Many of you would have heard of the story of a camel which came to a man in the desert and said ‘Can I keep just my face inside the tent…it is very cold outside’. As you can guess, slowly the camel was in and the man was out.
In a similar story the mutual fund regulator (regulators speak the language of the dominant player) is now creating business for brokers and demat service providers like banks.
The first step towards increasing business for brokers was to say that mutual funds have to list the units …or at least give the customers an option of holding the units in demat form.
We have spent enough energy (at least I have) – and Srikanth of fundsindia.com will agree that holding units in demat form is of no use to the end user!
I am happy holding my units in paper form – and keep my portfolio in free websites like www.myiris.com, www.valueresearchonline.com or www.moneycontrol.com. In fact I like the fact that my portfolio is analysed – and I know how my portfolio is split market cap wise and industry wise. No demat service provider does all this for me, and that too for free. Why the hell should I hold my units in demat form beats me.
So suddenly there is a SEBI circular saying…’from 1st October…fund houses should give an option to hold in demat form….’. In a couple of years they may say ‘It is compulsory ….to hold units in demat form’.
Of course SEBI will not want this – Sucheta will suddenly ask SEBI to give her the real number of unit holders in India (cdsl + ndsl – common holders, sorted PAN numberwise)….and the sheepish answer would be 125, 782 instead of ‘about 1 crore unit holders’ as is being flouted now…
This article has somebody saying ‘the transferability of schemes becomes possible….’. Nonsense. In case of a mutual fund, the units are NOT TRANSFERABLE. In case I wish to transfer it to my mother, I have to surrender it and my mother has to buy it from the same fund house – as there is no entry load it does not matter. Earlier I would have incurred an entry load of 2% for doing the transaction.
Why this demat is being pushed I have no clear idea. However hard I think, I cannot see a legitimate or sensible reason either. For the end investor it increases costs – any way with 84 mutual funds (I believe there are many waiting in the pipleline!), falling brokerage income for demat service providers and brokers….I can only speculate that regulators do not always work in the interest of the investor.
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