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Sebi pulls up mutual fund industry over dividend distribution practice

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Mumbai :The Securities and Exchange Board of India (Sebi) pulled up the mutual fund industry over the practice of distributing dividends without the consent of trustees. According to sources, the market watchdog took a serious view of this breach during a meeting with independent trustees, who sit on the boards of asset management companies (AMCs).
The meeting was attended by Ajay Tyagi, chairman, Sebi, Madhabi Puri Buch, whole time member, Sebi and more than 80 independent trustees. It was the first meeting between independent trustees and the Sebi chairman Ajay Tyagi.
Tyagi said that the primary reason for calling the meeting was to make sure that MFs have good governance standards and highlighted the importance of safeguarding investors’ interests.
“The industry’s assets under management (AUM) have doubled in the last four years and assets of beyond-15 centres have tripled. Today, the MF industry is 20 per cent of banking system. This shows that retail participation has significantly improved. We must safeguard investors’ interests to retain their trust,” Tyagi told reporters after the meeting.
Sebi presented findings of its recent inspection report, highlighting 25 critical violations committed by the industry participants in recent years. The lapse in distributing dividends was on top of that list, with Sebi officials highlighting the need for a larger discussion on this matter.
The Sebi had recently sent out findings of its inspection report to chief executive officers (CEOs) of all fund houses, warning them against several breaches committed and demanding corrective actions.
Sebi has observed there were several instances where either the trustees’ approval for dividend distribution was not obtained or the power of trustees were delegated to the officials of AMC to declare and fix the record date as well as decide the quantum of dividend under various schemes of the fund.
Dhirendra Kumar, CEO of MF tracker, Value Research, said the market regulator wants the MF industry to not only follow the regulations on paper, but also in spirit. Recently, the balanced funds category saw mis-selling as these schemes were sold on assurance of one per cent monthly dividend yield.
According to CEO of a mid-sized fund house, besides presenting the inspection report, the regulator explained the independent trustees about their role as ‘first-line regulators’.
According to a top industry official, Sebi chief directed independent trustees to conduct technology audits of the AMCs to prevent any possibility of online frauds. The official cited above said that the regulator wants to make sure that its push towards digital is not compromised by any unforeseen events.
There can be cases where investment is done from one account and redemption is done from another. The regulator wants to make sure that such instances don’t happen, especially in smaller towns where investors can be more vulnerable to online frauds,” Kumar added.
Tyagi said there was no specific discussion on distributor commissions, however, Sebi would take up the issue with industry body Association of Mutual Funds in India (Amfi) at a meeting next month.
The regulator also emphasized on the need for improving registrar and transfer agents (RTA) reconciliation, whereby the units allotted by the RTAs didn’t match the money lying with the fund houses in real time.
“The MF industry is a good story and we must make sure that it continues,” Tyagi said.


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India second most optimistic globally about executive job market in 2019: Survey

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Mumbai: Senior management leaders in India are optimistic about growth of executive jobs in 2019, only second to Brazil. According to the 2019 BlueSteps Executive Career Outlook report, nearly 57 percent of India’s senior executives believe that there will be stellar growth in job market opportunities as compared with 2018 levels.

In Brazil, 72 percent leaders are positive of growth. India is followed by Africa at 54 percent and France at 40 percent. The results are based on a survey of over 1,400 senior executives worldwide.

Globally, optimism levels for executives about senior management jobs market dropped considerably as against their strong outlook at the beginning of 2018. “This indicates that while the decrease in optimism does reflect an overall concern in the marketplace, the change may be more of a reflection of how strong last year’s market was instead,” the report said.

 

Nearly a third of the respondents cite strong economic growth and business environment as a reason for their optimism. India topped the list with respect to economy forecast for 2019, where 57 percent respondents believed in the pace of the country’s growth.

Brazil trailed with 56 percent leaders expecting growth. Leaders of the eastern European countries, the UK and Ireland were pessimistic about their economy.

The technology sector is expected to have the strongest growth at the executive level in 2019, with 70 percent of all survey respondents believing there will be robust growth in the industry.

