New SEBI rule make Syndicate Members redundant.

Latest SEBI rule regarding payment of commission for ASBA in issue process clarifies that for the purpose of payment of commission, both type of applications i.e. whether uploaded by Syndicate Members (Non–ASBA) or by SCSBs (ASBA), shall be treated on par and the commission shall be paid accordingly to Syndicate Members or SCSBs, as the case may be. Under the above situation, what role will the syndicate member be left with because it cannot offer ASBA mechanism to its clients. The SEBI rule states that the payment of commissions in the issue process should be based on the principle of fairness which demands a level playing field for both ASBA and non-ASBA applications. But, when it comes to providing equal opportrunities to Bank and Non-Bank entities, the Banks always get better treatment from the regulator. If the banks have now come to realise that there was no incentive for them, then why did they chose to become SCSBs in first place. Isn't it true that the banks will get all the blocked amount at the interest rates applicable for CASA deposits as against 7 - 9 % for Fixed Deposits ? Wouldn't it have been fair, if Syndicate Members also would have been allowed to offer ASBA facility to their clients either by lodging their applications with the SCSBs or by some other mechanism. Is SEBI convinced that the SCSBs will make adequate efforts to market/ distribute the IPOs. Isn't it that the Banks will just try/ get to make money without making any sincere effort on marketing/ distribution just by being a banking entity. Have banks committed to home deliver forms to their A/c Holders and then get them picked up ? Do they have sufficient infrastructure to service a large no. clients in branches. It is well known that most banks are overly dependent on ATM networks so as to reduce costs. Incidentally, the two day Banking Strike blackmail starts today. Any Comments ? Will SEBI consider putting penalties on the SCSBs for putting public convenience to ransom ?

Top institutions in fray for MF trading, distribution platform

Top institutions in fray for MF trading, distribution platform Action is building up in the mutual fund distribution arena, with four large institutions submitting their bids for setting up the Sebi-proposed trading and distribution platform. Such a facility will enable investors to transact mutual fund units like the way they transact shares. The National Stock Exchange, National Securities Depository (NSDL), Central Depository Services (CDSL) and the CAMS-Karvy consortium (registrar and transfer agents) have submitted their proposals to build the Amfi platform, ET has learnt from an official familiar with the development. Amfi will select the best bidder and forward the proposal to Sebi for final clearance. While it is quite natural for CAMS-Karvy to jointly bid for the platform because of their status as top registrars for Indian MFs, the decision of NSDL, CDSL and NSE to enter the fray is surprising, say industry watchers. It is not yet clear as to who will fund the project. "Amfi is yet to come clear on the funding part. In all likelihood, the institution that builds and operates the platform will be remunerated by charging transaction fees from platform users. This could be one aspect that is prompting institutions to bid for the trading The platform is being set up after Sebi directed Amfi to develop 'free and impartial' trading and distribution alternatives. The idea, according to sources, is to empanel all the 38 fund houses under one roof. The platform will allow investors to buy/redeem schemes, compare fund performance and receive portfolio statements (funds of different fund houses comprise a portfolio) through a single online window. "Amfi had asked us to give a proposal in this regard; only key market players (with good business network and non-alliance to mutual fund business) have been invited to bid for the project. We've been asked to submit a proposal on broad parameters such as cost of constructing the platform, technology, platform capacity, project completion time and chargeable fees (for using the platform)," said a senior official at one of the bidders. The need for an online platform has grown after Sebi scrapped the entry-load system and imposed restrictions on mutual fund houses reimbursing distributors through funds collected from investors. These steps are expected to affect the finances of MFs, as they will have to reimburse distributors from their own pockets. Against this backdrop, the industry been forced to take up initiatives to cut costs that are deemed high. A shift to online platform, which will be similar to that of stock trading account, will reduce overheads incurred on printing applications, performance statements and postage. platform," an industry source said. source: ET

IRDA to restructure half of existing ULIPs

IRDA to restructure half of existing ULIPs The insurance regulator will have a special arrangement to clear within three days unit-linked insurance plans (ULIPs) which have to be reworked because of new norms, which put a cap on the fee investors have to pay. The Insurance Regulatory and Development Authority (IRDA) has estimated that over half of the existing ULIP schemes will have to be restructured and it wants to ensure that there is no break in sales. Just as equity and debt public offerings have to be cleared by capital market regulator Sebi, new insurance schemes have to get the green signal from the insurance regulator under a so-called 'file and use system'. In May, IRDA relaxed 'file and use' rules to allow companies to start selling a plan if it does not object within 15 days of filing the scheme instead of 30 days earlier. But in reality, the process takes longer if there is any product innovation, as there are generally issues where the regulator seeks clarifications. The system also applies if companies were to restructure existing plans. Last week, IRDA said charges deducted from the premium paid by policyholders would be subject to a ceiling, which would be based on the difference between the gross yield (return to policyholder had there been no charges whatsoever) and the net yield (the return net of all charges). The regulator stipulated that the difference between gross and net yield should not be more than 300 basis points for policies up to 10 years and 225 basis points for those with longer terms. For life insurance companies, the flip side of the special dispensation is that the regulator will not relax the December 31, 2009 deadline, after which non-compliant products cannot be sold. Some companies wanted the deadline to be pushed to the end of the financial year in March 2010, arguing that it would take time for new products to be developed and cleared by IRDA. At a meeting on Wednesday with the regulator to discuss the new norms, the heads of life insurance companies said mortality charges — the cost of providing life insurance — should be kept out. Their reasoning was that while the cap on charges was uniform, mortality charges would be very high for an older person compared to, say, those in their 20s. source: ET

India Post stops MF distribution

The ban on entry load on mutual funds (MFs) has struck its first blow to the asset management industry, with the government-run India Post stopping the distribution of MF schemes through its designated post offices.

