Amazing how Sebi even under Mr. Sinha is trying to increase costs for the Mutual fund industry’s investor…

there is no doubt that the mutual fund industry is suffering from the after effects of Mr. Bhave and Don Quixote. However when Mr. Sinha came the industry was (perhaps) hoping for some relief. Well what has come has come out in a round about way and that is only fair.  If entry load was removed as a ‘good for the end user’ feature it will take a brave man to reverse it, so Mr. Sinha will not.

However SEBI is now making a great attempt to ‘inform’ the investor that he can hold the units in a demat form. This is a joke – anyway the units are NEVER held in physical form. I would want to demat something which I can ‘lose’ – like say gold, equity shares, etc. WHY THE HELL would i hold valueless ‘no. of units statement’ in demat form.

Well one of the important things a regulator does is in the name of the ‘common man – investor’ INCREASE THE REVENUES FOR THE players. So if you buy ‘units’ through a broker, you will end up:

1. paying brokerage

2. pay demat charges – sometimes going in, some times going out

3. some money will have to the stock exchanges, correct?

4. as volumes increase there could be some ‘service tax’ on some of the services, correct?

LOL if you increase the number of intermediaries …IN THE REAL WORLD  the price goes up.

In regulator language, the ‘investor’ becomes safe.

Long live regulators! without them what would bloggers write about?

solution: put all your money in PPF. RIP

ps: do you get a feeling when Nomura and Goldman Sachs enter….industry ki vaat lagti hai? LOL

what will suffer: client’s net return.

why: costs will go up. …

God bless. Sorry for spoiling your weekend. Could not resist commenting on yet another stupid SEBI ad.

PS: what about a communication class for the shenanigans at the regulator’s office?

No, I am not looking for work, Sucheta Dalal and Debashis should do this work shop. Of course they may come out pulling their hair. Debashis does not have too much to pull, though. LOL

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  1. The reason I will not demat mfs is that I am phobic. Why should anyone know what I have? Why should I make it easy?
    And is information transparent or what.
    I’ve had n number of relationship managers from ICICI wanting to tell me how to manage money. If I wanted advice I would have paid for it, no?

    Goldman/ Nomura – let us see. At the end of the day they will get a S.Naren Or Prashant Jain equivalent to run the funds. At least in terms of the equity research done in India so far, their work is pretty solid–I’m generalizing from my sector.

  2. – if one buys MF online via investment websites of some banks (ICICI i think), they charge 1% or so and possibly some annual charges for the account in website.
    – so charges are anyway there this way online. (yes user can directly buy from AMC and avoid it)
    – buying via trading account is another way. it is just one more option for a trading a/c holder, whoever wants to use its convenience.

  3. I don’t know whether you had opportunity to read a mail I sent to you on this demat issue on Jan’18th.

    On December 7th 2010, I wrote a small piece in my portal ‘A lie by your stockbroker’. The reason for writing that was an advertisement by a broking firm extolling the virtues of ‘demating’ the mutual fund units (how you can demat something which is already in a demat form!).

    A unit certificate may be ‘demat’ed but I’m unable to understand why an account statement should be in demat form.

    Account statement by definition gives you the detail of units held by you with custodian in demat mode.

    After I saw a SEBI’s publication in newspaper last week, I’ve been speaking to many people known to me in the industry (AMCs, CFPs and IFAs).

    I’m writing a piece based on the above discussion to be posted tomorrow or on Monday.

    As always, you’ve put it very aptly and in your own style.

    You may not be looking for work and you’ve an investment horizon of 60 years!

    But what you’ve got to say for advisors: become sub-brokers? Another layer of cost!

  4. Thanks for the eye-opener.
    Till today, I was wondering what is exactly stored in dmat form by trading MF on stock exchange.
    Now I got the answer : it is Account statement 🙂

  5. Mr.Subra – I’ve written and posted the piece I mentioned in the last comment.

    If you’ve time and if interested, please let me know the validity of the same.

  6. I could think of a couple of advantages of holding MFs in a demat account. Tell me if they are wrong.

    a. Single KYC – If you change your address, you have to do KYC only once for the demat account and not a KYC separately for the mutual funds.

    b. Single Nomination – for the whole demat account (shares and MFs). Easier maintenance if you want to change it.

