Market-regulator Securities & Exchange Board of India (Sebi), on Tuesday, said it is looking at the need to put a check on mis-selling of mutual fund (MF) products by the distributors through a compliance certification examination.

“There is a need to put a check on distributors, who mis-sell mutual fund products in the market. By May or June, we will come out with an online test for distributors,” Executive Director K N Vaidyanathan, told reporters on the sidelines of a Ficci event here. Currently, AMFI is conducting the test and accepts the registration formalities. From May onwards, the programme will be carried out by the National Institute of Securities Markets (NISM), a division of Sebi.

“From May onwards, NISM will conduct an online certification programme. In the entire process we need to distinguish between the passing of the test and certification. This is important,” Vaidyanathan said.

Sebi wants to bring all financial products certification programmes under NISM. Presently, NISM conducts certification programmes for intermediaries in currency derivatives, registrar and transfer agents for stocks and registrar and share transfer agents for mutual funds.

Cut transaction costs

Meanwhile, Sebi Chairman C B Bhave said the country needs to cut several transaction costs to grow its capital markets, adding that while volumes are large, the ticket-size of transactions remains small, which puts increased pressure on costs.

He pointed out that the market regulator is also evaluating ways to cut brokerage costs related to the transaction of securities in the markets.

“There are three types of transaction costs – brokerage, taxes and impact costs. While we are most efficient in terms of impact costs, there is still a lot more that needs to be done in terms of brokerage costs,” Bhave said.

Uniform standards

On challenges ahead, Bhave said Indian companies need to start reporting as per uniform accounting standards soon. The language of accounting needs to be the same across the world if investors are to make comparisons between companies across the world, he said.

“One of the most difficult challenges that corporates are expected to face is the transfer to International Financial Reporting Standards (IFRS) beginning April 1, 2011,” Bhave said. “We are currently looking at an expansionary phase of the markets. However, it is for us to be facilitators in this process and in our hands to ensure that such growth is in an orderly and efficient manner,” Bhave said.

The market watchdog plans to introduce more currency derivatives products, beginning with options, to give a wider choice to investors. “There is a lot of scope for expansion through diversification of products, but at the same time, the sensibilities of the consumer/investor must be kept in mind. We can not simply exist in a world of caveat emptor or buyer beware; there is a need for increased responsibility,” Bhave said.

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September 2021