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Moneycontrol » News Center » Mutual Funds » News
Sebi scraps entry load for MFs, cuts fees of intermediaries
Published on Thu, Jun 18, 2009 at 18:42   |  Updated at Fri, Jun 19, 2009 at 19:17  |  Source : CNBC-TV18
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The Securities and Exchange Board of India has rationalised disclosure norms for rights issues. The market regulator has allowed investors to choose commission payable to mutual fund distributors and has cut fees for financial intermediaries by 50%. It has also approved the concept of anchor investor. CNBC-TV18 was the first to report these changes on June 16.

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The Sebi board which met today approved the concept of anchor investor, which are long-term strategic investors. An anchor investor has to be a qualified institutional buyer and can subscribe up to 30% of the institutional quota. The promoter group cannot be an anchor investor. There will also be a 30-day lock-in period for anchor investors.

On rights issue:

The Sebi board has also rationalised disclosure norms for rights issues. Henceforth, there will be no preferential issue for superior voting rights. Also, no listed company can issue shares with superior rights.

On mutual fund schemes:

Mutual fund investors have a reason to cheer. There will be no entry load on any mutual fund schemes from now on. Distributors will now have to disclose commission for schemes. In a landmark move, mutual fund investors will now decide on the commission payable to distributors.

Fee cut for intermediaries:

The board has decided to rationalise the fees charged by intermediaries. It plans to cut fees for financial intermediaries by 50%. Broker fees for debt deals have been cut to Rs 2.5 per Rs 1 crore of turnover.

On initial public offerings:

From here on, companies planning an initial public offering will have to list on at least one national exchange.

Also see:

Sebi gives more power to investors: An analysis

SEBI's MF move to benefit retail investors: Religare Cap

Here is a verbatim transcript of Sebi Chairman CB Bhave's address. Also see the accompanying video.

This is to give you a brief summary of the decisions that were taken by the board today. The board decided today that any unlisted company making an IPO will have to list in at least one of the stock exchanges having nationwide trading terminals. This will provide a liquid trading platform to investors in securities of the company.

The board also approved the concept of an ‘anchor investor’. The concept will work like this. The anchor investor will have to be a QIB, what we call the Qualified Institutional Buyer. He can get up to 30% of the quota that is reserved for a QIB. In effect, about 15% of the issue can be given to the anchor investor.

The issuer will carry out a bidding process one-day prior to the actual issue opening in order to decide the anchor investor for allotment. The anchor investor will have to bring in a margin of 25% on application. Immediately after the allotment is finalised, he will have to bring in the remaining 75% within two days.

There will be a firm allotment to this anchor investor and therefore there will be a lock-in of 30 days after the issue gets listed. No person related to the promoter, promoter group or the book running lead managers will be allowed to apply as an anchor investor.

This provision has been made in response to a request from issuers. A number of issuers found that some investors were prepared to come in with a prior commitment which would enhance their ability to sell the issue and generate more confidence in the minds of retail investors.

At present, there is a requirement that shares offered for sale should be held for a period of one-year. There was a representation from the market that if those shares are held in the form of convertibles or depository receipts, then the period for which the convertibles or depository receipt has been held should also be taken into account. The board has agreed with this request.

Continued on next page ...

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