SEBI plans to incentivise MF distributors getting first-time investors

Market regulator SEBI is considering incentivizing mutual fund (MF) distributors to attract first-time investors to the industry, regardless of whether they are from big or small cities.

The move comes after SEBI suspended the B30 incentive (outside the top 30 cities) after finding distributors were abusing it. In March, SEBI found some distributors from B30 cities splitting large investments in MF schemes to ₹2 lakh to earn an additional 0.30 per cent incentive.

Ananta Barua, full-time director of SEBI, said there are proposals to incentivize distributors to bring “new to MF” investors without regard to where they live.

He added that SEBI is working on the process and an advisory paper will be released soon, responding to a proposal made at an industry event on Wednesday.

multiplication standard

Barua also said the SEBI working group is considering a proposal to set a higher TER (total expense ratio) if the MF scheme consistently outperforms the standard and a consultation paper is also underway.

Although investments in MF have risen steadily over the past few years, with inflows through the Systematic Investment Scheme hitting a new high of Rs 14,000 crore per month, most equity schemes have failed to beat their benchmark.

Investors expressed concerns about exorbitant fees being charged by finance houses despite their failure to outperform the benchmark.

more collaborative

Emphasizing the need for a robust risk management system, Barua drew an analogy with the SVB bank explosion in the US, and said that $40 billion withdrawn from the bank was injected into the money market.

Manoj Kumar, CEO of SEBI, said the regulator needs to continually improve to become more collaborative in nature. Technology adoption and a shift to data are key areas of focus being explored with every SEBI division having a presence in the technology space. He added that work on the new and improved B30 incentive framework is continuing.

“The Indian financial industry is well positioned in terms of best practices with SEBI working to build a more inclusive model,” he added.

The country is expected to drive a greater push towards financial inclusion and retail market participation in the demand for microfinance products.