The SEBI has come up with more strict regulations for the management of mutual fund Do you think the regulator can actually protect the investors beyond a certain point?
SEBI has come with strict rules for the management of mutual funds.
ï¿½ The new regulations state that the mutual funds will have to invest 20% funds in the government securities. This will provide a cushion of liquidity.
ï¿½ They will only be permitted to park only 20 percent of their total assets in one sector. In case of the finance sector, the limit is only 10 percent. It will be helpful for the mutual funds to diversify risks and bring down sectoral concentration.
ï¿½ All standstill agreements by the mutual funds have been banned.
ï¿½ The assets of these funds have to valued on a mark-to-market basis for better reflection of their value.
SEBI is doing the right job but cannot completely mitigate the risk as all market investments are subjected to it. The regulator is however concerned about the defaults and their roll-over effect. Defaults lead to shaking of investor confidence and can have bad consequences for the economy.