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Sebi warns MFs on disguised portfolio plans

BS Markets Bureau in Mumbai | July 19, 2003 11:48 IST

The Securities and Exchange Board of India on Friday warned mutual funds against running some plans as portfolio management schemes.

The warning comes in wake of the fact that some schemes have only corporates and high networth individuals as investors.

The capital market watchdog also said that if asset management companies are keen on running only serial plans (special schemes for corporates), there may be some rethink on the tax aspect of these funds.

At a meeting with senior fund managers, Sebi chairman G N Bajpai urged mutual funds to increase their retail investor base by tapping rural areas.

"The economy is doing well with enough liquidity in the system and this situation could be used to expand investor bases," Bajpai told reporters after a meeting with chief executives of mutual funds in Mumbai on Friday.

The mutual fund companies could enter rural areas to bring more investors into their fold, he said. Today's interaction was planned to seek feedback on working of MFs and issues concerning operations.

Sebi made it clear to MFs that schemes could not be run as PMS for few investors, though no specific MF was singled out. The regulator, based on the routine review of MF records, found instances where sometimes only one-two investors existed in the scheme, which runs against the principles of a mutual fund, Sebi sources said.

No customer data of the 30 mutual funds are available and the only figure available is the assets under management of these funds, which is Rs 1,04,762 crore (Rs 1,047.62 billion) as on June 30. Similarly, there is no record of participation of retail and corporate investors in the 400 schemes floated by these funds.

The ratio of retail to corporate investors could be as low as 20:80 in terms of value of assets.

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