FUND FULCRUM (contd.)

April 2018

Reliance Mutual Fund has added the highest retail AUM of Rs.20,559 crore in FY 2017-18, shows the data collated from AMC websites. The retail AUM of the fund house increased to Rs.73,215 crore from Rs.52,657 crore in March 2017, a growth of 39%. The fund house manages total AUM of Rs.2.45 lakh crore as on March 2018. This indicates that 30% of its AUM came from retail investors. However, HDFC MF still tops the retail market share with assets of Rs.73,365 crore as on March 2018. The fund house added Rs.18,956 crore last fiscal. SBI Mutual Fund saw the third highest increase in retail AUM. The retail assets of the fund house increased by Rs.15,601 crore to Rs.45,214 crore in March 2018. UTI Mutual Fund added Rs.9,325 to its retail AUM kitty in FY 2017-18. The fund house witnessed 20% increase, which is less than that of other top six fund houses. UTI MF managed retail AUM of Rs.55,326 crore as on March 2018. In percentage terms, Aditya Birla Sun Life Mutual Fund witnessed the highest growth in retail AUM.  Retail AUM increased to Rs. 43,835crore from Rs.28,406 crore last year, a growth of 54%.

Piquant Parade

Earlier, SEBI had asked Sahara Mutual Fund to wind up its mutual funds business by April 21, 2018. However, the fund house was allowed to run its ELSS Sahara Tax Saving Gain Fund for four more months as such funds come with a lock-in period of three years. Following the SEBI order, Sahara Mutual Fund had approached the tribunal. In a minor reprieve for Sahara Mutual Fund, the Securities Appellate Tribunal (SAT) has stayed SEBI’s order against the asset management company till it issues further notice.

Regulatory Rigmarole

SEBI has reduced the expense ratio in open-ended mutual funds. Now, fund houses can levy only up to 5 bps in lieu of exit loads in open-ended schemes as against 20 bps. So far, SEBI had allowed fund houses to charge an additional TER to the extent of 20 bps with effect from October 2012 in lieu of exit loads. In addition, the market regulator had mandated fund houses to credit back the entire exit load to the schemes. Since SEBI does not allow fund houses to charge exit loads in close end schemes and ELSS, the move will make open-ended mutual funds cheaper.

In another move, SEBI has launched ‘Go Green’ initiative in mutual funds to reduce the use of paper. Under this initiative, SEBI has done away with the requirement to publish daily NAV, sale/repurchase prices in newspapers and sending of physical copies of the scheme annual reports and statement of scheme portfolio on half-yearly basis to unit holders. However, fund houses will be required to publish these details on their own websites and AMFI website.

Aadhaar is not required for fresh mutual fund transaction till further notice. AMFI asks AMCs and R&Ts to maintain status quo and not reject fresh mutual fund transaction on account of Aadhaar. AMFI, in consultation with SEBI, has deferred the requirement of Aadhaar for fresh mutual fund transaction from April 1, 2018 until further notice. “We have approached SEBI for guidance in the matter informally and it is understood SEBI is also trying to get clarity from Department of Revenue, MoF. In view of the confusion with respect to requirement of Aadhaar for new accounts, AMFI Ops Committee as well as Board of Directors are of the view that it would be prudent to maintain status quo, until there is absolute clarity in the matter,” said AMFI in its communication.

 Now, investors can lodge their complaints and grievances against any fund house through SEBI Complaints Redress System (SCORES) platform. SEBI has introduced a new facility under its existing platform SCORES to enable investors to lodge a complaint directly with the fund house concerned. The fund house will have to redress such a grievance within 30 days, failing which it will attract SEBI intervention. Sharing the rationale for this, SEBI said that investor grievances can be resolved faster if investors approach the company concerned or intermediary directly. SCORES is a web based centralised system to capture investor complaints against listed companies and registered intermediaries. Investors will require to open an account with the platform using their PAN and contact details. Once the platform activates the account, investors can lodge complaints against AMCs and RIAs. If investors are not satisfied with the redressal, they can lodge a complaint with SEBI through SCORES within three years. SCORES also has a mechanism that allows investors to monitor the status of their complaint. The markets regulator has already put in place a ‘Complaint Review facility’ under SCORES through which investors can request for review of their complaint within 15 days from the date of closure. SEBI has asked AMFI to issue a circular on this to all mutual funds.
 
