SEBI Chairperson Madhabi Puri Buch has directed the Association of Mutual Funds in India (AMFI) to constitute an ethical committee to ensure that all the members of the industry follow the regulations both in letter and spirit.
The industry should ensure its members do not take short cuts to attract investors and shore up assets under management. SEBI believes in the consultative process while framing the regulations and expects the industry to abide by it.
Self regulation
“Even one bad apple in the industry can bring a bad name to the whole industry, particularly when it is being recognised for its good work. A mischief done by one particular person can ruin the hardwork of the entire industry and it will be very difficult to regain the faith of investors,” she said, while inaugurating a new office of AMFI on Tuesday.
SEBI is giving an opportunity for the industry to regulate itself on the ethical front and hopes that it will not make the regulator come down heavily on them, said Buch. Sometimes when a scam in the industry comes to light, industry people are not at all surprised, as they were expecting it to be broken and they move on to the next work, she added.
“We know that AMFI does not have an SRO (self-regulatory organisation) status but so far, it has succeeded in co-ordinating between SEBI and the industry. In the same vein, it should ensure that bad apples are weeded out,” said Buch.
Using technology
SEBI has adopted an institutional process to check wrong doings by individuals in the industry. “We have succeeded in laying a strong foundation and the regulator wants to build a beautiful structure on it. The industry should not let the hard work put out by them go waste,” Buch added.
The industry captains may earn a lot of money in salary and bonuses in terms of stock options. However, at the end of the day, they will be remembered by generations to come if they leave a strong foundation for vibrant capital markets, she said.
AMFI should take the help of technology to weed out bad apples and boost financial inclusion as it is not only efficient but also very cost effective, she added.