The Mutual fund industry is governed by SEBI. Great, So SEBI governs who can manage money. He should not have committed too many crimes (especially in the finance kind) and they get a license.

Some famous names: Sahara, CRB, Peerless, Shriram, well what more to say?

Some which refuse to grow up: Escorts, and there are others, but why take panga? this is a personal financial blog not a panga blog.

Some fund houses which have grown big due to an early start now do not want the new comers to come in. You do not need me to name them do you?

Then there are Trustees who know how the business is run. They know everything about the law, they know about mis-selling, about insider trading, about soft rupee commissions. They are appointed by the shareholders to protect the interest of the unit holder. Some investors even now believe that there is no conflict of interest.

The auditor appointed by the shareholders is supposed to protect the interest of the shareholders. Clear mandate. In the fight for the shareholder it is possible that an employee, IFA, …etc..’s interest may be compromised. That is fine. After all an IFA cannot appoint an auditor to see whether he has been paid right. Hey that is the IFA’s problem, not the regulators.

Anybody can be appointed as an employee as long as he passes an exam. Anybody with an IQ more than 69 can usually pass it. For most people it takes about 20 minutes and most people score about 85+. You need about 50 marks to pass the exam. They get to sit in nice swanky offices attend seminars on “how financial inclusion is critical for India”. This is normally held in Singapore, Hongkong or sometimes in London.

Then there is the IIT, IIM educated investor who is told he is too dumb, too busy, too emotional, too chicken hearted to be in the markets directly. Partially true, he is told that a class 12th pass portly 45 year old experienced man will tell him how to invest. He has of course passed an exam too. He is the weakest link.

The weakest link is the guy who brings the forms to you so that you can fill up the form, attach the cheques and hand it back to the fund house.

This guy is the equivalent of the server in a hotel chain. He of course has to pass an exam. He is supposed to be an expert in the markets, behavioral finance, investor psychology, risk profiling, estate planning, tax planning, Huf, banking, compliance, risk, ..etc. Fairly obviously this guy is paid well, right? No. On an average he earns less than the salary (guaranteed) of the driver of the CEO.

He is also called ‘bakra’. Most of the blame for what goes wrong in the fund industry are because of this ‘baali ka bakra’

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