Monday, December 31, 2018

Sebon fines four mutual fund managers

The capital market regulator has fined four mutual fund managers for parking their money in bank deposits higher than the prescribed limit, violating investment-related rules.
The Securities Board of Nepal (Sebon) move is likely to push mutual funds toward volatile stock market due to the lack of other investment scopes.
Though mutual funds are barred from depositing more than 10 per cent of total assets of their schemes in banks, the Sebon has used it discretion to define bank deposits as fixed deposits to fine them for breaching investment-related provision in the regulation. "But if the merchant bankers put the same fund in the call deposits, it is not counted as bank deposit, according to the regulator.
The Sebon – issuing a press note today – confirmed that it had fined NMB Capital, Laxmi Capital Market and CBIL Capital Market Rs 35,000 each for investing funds that are supposed to manage in bank deposits, breaching the allowed limit. Likewise, NIC Capital has been fined Rs 25,000 for breaching investment limit on bank deposit.
According to the Sebon, Citizens Mutual Fund-1 managed by CIBL Capital, NMB Sulav Investment Fund-1 and NMB Hybrid Fund L-1 managed by NMB Capital, Laxmi Equity Fund and Laxmi Value Fund-1 by Laxmi Capital and NIC Asia Growth Fund by NIC Asia Capital breached the rule on limitation of the fund.
This is the first punitive action against mutual fund scheme managers, the Sebon press note reads, adding that the regulator expects the action will help strengthen compliance among securities businesspersons and develop healthy market.
Earlier five months ago, the Sebon has sought clarifications from them over the breach of limit on investment on bank deposits from their mutual fund schemes. The fund managers – in their clarifications to Sebon in August – said that their share of fixed deposit investment crossed 10 per cent due to the fall in their value of assets.
The Nepal Merchant Bankers' Association, however, claimed that that the regulatory body should revise its regulation that bars fund managers from making their judgment on investments. The association also claimed that the regulation was introduced some eight years ago and now it's high time to review those provisions. 

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