  7. single kyc? did not understand. Every few years the authorities come up with some such stuff. Next it will be UID. One top politician’s son will come out with blood sample based identification, that will be introduced..

    anyway kyc is to be done only once.

    nomination is something u do once- how often does a person change it? (you can is a different thing). the flip side is all the assets will go to a single nominee. If you want to give your equity portfolio to your son, mutual funds partially to your daughter, some mutual fund like for your granddaughter’s wedding….you will still need a will.

    there is no ECONOMIC justification for dematting pieces of paper without commercial value. Next they may demat your bank account…NSDL live long. We need to create business for nse, nsdl,..etc. and we pay the price.

  8. Mr.Subra – Mr.Bhat of IFA Galaxy has posted what I wrote in the IFA Galaxy forum.

    I’ve just written to him about this posting of yours.

    If he chooses to share this posting in the group, you may expect comments surpassing ‘Honest Lies’.

  9. Sebi comes down on anything that are good for the retail take the case of FMP’s no indicative returns, no portfolio. In the process they have a killed a great product. But they say they are investor friendly and try to cross sell NSDL/CDSL/NSE/BSE.

    Are we sure that these SEBI Advertisements are released during Mr. Sinha’s tenure or was it last arrow from Mr. Bhave & team?

  10. I personally feel that this must be a BRIGHTT idea of some one in SEBI to show that they are also doing what IRDA is doing to educate the investor. I am sure most of the members of IFA Galaxy and Subra also wud have seen IRDA ads. No one made noise.

    Trying not to read too much in between lines, what this ad has done is to inform the investor the facilities available which is common knowledge.
    If an investor chooses to use of services of a broker he will come to know of the charges and decide whether he should go there or stick to his advisor, and a rational decision by an investor who needs advice and service will be to stay with advisor and also pay him for his service.
    I do not think we should make too much noise about this lest we become perpetual cynics in the eye of the new regulator and his team who really may be wanting to help us. At least one act of allowing AM to dip into load account, a circular issued fairly early after change of guards is a good sign. Let us try to see glass half full and not half empty. love

  11. Agreed. But why not highlight the fact that mutual fund units are already in demat form. Why saying that you can demat something which is in anyhow in demat form. Half truth always leads to confusion.

    Gone are the days when mutual funds issued unit certificates.

    So the concept of demating is totally irrelevant.

    It gives an impression of trying to help depositories,exchanges and brokers at the cost of investors and other channels.

    If the idea of demating the account statement (very funny!) is investor penetration through stock exchanges and depositories, we need to see what penetration these agencies have achieved in stock market.

    I hope all of you would remember Moneylife article on handful of players and small set of investors in Indian stock exchanges.

    LIC & UTI have shown what kind of penetration is possible through advisory force, which stock exchanges and depositories have failed to achieve.

  12. Ramesh Bhatt and Muthu – thanks for noticing this post. Frankly this is not the first or the last step towards removing the IFA. Not sure about Muthu’s age but I guess Mr. Bhatt was around when the ‘sub-broker’ was killed. He used to go into the ring and give two way quotes – suddenly technology ensured that these 3000 ‘jobbers’ were without a job. Then there were – believe it or not – about 100,000 clerks who were doing settlement, share transfers, etc. Technology ensured that shares went electronic – and these guys were out. Now the avowed aim is to make sure that ‘investors’ use the NSE/BSE platforms – the advantage is that the members can be prosecuted if something goes wrong. Well if you are an iFA AND WERE hoping to retire on the trail money, please do not fool yoursel

  13. Thank you, so much. This article is an eye opener to every IFA. Please take this to the investers too. Long Live IFA’s.

  14. With bio-metric KYD in place, anybody can be prosecuted! Why we need to reserve that ‘privilege’ only to a stock broker?

    Individual Advisors in the local community has more incentive to behave better and nurture long term relationship than a ‘member’!

  15. it is true that what you said they have to pay twice the charge of service tax education cees tax i think so

  16. I want to do some corrections. It is not Regulator. It is STRANGULATOR and not for Distributor, but for the investor and Mutual Fund industry !! It is the MF industry which is loosing the support of intelligensia provided by well qualified and experienced IFA community, who are not solely dependent on MF industry. IFAs can utilise their knowledge anywhere and earn their livelihood. It only pains me that the mindless action of SEBI Board is killing well established MF industry, which is the backbone of Stock Market. Now SEBI Board can be termed as a group of persons who are : Stupid Eccentric Brainless Idiots (SEBI) !!

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