SEBI issues uniform norms to disclose past performance of Mutual Fund schemes post-merger. Many fund houses have merged their schemes in the last few months. Ever since fund houses have merged schemes, there was confusion on how they disclose past performance of their schemes. In order to create a level playing field, SEBI has directed fund houses to follow uniform rules to disclose past performance of their schemes post-merger. Earlier Mutual Fund Advisory Committee (MFAC) has recommended SEBI to issue uniform guidelines on this. Here is how past performance of the schemes would look post-merger. If two schemes have similar features, fund house will have to disclose the weighted average performance of both the schemes. If two schemes have different features, fund houses can highlight the weightage average performance of the surviving or retained scheme. However, fund houses can also disclose the past performance of scheme which was not retained post-merger on request of investors. If two schemes merged to form a different scheme altogether, fund houses need not disclose any past performance. The circular comes into effect from May 1, 2018.

 AMFI asks distributors to submit declaration of self-certification by June 30, 2018. Distributors who do not submit DSC will not get brokerage from July 1, 2018. In an email communication sent to distributors, “Distributors are required to submit the annual declaration of self-certification for the financial year ending March 31, 2018 to CAMS with the definite timelines in line with code of conduct prescribed by AMFI. Please ensure to submit the relevant declaration of self-certification (DSC) form at the earliest to enable us process the same and share the details through the 'Central Distributor Management Services' to all RTAs for necessary updations.”All you need to do is fill the prescribed form available with AMFI and send it to them through the point of sales office of CAMS. Distributors who registered with AMFI after October 1, 2017 are exempted. However, they will have to submit their DSC of the last financial year by the next one, i.e. FY 2018-19.

AMFI has hiked ARN registration and renewal fee for mutual fund distributors by the extent of GST i.e. 18%. Mutual funds will now have to pay GST on their ARN/EUIN registration and renewal fee with effect from April 1, 2018. In an email communication, AMFI has said that while the existing fee structure for new ARN registration and renewal will remain unchanged, the applicable GST on ARN/EUIN registration and renewal will be levied on distributors. Simply put, AMFI has hiked the ARN/EUIN registration and renewal fee by the extent of GST i.e. 18% of the total fee. So far, such fees were inclusive of GST. The current fee structure for ARN Registration/Renewal has been in force since November 2012, when it was revised downwards, while the EUIN Registration/Renewal fees structure was last rationalised in November 2015. The fee structure was therefore reviewed by AMFI, and it has been decided that while the existing fee structure shall be continued without any change, the applicable GST on ARN/EUIN Registration/Renewal fees shall be levied/collected from the applicants/ARN/EUIN holders, additionally, effective from April 01, 2018. So far, distributors needed to pay ARN registration fee of Rs.3,000 and ARN renewal and EUIN registration/renewal fee of Rs.1,500. However, distributors will now be required to pay an additional fee of Rs.540 on ARN registration and Rs.270 on ARN renewal and EUIN registration or renewal. This means, from April 1, 2018, distributors will have to pay ARN registration fee of Rs.3,540 and ARN renewal fee of Rs.1,740.

The mutual fund industry has two crore unique investors. AMFI’s latest data shows that less than 1.5% of Indians invest in mutual funds. Of the total 134 crore people in the country, the mutual fund industry has 2 crore unique PAN indicating that the industry has 2 crore investors. Currently, there are 29 crore PAN card holders in India. Going by these numbers, you can say that the penetration of the mutual fund industry in India is close to 7% (based on the number of PAN card holders, which is mandatory to invest in mutual funds). These 2 crore investors have 6.60 crore folios. This means, each investor holds at least 3 folios in mutual funds. However, the number of mutual fund investors is much lower than the number of investors in banks and insurance. While 75 crore Indians have bank accounts, 35 crore people have insurance policies. Recently, AMFI launched the Mutual Funds Sahi Hai campaign to urge citizens to take a pledge to invest one day’s income in mutual funds every month. The campaign, which is a unique collaborative initiative of the industry would help to get 2% of India's population to invest in mutual funds in the next one year.