The Securities and Exchange Board of India (Sebi) is set to tighten corporate governance rules and announce a long-term mutual fund policy soon as part of market reforms.
Sebi board members are scheduled for a meet in Delhi on February 13 to consider the proposals, sources told FE. High on the agenda is the alignment of Sebi’s corporate governance norms with the Companies Act, which was amended last year.
Sebi has been flagging concerns over various governance issues, including matching salaries of top officials of the firm with the performance and goals of the company and a mandatory disclosure of the ratio of remuneration paid to their directors and their median staff salary. Similar provisions have been made in the new Companies Act. Sebi feels the average remuneration of CEOs in some companies are higher than those received by their foreign counterparts. Sebi may prescribe adoption of global practices without increasing the cost of compliance of firms, sources said, adding fines against erring CEOs and CFOs may be raised further.
In case of mutual funds, the regulator wants to unveil a long-term policy that encourages fund houses to reach out to more investors and offer a range of products including long-term schemes. The MF industry has been demanding Sebi and government allow MFs to offer long-term products such as the 401(K) scheme of the US where employees contribute a part of salary to mutual fund schemes and get tax breaks on them as it is the case with provident fund and pension fund. Also, there has been demand that fund houses be allowed to manage market-linked plans of insurance companies.
"The objective of the policy should be to increase the reach of mutual funds and conversion of more household savings into investment especially in the capital market," said Sundeep Sikka, CEO of Reliance Mutual Fund and chairman of Association of Mutual Funds in India (Amfi).
Assets under management (AUM) of the mutual fund industry rose 9.4% or Rs 77,400 crore, in January to a record high of Rs 9.03 lakh crore following fresh investments of Rs 83,500 crore. Bulk of the inflows in the month was into money market and liquid funds.