UK Sinha, the chairman of the Securities and Exchange Board of India (SEBI), is looking at introducing incentives for mutual fund distributors, while ensuring they are better regulated — in a bid to help the industry through a time of declining investor participation.

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“We are seriously looking into distributor regulation,” Sinha said, speaking at the seventh mutual fund summit conducted in Mumbai, adding that such regulation would be introduced in a non-disruptive manner.

He said there has been a decrease in the number of active independent financial advisors and that sales of mutual funds in smaller towns has declined since the introduction of the no-entry load.

The number of folios or individual accounts in the equity segment has shown a decline from 409 lakh as of March 2010 to 392 lakh as of March 2011, according to a PricewaterhouseCoopers report.SEBI is looking at some way to incentivise distributors. It is difficult to increase sales especially outside of the metros in the absence of an incentive structure, he said.

He stressed the need for mutual funds to tap pension money as a means of growth and reiterated SEBI’s support on the matter.Sinha is also looking at introducing a common know your customer (KYC) regulation.

“A group has worked on it…and we hope that we will be able to provide uniform KYC for all activities within the capital markets,” he said.