This website uses cookies to ensure you have the best experience. Learn more

Mutual Funds Essay

3196 words - 13 pages

CONCEPT PAPERONREGULATIONOF INVESTMENTADVISORS
1. Background
1.1 Section 11 (2)(b) of SEBI Act empowers SEBI to register and regulate working of
Investment Advisors and such other intermediaries who may be associated with
securitiesmarketin any othermanner.
1.2 As decided by SEBI Board in its meeting dated March 22, 2007, SEBI had posted a
consultative paper on the “Regulation of Investment Advisors” on its website inviting
public comments. Based on public commentsreceived on the consultative paper as also
the USAID (Fire Project), a memorandum was placed before the SEBI Board proposing a
regulatory approach forInvestment Advisors. It was proposed that the Regulationsshall
be ...view middle of the document...

and the distributors which sell these products who call
themselves by various nameslike agents,financial advisors,financial planners, etc.
2.2 It is necessary to resolve or at least mitigate these conflicts, especially in the case of
financial products because of their two peculiar characteristics. Firstly, the products arePage 2 of 11
intangible and conceptually more difficult to understand. Secondly, the pay‐offs are in a
distant future and can be camouflaged by several factors externalto the product. Itisin
this context that the distributors occupy a key role; all the more so considering the low
levels offinancial literacy and awarenessin India.
2.3 Two major conflicts of interest in the financial product distribution space are the
following:
a. Dual role played by distributors as an agent of investors as well as of the
manufacturers. This is due to the fact that with respect to many financial products,
agents receive their payments from two sources: commissions from the
manufacturers (either directly or through deductions from the investment amount
of investors), and advisory fees or other charges received from the investors. This
immediately raises the question: whose interests do they represent: the
manufacturers’ orthe investors’? This question has also been raised in the Devendra
Swaroop Committee report on ‘Minimum Common Standardsfor Financial Advisors
and Financial Education’. This prevalence of divided loyalties may not be in the best
interest of all the stakeholders concerned. It often results in a situation where the
distributors are loyal to only themselves. They would happily churn investors’
portfolio and also squeezemore commission fromthemanufacturer.
b. A situation might arise where distributors are likely to be partial to, and would sell
more products ofthemanufacturer who isthe best paymaster; and ultimately, other
manufacturers would scramble to do the same,thusleading to a race to the bottom.
Thus,there is an inherent conflictin the activities of an agent/distributor distributing
similar products of variousmanufacturers.
2.4 There could be many possible solutions to these issues  ‐ the most obvious and the
easiest being enhanced disclosures. However, in a country like India where levels of
literacy are low and financial literacy even lower, disclosures have a limited effect.
2.5 The Financial Services Authority, UK, had outlined plans to ban commission payments
for product providers and enforce financial advisors to agree on fee payments with
clients upfront. It defined two categories ofservice: independent and restricted, on the
basis of which advisors would charge the fee. Examples of restricted advice may be
where advisors offer advice only about the products of a particular manufacturer; or
about the products from a defined list of manufacturers. Independent advice would
include unrestricted advice based on a comprehensive and fair analysis of the relevantPage 3 of 11
market....

Other Papers Like Mutual Funds

Mutual Funds, Vanguard Paper

1386 words - 6 pages Vanguard Mutual Fund Evaluation FIN/420 1/26/2014 The Vanguard Group The Vanguard Group offers an array of mutual funds, exchange-traded funds, brokerage, and asset management. When choosing and comparing mutual funds, there are characteristics that you need to first evaluate. This paper will review five different categories of mutual funds that Vanguard Group offers its investors. Actively Managed Common Stock Fund The Selected

Chapter 4 Mutual Funds and Other Investment Companies

5208 words - 21 pages Multiple Choice Questions 1. Which one of the following statements regarding open-end mutual funds is false? A) The funds redeem shares at net asset value. B) The funds offer investors professional management. C) The funds offer investors a guaranteed rate of return. D) B and C. E) A and B. Answer: C Difficulty: Moderate Rationale: No investment offers a guaranteed rate of return. 2. Which one of the following

An Outlook On The Evolution Of Mutual Funds - India

2813 words - 12 pages An Outlook on the Evolution, Scope and Growth Potential of the Mutual Funds Industry In Deyvaansh Misra Contents INTRODUCTION 3 A RETROSPECTIVE VIEW OF MUTUAL FUNDS 5 THE FUTURE LIES ON THE BRINK OF THE HORIZON 6 CONCLUSION 10 INTRODUCTION Shakespeare once wrote, ‘out of this nettle, danger, we pluck this flower

Project Manager

2336 words - 10 pages Master of International Business Administration Financial Management-Fall 14088 Mutual Funds, Types, Classifications, Risks, Expenses and Performance in Egypt Supervised By Dr. Ahmed Bahaa Presented by: Yasser Hassan El Sayed Oct 19, 2014 DrAhmedBahaa-ESLSCA-FM-45A-Yasser Hassan El Sayed - Mutual Funds Assignment Page |1 Table of Contents TABLE OF CONTENTS

