Sebi has made a statement that they are planning to come down heavily on Mis-selling of mutual funds.

I am really impressed.

Just wondering how.

Reminds me of the ‘Retail Real Estate Mutual Fund’. The Guidelines were announced long ago….still waiting for the first launch. I remember seeing the guidelines and saying ‘how will it work’ …

daily NAV was an administrative problem. Much worse was in a market as murky as the Real Estate, how will you ensure that the transactions are clean?

Similarly, happy to see SEBI’s attitude towards mis selling, but hey:

a. What is mis-selling: this has to be defined, and that looks difficult. Well impossible.

b. If I go to an old man and say “ is a Monthly Income Plan of Hdfc – and see it says ‘Long Term’ – so sir it is a risk free product…please buy it. Tell me who is helping mis-selling? The agent or the INDUSTRY which is allowed to name a product as a Monthly Income Plan….

To me this sounds nice and as usual utopian. The issue is easy to see if you are a regulator and have a fantastic telescope…with fantastic power.

However they have to realise that they are looking at the moon….but the problem is for the autorickshaw driver and his passengers.

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  1. mis-selling is such a copout/weasel means not taking responsibility for your actions.

    why not a)banning mis selling of marriages -many people are sold dud marriages/dreams b)why not ban bacherlorhood -many people are sold the alleged ‘carefree’ lifestyle only to be let down sooner than later c)ban school syllabi -they sell us a bill of goods which can only be termed as outright lies d)ban job advertisments -they never speak of the long weekend work and the boring work content e)ban voting/elections -it is clearly misselling or even an advance auction on stolen property! -no argument here.

    there is no limit to things that can be banned if the buyer is willing.

  2. I do not believe regulating needs extraordinary amount of correct defination, it is just that the deterrent punishment has to be so massive that the Industry cannnot even think about doing the same mistake again. Example is FCPA act by USA, they have not defined any defination so the onus has shifted to companies for stopping the Fraud activities….

  3. As Subra says its the intent and desire of the regulator to actually do their job. FCPA is effective also because of judicial outreach, now our highest prosecuting agencies are happy to let go of criminals against whom they have proof, whats the use of legislation?

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