Sebi plans to cap mutual fund licence to one year

Sebi may cap mutual fund licence to one year
Indian capital market regulator, Securities and Exchange Board of India (SEBI), is set to limit the span of a mutual fund licence granted to a company to only one year from the date of its issue.

The regulator does not want companies, which do not have sound financial health to start their operations after a passage of long time from the date of issue of licence, as that may risk the funds of investors. SEBI said that the company which fails to start operations within the one year period will have to apply again for a new licence and submit its latest financial documents along with the application of the licence.

UBI-KBC which launched its first scheme in May this year and India Infoline are the fresh additions to India's domestic mutual fund sector that has 41 players. The total assets under management of the entire industry as on March 31, 2011 was more than Rs 7 lakh crore.

Aegon, the Dutch financial services giant became the first company to surrender its licence to SEBI in April this year as it failed to start its operations since it was issued a licence in October 2008.

The aim of SEBI through this new regulation is to make sure that only companies that are sincerely committed to starting mutual fund business will be granted a licence. There are 18 applications lying with the regulator for its approval to start mutual funds. Companies such as Goldman Sachs had to delay the launch of their mutual fund business in India due to regulatory hurdles and uncertain market conditions.

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