India Post — a 'national distributor' in the real sense, thanks to its expansive distribution channel covering over 210 post offices — has informed mutual funds (with which India Post has exclusive tie-ups) that it will not sell schemes until there is clarity on distribution commission.

"We will not sell mutual funds until we get some clarity on entry load. We'll see how the issue unfolds over the next few weeks. The final decision will depend on how Sebi settles the issue without really hurting the distributor,"a senior official at India Post told ET.

A circular sent to the heads of concerned postal circles states that: "in view of Sebi guidelines, empowering investors through transparency in payment of commission and load structure which will come into force on August 1, it has been decided to suspend the retailing of MF products on all MF companies with effect from August 1."

But the department will distribute Franklin Templeton's Build India Fund as "it will get commission as per the existing terms (referring to the earlier commission structure) and conditions for retailing the NFO,"the circular added.

India Post sells schemes of Principal MF, SBI, UTI, Franklin Templeton and Reliance Mutual Fund through designated post offices in India.

According to the official, India Post has sold mutual fund schemes worth Rs 150 crore last fiscal. Ballpark estimates suggest that the postal behemoth would have earned anywhere between Rs 5 crore and Rs 10 crore on it, including upfront and trail commissions.

India Post started distributing mutual funds in 2001, first by signing an exclusive tie-up with IDBI-Principal. The India Post website says the department has stationed one AMFI qualified personnel at every designated post office to sell mutual funds.

"We've not yet received any official communication regarding it. But if it is true, the long-term impact is going to be very drastic. India Post — though not much of a big contributor to AUMs currently — has all that it takes to be a big rural distributor in future,"said the channel head of bank-promoted fund house.

India Post's decision to stop fund distribution stems from the recent Sebi ban on entry loads in mutual funds. According to the new rules, investors now have the freedom to directly negotiate on the fee that they pay for the services of distributors, or brokers, during the purchase of mutual fund schemes.


source: ET

Asia economies to rebound in 2010 : ADB

Asian economies will likely bounce back from the global economic slump in 2010 but fears remain over the sustainability of growth if there is no wider recovery, the Asian Development Bank said Thursday. The bank's chief economist Lee Jong-Wha said the outlook for East Asia this year remained "pessimistic" but foresaw a V-shaped recovery led by China if countries continue to focus on stimulating domestic demand. "We are optimistic for developing Asia for a V-shape recovery.... But the big question is whether it will be sustainable growth -- in that part we are rather pessimistic without a full global recovery," Lee told media ahead of the launch of ADB's biannual Asia Economic Monitor in Bangkok. "It will be very difficult to return to the pre-crisis trend of growth," he added. Despite an increasing proportion of export demand coming from within Asia, notably China, countries in the region continue to rely on markets in the US, European Union and Japan for 60 percent of final goods exports, Lee said. Those markets are less likely to recover from the global financial crisis so quickly, he said. The ADB report recommended a continued focus on loose monetary and fiscal policies to stimulate domestic demand, with support for small enterprises and stimulus packages that must be fast and efficient. "The issue is how effectively they (Asian governments) can mobilise these additional fiscal resources," Lee said. The report showed that the pace of capital outflows from Asia had slowed in the first quarter of 2009, and Lee urged large Asian investors to focus more of their capital spending within the region. While China's recovery has "gained traction" and the more closed smaller economies such as Indonesia are on course to stronger growth levels, Lee said concern remained for more export-dependent small regional economies such as Hong Kong, Singapore, Malaysia and Thailand. The Manila-based bank said earlier this month it would update on September 22 its flagship Asian Development Outlook forecasts, which predicted earlier this year that developing Asia will see its economic growth fall to 3.4 percent this year compared to 6.3 percent in 2008.

June infrastructure output up 6.5 pc y/y: Govt

Country's Infrastructure sector output grew 6.5 per cent in June from a year earlier, higher than an unrevised 2.8 per cent in May, government data showed on Thursday, signalling signs of a pick up. Output had risen 5.1 per cent in the same month last year. During April-June, the output rose 4.8 per cent, compared with 3.5 per cent in the same period last year. The infrastructure sector accounts for 26.7 per cent of country's industrial output.

Mahindra Satyam tops value, volume chart on both exchanges

Mahindra Satyam has topped the combined value chart with a turnover of Rs 1,012.4 crore. It is followed by ICICI Bank (727.57 crore), Reliance (Rs 685.86 crore), Bharti Airtel (Rs 612.42 crore) and Sterlite (Rs 530.53 crore). The combined volume chart is being led by Mahindra Satyam as well with trades of over 126 million shares on both the exchanges. It is followed by IFCI (61.77 million), Ispat Industries (39.76 million), Unitech (37.33 million), and Suzlon (30.86 million).