SEBI mulling performance-linked incentives for mutual funds

Capital markets regulator Sebi is looking at introducing a performance-linked incentive for mutual funds and will soon be coming out with a consultative paper on the same, a senior official said on Wednesday.

The Securities and Exchange Board of India (Sebi) has suspended the 'B30 scheme' which pushed the industry to go to newer geographies, because of undesirable practices, and will soon be coming out with a revised scheme, the watchdog's executive director Manoj Kumar said.

Kumar said Sebi generally focuses on pushing the industry to pass on the benefits of changes like technology to the MF (Mutual Fund) investors, which may not be welcomed in certain quarters in the industry.

"Shortly, you will see once we come out with a consultative paper where we will try to link performance and try to see surrounding that performance what incentive structure we can create," Kumar said while speaking at a MF summit organised by industry lobby CII.

He, however, did not elaborate on the contours of the performance-linked incentives which the Sebi is thinking of right now.

On the B30 scheme, Kumar made it clear that the regulator has not discontinued the inactive scheme but only suspended it.

"… we have come across certain practices which are not desirable to continue with this type of incentive structure. So, we are revamping that structure," he said.

Kumar hinted that simplification of the current processes will be a key agenda in this drive, which may include doing away with certain aspects and relaxations in others.

To a suggestion from an industry participant who pitched for a 'new to industry' incentive rather than the B30 incentive scheme, Sebi's Whole Time Member Anant Barua said such a proposal is already under discussion and exact contours of the same will be out in a consultative paper.

Meanwhile, Kumar said Sebi had written to the MF industry lobby grouping Amfi, giving them 30 days to revert on the suggestions made but has not heard back for over two months.

He said Sebi wants the industry to embrace self-regulation, and added that Amfi is also ready with the 'Amfi 2.0' framework to strengthen the industry's operations.

Besides, Amfi has devised a scheme on the lines of the PM Jan Dhan Yojana to deepen the reach of the MF sector, Kumar said.