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Traders’ body slams Rahul’s statement on abolishing GST

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New Delhi: Traders’ body CAIT criticised Congress President Rahul Gandhi’s statement of abolishing GST if voted to power, saying he does not have a blueprint of any alternative tax structure.

The attempt of Gandhi for seeking political mileage making traders a scapegoat is deeply regretted and vehemently opposed by CAIT, the Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal said.

He said Rahul Gandhi should not do any politics using shoulders of the traders else traders are capable to give a fitting reply in forthcoming elections.

 

CAIT secretary general said Gandhi is opposing the GST “whereas he does not have a blueprint of any alternate tax structure”.

Khandelwal demanded Gandhi should speak out the plans and programmes thought by the Congress party for traders and added that there must be a blueprint of alternative tax structure before abolishing GST.

While addressing a traders’ conference in New Delhi, he said the Congress has ruled the country for a long time and in such a long tenure, the trading community was never on a priority of the government or for the Congress party.

In reference to forthcoming elections, Khandelwal claimed almost 7 crore traders across the country have now converted into a vote bank due to a two-month national campaign of the CAIT under the slogan “One Nation-One Trader-Ten Votes”.

The CAIT would shortly release a National Charter of Traders carrying core issues of the trading community and whoever political party gives a logical road map of solutions, the traders will vote for that party as one unit across the country, Khandelwal said.

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NSE eyes 350-375 tonnes of domestically refined gold market for derivatives

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Mumbai: With over 350-375 tonnes of the domestically refined gold market still away from the organised trading platforms in India, the National Stock Exchange of India (NSE) has decided to accept it as good delivery on its derivatives platform. So far, only London Bullion Market Association recognised bullion is accepted as good delivery on the exchange platform.

NSE has initiated a move to decide India good delivery norms for gold including sourcing norms for gold refined and unrefined (dore). The process of finalizing new norms and implementing is expected to take two months.

These are significant as in last few years Indian bullion refineries’ business has increased and in 2018 domestically refined gold contributed from dore and recycled gold to half (350-375 tonnes) of the domestic gold demand. However, on gold futures exchanges this gold cannot be delivered. This means domestic refineries have limited access to hedge their future production on exchange platform as they can’t deliver gold the refine on exchange platform.

 

India’s domestic physical gold demand is 600 tonnes for jewellery and 160-175 tonnes of investment demand, according to the World Gold Council 2018 data. 275 tonnes of gold was supplied by Indian gold refineries and 87 tonnes of gold was derived from scrap or recycled gold. Indian metal companies also derive gold from ores of other metals during the process of refining them. This was 8.6 tonnes. All these can now be deliverable on the futures market once India goods delivery norms are in place.

At present, only MMTC-Pamps refines gold, which is LBMA standard and eligible to be delivered on Indian exchanges.

NSE’s move will help this domestically refined gold deliverable on its futures exchange where gold is already traded. At present, MCX and BSE accept gold to be delivered in futures, which is as per LBMA good gold delivery standards. NSE spokesperson said that “we are developing India good delivery standards and they will be largely in sync with LBMA and BIS norms.” 20 plus Indian bullion refineries that are registered with Bureau of India Standards have applied to NSE and six have been approved. International agency Alex Stewart, which provides inspection and analytical laboratory services, is studying the processes of these refineries and giving their score.

Even a domestic laboratory is also looking at the same and expected to give its report on processes of refineries that it has studied.

Sourcing of dore or unrefined gold is a big controversy globally and there was always a question on mines which are producing it whether the mine is using the funds for illegitimate activities or not. Globally OECD has developed norms to avoid such gold and Indian industry has been working for the same. However, NSE spokesperson said that “the exchange’s India good delivery norms for gold will accommodate norms to verify legitimate sourcing of gold dore by Indian refineries.”

The sourcing norms will also include norms for sourcing domestic gold for recycling where the gold provider will have to give an undertaking that no money laundering etc involved for the gold he is giving for recycling.

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