Little surprised at delayed response from regulator in recent case: M DamodaranPTI | Mumbai | Updated: 05-03-2021 17:08 IST | Created: 05-03-2021 16:51 IST
A day after reports surfaced that the markets regulator has issued notices in the Franklin Templeton (FT) matter, former Sebi chairman M Damodaran on Friday said he was a "little surprised" that it took the watchdog so long to act despite criticism being out there in the market.
Without naming FT, Damodaran said a lot of the onus lies with the trustees at an asset management company and termed them, conscience keepers, for the industry who need to ask tough questions to the management and avoid "peaceful coexistence".
According to reports, Sebi has issued notices to FT, its trustees, and key management personnel and had also ordered an audit after the AMC announced winding up of six MF debt schemes in April last year.
"Frankly, I was a little surprised that in a recent case that it (took) this long. With all the criticism which was out there in the market, the regulator must have," Damodaran, a career bureaucrat who has also headed Sebi, said addressing a mutual funds summit organized by CII.
"I am sure they were doing something but for the public to know that 'yes, we are on top of this would have been very comforting," he added.
Damodaran, who is credited with turning around UTI MF before he was appointed as the Sebi chairman, said the industry has to run on the 3Ts of Transparency, Technology, and Trust and specified that the regulator also needs to have trust in the industry for which regular conversation would help. If the industry operates in a situation where there is distrust, it will have to contend with more prescriptive regulations, he warned. The regulator should also avoid "episodic regulations" which are triggered by some ill events, he said, adding that the need is to focus on writing fewer regulations and regulate or enforce more. Switching to the role of the trustees, he said these are important sets of officials in a fund set-up and compared their role to auditors of a company, whose job is to ask tough questions and ensure action is taken on a matter.
"They (trustees) are the conscience keepers of your industry. If they don't measure up, there will be issues. AMCs must get more out of the trustees, get them to ask more questions. Peaceful coexistence is not the answer on a long-term basis," he advised the MF industry. The industry also needs to ensure that it communicates with clarity and some message is carried in its communication to the investors, he said.
Acknowledging the debate where people are recommending passive investing without buying into the role of an activist fund manager, Damodaran said such a practice should not continue. He said the MF industry needs to do more to be inclusive and to go beyond the high net or middle-class families in urban India from a distribution perspective.
If the industry does not deliver on such inclusivity, it may be exposing itself to more prescriptive regulations where such a thing will come as a mandate, he said.
Kotak Mutual Fund's chief executive and managing director Nilesh Shah also touched upon the need to be inclusive as a key focus for the industry.
The industry veteran said there is a debate over value generation by fund managers as the alpha they generate has come down and warned that if this is the case, professionals have no reason to be in the business.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)