Good news for Mutual fund investors as the Securities and Exchange Board of India (SEBI) on Wednesday has provided huge relief to them by approving the draft proposal of easing the initial charges on close-ended mutual funds which was already deducted from open-ended mutual funds in 2006.
For providing more relief to Indian investors, SEBI has now scrapped the initial charges from the Close-ended mutual fund through scraping amortisation expenses over it. Earlier SEBI has deducted the amortisation charges from Open-ended funds in April 4,2006, but it was continue in close-ended schemes, which caused the flourish of close-ended fund in 2007.
24 out of 34 new offered mutual funds were close-ended in 2007. The MF firm charges up to 6% initial expenses on total investment from the investors.
“The decision of removing initial issue expense will make close-ended mutual fund schemes less expensive for retail investors," said SEBI chairman M Damodaran to the reporters after ending its board meeting here on Wednesday.
The decision of removing initial issue expenses would be basically beneficial to the long-term investors, who will not have to bear the cost of earlier redemptions by other unit holders. This waving would also be applicable to direct applicants who invest directly in close-ended schemes.
However, this decision could be proved as a death nail for the close-ended fund scheme because in the absence of entry load and initial expenses charges it would be very difficult for the mutual fund houses to observe the input expenses from the schemes.
Earlier, SEBI has prohibited Mutual fund houses from charging and amortising issue expenses on open-ended schemes in 2004 and end the entry load charges from the close-ended funds which means closed-ended schemes could continue to amortise the initial issue expenses till they remained closed, but could not charge an entry load.
Asset Management Companies have made a mockery of the SEBI directives and launched one after another close-ended mutual funds in 2007. Now, SEBI has deducted the power of fund houses by waiving the initial issue expenses charges and entry load charges in the interest of the investors.
““This would bring in more transparency and better upfront disclosures to the investors in terms of the expenses charged in close-ended schemes.” said Damodaran.
Besides these, many other decisions have taken over several issues including SEBI (Issue and Listing of Debt Securities) Regulations, 2008; SEBI (Public Offer and Listing of Securitized Debt Instruments) Regulations, 2008; and SEBI (Intermediaries) Regulations, 2008.
SEBI has also made provided permanent registration facilities to existing financial intermediaries which need to re-apply in every three years. While on the issue of short-selling by institutional investors, the Sebi chief assured to introduced it in the first week of February if would not do on February 1.
It had already introduced short-selling for retail investors which allows the traders to sell stocks without purchasing it. The regulator will consider the submitted reports on IPO in February, informed SEBI.
|
|
Comments:
