No changes in upfront margin rules: Sebi chief Ajay Tyagi

The Securities and Exchange Board of India (Sebi) chief Ajay Tyagi said that there would be no changes to the upfront margin rules in the cash market, even though there were some initial teething issues. Speaking at the 25th Annual General Meeting of the Association of Mutual Funds of India (Amfi), the Sebi chief said that the regulator would soon take a decision on the industry’s representation on multi-cap funds.

On being asked when would the regulator clarify the issue pertaining to the investments in the multi-cap schemes, he said, “We have received the representation from Amfi and we are actively examining that request and we will see how to further clarify it. Intention certainly cannot be of anyone to push for investments which may not be in the best interest of investors. Amfi has given a suggestion, till we take a view on that I would not like to say what are the suggestions and what we are doing, we will shortly and quickly examine it.”

Sebi had issued a circular on multi-cap schemes, requiring them to invest a minimum of 25% each in large, mid and small cap stocks and giving flexibility to the fund manager for the balance 25%. Tyagi said, “Sebi norms for categorization of mutual fund schemes have two objectives – that the scheme portfolio should reflect the name of the scheme; and that the scheme performance can then be compared against an appropriate benchmark. The funds need to keep their scheme portfolios true to their label.”

Tyagi also said that they have addressed the issue of investments by Employees Provident Fund Organisation (EPFO) only in the mutual funds backed by the public sector companies. “We agree that there is some sort of communication that public sector undertakings (PSU) should or perhaps the EPFO should invest only in the mutual fund which are owned by PSU banks. We have already addressed to the government as we agree that mutual funds of any categories, so long as they are registered and regulated by Sebi, should not go by the ownership of the mutual funds, whether it is owned by PSU banks or a private bank or non-bank also. So we have taken it up with the government suggesting that it should be amended and they should be free to invest in any mutual funds which are regulated by Sebi, they can take a view on the performance vis-a-vis the benchmark and decide such investments,” said Tyagi.

On being asked whether they would look at the changes in the upfront margin rules, Tyagi said, “At start there was some teething trouble but later it was stabilised, this decision is for everyone’s good and now discussion is of changing it.”