-
27. Explain the standard and transparent guidelines in accounting and operations issued by SEBI (Mutual Fund) Regulation, 1996.
The basic premise of a Mutual Fund is that it gives an ordinary investors,having limited financial resources and no experience and expertise in the capital markets an opportunity to earn returns commensurate with his risk bearing capacity .Thus ,Mutual Fund are important intermediaries which channelize hard earned savings of a large number of investors into the stock markets .They are the catalysts in price formation and price discovery , and help in maintaining the allocative efficiency of capital. With a view to regulate this fact growing Industry and in order to safeguard the interests of investors, the Securities and Exchange Board of India (SEBI) issued for the first time, a comprehensive set of regulation -The SEBI (Mutual Fund) Regulation , in 1993, which were then applicable to all Mutual Funds except UTI. In later years , it was found that there were several instance where the regulations were not fully followed by Mutual Funds and there were many voids, which were not properly plugged.At the same time, SEBI desired the Mutual Funds to follow strict disclosure standard and greater transparency in accounting and operations. Thus on December 9, 1996, SEBI announced the revised SEBI (Mutual Funds) Regulations, 1996.
Ans: SEBI (Mutual Fund) Regulation, 1996 issued standard guidelines on internal management procedures, investment valuation norms and accounting policies and standard that the Mutual Fund houses have to follow . The SEBI regulation lay down the procedures for calculation and declaration of Net Asset Value of Mutual Fund schemes. The regulation lay down the code for advertisements . The regulator has laid down guidelines for winding up the schemes and protecting the investors against any regulatory infraction or defalut by a Fund. The apex regulator has also powers to amend the Mutual Fund Regulations, whenever situation warrant, in the form of guideliness and circulars which shall be binding on the Sponsor , Mutual Funds' Trustees, Asset Management Companies, and Custodians.