Chapter 4

1468 words - 6 pages Chapter 4- Mutual Funds and Other Investment Companies Why buy mutual fund: people are lazy if you are trading stocks you have to give basis data for transactions you make for takes but with a mutual fund they do it for you. Diversification ** an individual investor choosing a mutual fund should consider not only the fund’s stated investment policy and past performance, but also management fees and expenses.** 4.1 INVESTMENT COMPANIES

Djwhjwhjhhwhj

3104 words - 13 pages | 2. | ACKNOWLEDGEMENT | 4 | 3. | INTRODUCTION | 5-6 | 4. | HISTORY | 6 | 5. | DIFFERENT TYPES OF MUTUAL FUNDS | 6-8 | 6. | LITERATURE REVIEW | 8-11 | 7. | OBJECTIVES | 11 | 8. | RESEARCH HYPOTHESIS OF THE STUDY | 11 | 9. | ANALYSIS | 11-12 | 10. | CONCLUSION | 13 | 11. | REFERENCES | 14 | C E R T I F I C A T E

Investor Satisfaction Case - a Business Report

2177 words - 9 pages satisfied (but somewhat less than stock fund investors) and that tax-deferred annuity purchasers are less satisfied than both stock fund or bond fund investors (Collins &. Mack, 2007). Regardless of whether a mutual fund is passively or actively managed, most funds have only one class of stock that shares equally in all the investment income and capital gains of the fund. However, some mutual funds have several classes of stockholders. For instance

Etf Research

1186 words - 5 pages broad market for many years. They basically had two options before the advent of the internet. They could call a stockbroker and place an order for a particular stock, (usually paying a commission of about $100.00 - $200.00 dollars per trade), or they could invest (buy shares) in a mutual fund which held many different stocks and offered diversification to the investor, many (but not all) mutual funds do not charge a commission. If the investor

Hyperion Aurora

389 words - 2 pages Hyperion Aurora Trust Case 1. Factors in the 1990s a. Chartered banks began to align themselves with full service brokerage houses and CIBC bid and won Hyperion Trusts (proprietary mutual funds sold by Wood Gundy brokers) b. Mutual fun business growth required new professional management c. Brokers wanting more flexibility in the configuration of 5.5% commission from Hyperion and .5% service fee every year thereafter (depends on age ex

The Inverse Relationship: Fund Performance and Its Turnover & Expense Ratio

1286 words - 6 pages The Inverse Relationship: Fund Performance and its Turnover & Expense Ratio Abstract When investors are seeking diversified investment options with low initial investment requirements, many investors may find themselves delving into mutual funds. Often times, mutual funds can provide low cost, low maintenance options for everyday investors. The funds that an investor may choose are often professionally managed. The Prudential Jennison

Hedge Funds

2971 words - 12 pages with mutual funds. In general however were these mutual funds outperformed by the hedge funds because of the absence of regulation within the hedge fund industry. Where the mutual funds had all kinds of restriction that needed to be dealt with, the hedge funds had a free playing field of which they took full advantage. Figure 1

Related Essays

Mutual Funds Essay

699 words - 3 pages Mutual funds: The first mutual funds were established in Europe. One researcher credits a Dutch merchant with creating the first mutual fund in 1774.[5] The first mutual fund outside the Netherlands was the Foreign & Colonial Government Trust, which was established in London in 1868. It is now the Foreign & Colonial Investment Trust and trades on the London stock exchange.[6] Mutual funds were introduced into the United States in the

Mutual Funds Essay

1563 words - 7 pages investment mutual fund is better option to enjoy investment in different assets class and higher returns. 3. Which are the different Asset Classes Mutual Funds can invest into? Ans.: An investor can invest into the following three types of Asset Classes. i) Equity Funds Funds that invest in stocks represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth with

Savings And Mutual Funds Essay

611 words - 3 pages Savings & Mutual Funds Group 4 How can a mutual fund earn from its securities investments ? 2 ways: (1) dividends and interest (2) a security can rise in value What is a mutual fund? A Mutual Fund is an investment company that pools the funds of many individual and institutional investors to form a massive asset base. 4 Basic Types of Mutual Funds  Stock Funds(also called equity),  Bond Funds,  Money Market Funds and  Balanced Funds

Money Market Mutual Funds Essay

1575 words - 7 pages Current Issues Project: Money Market Mutual Funds Money market mutual funds are mutual funds that invest in short-term debt securities. This investment tool has been used by individuals and institutions for decades but the way money market funds operate has changed drastically over the last five years. There are a few reasons for the changes. The bankruptcy of Lehman Brothers Holdings Inc. in 2008 caused the Reserve