MFs cry foul over Sebi's perform or perish norm for NFOs

Market regulator Sebi regulates the mutual fund industry, not just through directives and orders in black and white, but informal understandings as well. And the latest such informal understanding is that only new fund offers that get a substantial investor response will receive approved. CNBC-TV18's Mitra Joshi and Payaswini Upadhyay report.

Mutual fund houses will have think twice before launching new schemes. CNBC-TV18 learns that in September, Sebi reached an informal understanding with fund houses, one that says new equity schemes will need to rake in at least Rs 10 crore to get Sebi approval.
For debt schemes, this minimum corpus was set at Rs 20 crore. Failure to reach these informal targets was to result in a refund to investors within 15-20 days of the NFO's closing date.
Further, failure to complete refunds within six weeks was to result in an interest payment of 15%. Sources in Sebi say this move was to ensure only serious NFOs were launched. However, fund managers say this is only making it more difficult to attract investors.
Like Waqar Naqvi, CEO of Taurus Mutual Fund points out.