Mutual fund mis-selling: Sebi circular

Sebi has come out with a circular to say what is mis selling and making misselling a fraud. As usual somebody in the ivory tower looking at the battle field with telescope of good intentions.

To me it looks like the Centre’s law against child marriage – the act is old, and the activity is happening. Happiness all around. The Govt and ‘womens’ organisations are happy, the govt is happy and people doing it are happy.

Now let us come to the definition:

“(s) mis-selling of units of a mutual fund scheme;
Explanation.- For the purpose of this clause, “mis-selling” means sale of units of a mutual fund scheme by any person, directly or indirectly, by─

(i) making a false or misleading statement, or
(ii) concealing or omitting material facts of the scheme, or
(iii)concealing the associated risk factors of the scheme, or
(iv) not taking reasonable care to ensure suitability of the scheme to the buyer.”

“The equity market has given 18% p.a. return for the past 40 years..so equities are a good investment”

is it a fair statement? is it mis-selling? Actually it depends on the context in which it was made, does it not?

One bachelor (with a widowed mother who had enough independent income) was sold a life insurance product. I laughed said ‘mis-selling’ The CXO of the company said ‘Subra he is earning Rs. 400,000 a month…he can afford Rs. 25000 a month’ – so this is not mis-selling 🙂

To me the worry is …very few agents even realize that they are mis selling. CIOs who are now busy doing sales calls always keep saying “for the long term equity is good…markets are at attractive levels’..Is that mis selling?

Just too many instances…

I have been mis sold to by hospital services, my daughter’s school,  – and these sadly have a far greater consequence.

A friend who is a gynaec said….”Mis-selling in mutual funds…? Who is worried?” The allow abortion pills to be sold across the counter -WITHOUT PRESCRIPTION…The young girls in class 12th or FY have NO clue of the trauma and guilt such a pill can cause….

Amen.

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1355306299458.pdf

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5 Responses to “Mutual fund mis-selling: Sebi circular”

  1. Saw Prashant Jain’s interview g’day on CNBC. He tried to say don’t invest at high p/e’s. But anchor tried to infer that as infra funds are at low p/e’s so can people invest in them. The Prashant started to say to justify saying that present market is good when compared to forward p/e’s

  2. look personally i have a lot of respect for Prashant Jain, Naren Sankaran, Siva, Bala (Birla), Nagnath, …..but YOU need to realize that ALL these people are in an AUM race…At no stage will they tell you ‘this is a good time to sell equities’. If you have long term money it HAS to be equities, short term money has to be in low duration debt or bank fd.

    If u do not know how to time…stick to their flagship funds. Discovery or Dynamic for Naren, Top 200 (inspite of recent poor run), Franklin India Blue chip…Or if u need non India asset allocation in their foreign funds.

    On Infra – I have strong views…so will not use this space..all these great guys have Infra funds…

  3. Thank you sir.For retirement which is 15 years away…Selected Top 200 and Franklin for me and wife respectivly…..for education corpous…..8 years away selected Dynamic .Thank You

  4. Though it may not be clear how SEBI will handle mis-selling, it is evident that SEBI is taking steps which are in the interest of a ‘not-so-knowledgable-in-equity’ person (like me). Two such examples are:
    1. The recent mandate to ask AMCs to offer direct plans
    2. Abolishing 2.25% entry load few years ago for direct investments

  5. Vikas Bansal the challenge is to know the diff between good intentions and good results…

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