'MFs misleading investors': Sebi seeks reply from Amfi

The Securities Exchange Board of India (Sebi)

The Securities Exchange Board of India (Sebi) has sought a reply from the Association of Mutual Funds in India (Amfi) for mutual funds misleading the investors.

In a letter addressed Amfi chairman, Sebi has listed 23 grave lapses by the MFs in India between April 1, 2016 and March 31, 2017, and sought a reply from the mutual funds. ".. (Sebi) has taken adverse view of instances of mutual funds misleading the investors by reporting incorrect data on the investor complaints," the letter accessed by DH stated.

Yet another grave lapse mentioned in the letter has been the failure to liquidate equity portfolios in the close-ended schemes on or before the date of maturity. 

The letter is in continuation of an earlier letter from Sebi to asset management companies (AMCs). "Further, Sebi, after considering the observations of the inspection team,..... and the comments of AMCs and Trustees thereon, has taken an adverse view of the additional observations," the letter said.

Sebi has also highlighted the instances in which the performance of only selected schemes was presented to the board of the AMCs. 

Sebi has also said that it has observed that there have been instances wherein AMCs haven't disclosed the transactions of the debt and money market securities in its schemes portfolio on the AMC website. 

Sebi has also asked the members of the Amfi to take the corrective action in this regard at the earliest.

The mutual funds, that have been marred with lower returns this year, have come under the increased scrutiny of the market regulators over the years. Most of the mutual fund schemes across platforms, save a few, have seen negative returns this year -- with some debt schemes showing a negative return of 18% in their year-to-date performance.

Recently, MF investors faced a huge scare, after many fixed maturity plans defaulted due to their exposure to the Essel Groups debentures.

Market insiders put a lot of blame on the governance issues by the mutual funds, who they say don't seize the pledged assets of the bond sellers, in lieu of a better return. 

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