Sucheta Dalal :MF shenanigans (18 Jan 2003)
Sucheta Dalal

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MF shenanigans (18 Jan 2003)  



Samir Arora is not the only fund manager in serious trouble with the regulator. The market grapevine says that three more fund managers under the regulator’s scanner for front-running and the back-dating of net asset values (NAV). All belong to highly-reputed organisations. Interestingly, Securities and Exchange Board of India (Sebi) sources denied any action on their part, but the industry grapevine insists that the regulator is leaning on the parent organisations of these funds to sack the managers. One of them has already departed, but a second has allegedly dug in his heels and refused to go. Rumour has it that the fund manager (widely known to insist on kickbacks on trades) has threatened to expose his bosses, if he is forced into an unceremonious exit. Given that the speculations began a week ago, the threat seems to have bought him additional time. Interestingly, the market grapevine says that this time, a few brokers, tired of his demands had mustered the courage to complain to the regulator. The third fund manager also belongs to an organisation, whose reputation will suffer a serious blow if the regulator decides to act. Sources say that the regulator wants the organisations get rid of these officials because it probably does not have enough evidence to get a conviction; also it doesn’t want to shake up investor confidence just when the mutual fund industry is on the way to recovery.

Inaction trail

While on the trail of shady fund managers and their activities, Sebi is understood to have obtained confessions from at least five MFs accepting that they backdated NAVs at the end of September last year. The regulator has also dashed off letters to all MF seeking to know if they indulge in late trading and permit high net worth clients to profit through late-trading or old NAV’s at the cost of the retail investors. The letter is amusing, because details of late trading by MFs and their propensity to change the terms of schemes at will, are supposed to be on the action agenda of the Association of Mutual Funds of India (AMFI) for several months. Yet, neither Sebi nor AMFI has moved to standardise NAV calculations across funds or to shutdown late trading opportunities.

Erasing conflict

This column has earlier pointed out how the former president of the Institute of Chartered Accountants of India (ICAI) had been accused of a serious conflict of interest, because he owns a stake in a Chennai-based institute that coaches students for CA examinations. After almost a year, the Department of Company Affairs (DCA) has taken cognisance of the allegations and issued a strong letter to the institute, saying that it must ensure that members of ICAI’s Examination Committee must exclude members who have any conflict of interest, by way of connections to coaching classes etc. It has also asked the institute to have a special audit of its accounts over the last three years ending with 2002-2003 by a set of auditors, which must include a nominee of the CAG. The DCA has also discovered that the ICAI’s lavish tour allowances had no official sanction and is planning a rollback of its perks. This means that the newly-elected office bearers of ICAI, will end up paying for the sins of their predecessors.

Yellow Exports

India, which has long been one of the world’s biggest consumers of gold has recently turned into an exporter of the yellow metal. A reputed gold expert tells us that the country’s goldsmiths have already exported around 40 tonnes of gold jewellery, even while the price of the yellow metal soars on the international market. But it is neither due to superior design or any special demand for Indian jewellery. Their profitability is purely by way of generous concessions that the government offers exporters. Obviously, the gold trade had learnt how to keep its business shining by exploiting pre-liberalisation subsidies offered by government.

Dark flashback

Sentimental Non Resident Indians, who attended the much hyped up Pravasi mela were sharply reminded about what it was that sent them away from their homeland in the first place. Not only were they relegated to the backbenches, with Indian VIPs occupying most of the front rows, but they were even barred from the promised tea meeting with the nation’s top executives. Ram Buxani, a top Dubai-based industrialist says, the security staff, which had earlier asked them to submit their mobile phones into custody, unapologetically said that the phone was ‘misplaced’ and offered to ‘replace’ it, if he insisted on it. Buxani replied, ‘‘instead, I’ll forgive you for the loss if you apologise’’. He and others who lost their phones are certain they were gypped and the experience dimmed the newly- acquired shine of their motherland.


-- Sucheta Dalal



 



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