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Sebi may allow MFs to invest abroad, ponders legal move in HLL case

The Securities and Exchange Board of India will shortly allow mutual funds operating in India to invest in the overseas securities markets, Sebi chairman D R Mehta said at the fourth annual seminar on mutual fund industry in Bombay today.

''The committee headed by Khizer Ahmed of the Reserve Bank of India tabled its report yesterday. Sebi will shortly take a decision on the report to allow open-ended and closed-ended schemes to invest in overseas markets,'' Mehta said.

Mehta further said that Sebi was examining whether to take legal recourse against the decision of the Appellate Authority of the finance ministry to dismiss Sebi's case against fast moving consumer goods major Hindustan Lever Limited.

''I gave a judgement on what I thought was right. The appellate authority reversed that. We are examining the matter,'' he said.

Mehta said that Sebi has so far given permission to 39 funds to operate MFs. ''Out of them, three have stopped functioning, while three others have not launched their schemes as yet. So, presently 33 funds apart from Unit Trust of India are operating,'' he said.

He critisised over-division of regulatory authorities. He said that the Financial Services Authority in Britain was a large organisation regulating the entire financial system in that country. ''In India, we do not have a concept of a lead regulator,'' he remarked.

Mehta critisised Sebi's detractors for blaming Sebi for everything that goes wrong in the capital market. Dwelling on the issue of MFs, he said that if these schemes are not able to perform to investors' expectations, Sebi cannot be taken to task as the quarterly reports of these schemes have to be first submitted to the trustees of the asset management companies managing these schemes and then to Sebi.

On guaranteed-return schemes, Mehta said that these schemes were floated before regulations governing them were framed. ''There were five such schemes that had collected Rs 12.50 billion from the public. When the entities promoting these schemes could not meet their commitments, our first task was to ensure that people get back their money. In this direction, we even took LIC and GIC to task and told them that they would be declared unfit to be in the capital markets and debarred if they do not pay the investors,'' he said.

The Sebi chairman said that as a result of Sebi's directives to collective investment schemes to get a rating before deposit mobilisation, 31 such schemes had obtained a rating.

On the recent payment crisis on the stock exchanges, he said that that total amount involved was Rs 300 million. He said that in Hong Kong, a broker who failed had a total liability of $ 400 million. He wondered why so much of hue and cry was taking place over such a small amount.

UNI