionally if you see NRIs have preferred investing in real estate, it has as being the go-to investment, when we look at financial assets, you cannot do small savings schemes, but you can pretty much do, fixed deposits, you can invest into PMS as well, you can invest into stocks and of course, you can invest into mutual funds.”

“When we look at each one of these investments clearly, I think physical investments or physical assets, like real estate, are a big no because honestly monitoring it sitting in another country is not at all easy. These days, it is very difficult to find people who are going to take care of that property for you. Plus, if you look at the TDS on rent, there are so many other issues involved. On the side of the financial assets, of course, fixed deposit rates are quite low.”

“If you look at direct stocks, you need to open something known as a PIS, which is a portfolio information scheme account with certain banks and have a trading account that is linked to it and these investments are actually monitored. So there are various limitations to these particular investments. Hence, I think mutual funds turn out to be a good bet.”

Watch accompanying video for more.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Franklin Templeton moves to calm Indian investors after new debt fund ban

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Franklin Templeton India told investors on Wednesday that the market regulator’s ban on its launching new debt funds would have no impact on existing funds that manage USD 8 billion in assets. The Securities and Exchange Board of India (SEBI) on Monday barred Franklin from launching any new debt schemes for two years after a probe into its sudden closure of six credit funds last year found ”serious lapses and violations.”

Franklin has said it strongly disagreed with SEBI’s order and planned to appeal it. In an e-mail to investors on Wednesday seen by Reuters, the fund house sought to reassure investors about any broader impact its other funds. ”I would like to clarify upfront, that the SEBI order has no impact on other schemes managed by Franklin,” India President Sanjay Sapre said in the email.

Franklin continues to manage more than 610 billion rupees (USD 8.36 billion) for more than 2 million investors in India, he added. Franklin has faced regulatory probes and court battles since April 2020 when it unexpectedly wound up six credit funds in India with assets of close to USD 4 billion, citing a lack of liquidity amid the coronavirus pandemic. Those funds had large exposure to higher-yielding, lower-rated credit securities.

In the Monday order, SEBI also ordered the fund house to refund investment and advisory fees, along with interest, of more than 5 billion rupees (USD 68.51 million), and fined the global giant another 50 million rupees.

One senior Indian fund manager, who declined to be named, told Reuters that money managers grew more cautious about investment decisions after the SEBI order. ”SEBI now is not leaving any room for any deviation and it’s becoming very strict … there is a heightened level of alertness and attention that has come,” the manager said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Your Investment Guide: As equity investors mature, MF experts discuss strategies to grow your wealth

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The world is living through an unprecedented time that will probably define history as well as the future. As people around the world battle the coronavirus pandemic, it’s important to remember that there will be life beyond and free from the deadly virus. With that positive focus CNBC-TV18 has come up with an investment guide to help you identify opportunities to create long term wealth and secure your investments for the future.

Radhika Gupta of Edelweiss MF, A Balasubramanian of Aditya Birla Sunlife MF, Ashwani Bhatia of SBI MF and Kalpen Parekh of DSP shared their views on how investors can navigate through these turbulent times.

In terms of investor behavior, Gupta said, “It is pretty heartening. As far as equities are concerned, investors have remained steady so far, March numbers suggest that. I don’t think there is a material change in gross flows. For younger investors who have come in after 2008, there is some amount of anxiety, questions asking should I stop my systematic investment plan (SIP) and all the natural questions that will come in because this is your first cycle.

“We haven’t seen heightened redemption pressures as yet, I do expect that if things continue to be uncertain for a while, that could definitely change, but so far you have seen more maturity than the past and that is a function of the fact that investors are now beginning to see more equity cycles, hence are becoming better and more mature investors. On the fixed income side there is a bit of nervousness, particularly around credit, because in fixed income we are a little less forgiving,” said Gupta.

When asked if there were redemptions in equity inflows — and if so, where do people want to withdraw their money from, Balasubramanian replied, “The investors are getting matured day by day. People are okay to continue their investment and people understand that COVID-19 virus on the market is quite unprecedented and at the same time people have come for long-term.”

“Generally the inflows into the mutual fund is quite large and given the fact that last one year has been pretty volatile and investors have been moving from one fund to other fund on the basis of the performance of last one year and two years – people will keep doing their reallocation of portfolio. Some would have seen redemption, some would have gained market share so that is a function of dynamics of each fund houses performance. Having said that, in the last one-two months, the fall which is not related to only India is related to global market, not one sector, not one stock, the entire market has fallen,” he added.

Speaking the news fiscal and market conditions, Parekh pointed out, “My experience is that in the first round when the market corrects a lot of money comes in, new money comes in because people feel this is an opportunity and next round is a function of how things evolve.”

“Therefore, if market rises without good news then there will be nervous investors who may take some money out, but if market rise up with a good news of resolution of COVID-19 and the lockdown getting lifted around the world then there will be stability. If market falls further then as in the past cycles, investors would get more nervous and reduce their exposure. So two-three weeks down the line we will get to know how each of these variables are playing out and that will give us a signal of what trends we expect in the future,” Parekh noted.

Lastly, talking about FII selling, Bhatia stressed, “You should think how long FIIs can sell; now everybody is trying to run. Is it possible to run? I don’t think so. However, domestic flows have been steady and we are telling our investors to keep the faith, add more units, don’t cancel your SIPs at this time; this is not the right time. This is the time to accumulate.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Commercial Paper issuers may soon have to disclose key information to mutual funds: report

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Corporates, non-banking finance companies (NBFCs) and other businesses may soon have to declare key information for issuing commercial papers (CPs) to mutual funds, The Economic Times reported.

The recent discussions between Securities and Exchange Board of India (Sebi) and fund houses about the proposed move will compel the firms that issue CPs to explain their ‘asset-liability (AL) mismatch’ that hit the financial market in the recent past, the report said citing a senior official in the MF industry.

The evaluation of the mismatch between the assets and the liabilities, along with market intelligence and due diligence carried out by a mutual fund house, is likely to enable a fund manager to have a better idea on the liquidity stress, the report said.

Sebi took feedback from MFs and it is likely to ask funds to seek additional information from CP issuers. Since MFs are the biggest investors, companies would have to disclose, added the report.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow