New Delhi:Mutual funds may soon face some tough questions from market regulator Sebi regarding the exercise of their vote on key business proposals of the companies in whose shares they have put in investors’ money.
The market watchdog is irked by the casual approach adopted by most of the funds when it comes to voting on proposals put forth by the company management for shareholder approval, as also the disclosure of these votes, a senior official said.
The current dispensation at Sebi, with chairman U K Sinha coming from a mutual fund background, is looking at measures like distributor incentives and making MFs a preferred stock market route for retail investors.
At the same time, the regulator wants funds to adopt the role of conscience-keeper for listed firms by actively raising their voice on the listed companies’ corporate governance practices, the official added.
Mutual funds collect money from investors and put the capital in shares of various listed companies and thus become their major institutional shareholders.
This gives them significant voting power in key decisions of listed firms, but they have so far mostly acted as yes-men or indifferent when proposals are put to vote by the companies.
This passive stance of fund houses, including by leaders like ICICI Prudential and Reliance MF, has come to fore after Sebi pushed them to make public their votes as shareholders.
Unsatisfied by the disclosures, Sebi is considering changes in its rules and might ask the funds to be more specific, including about reasons behind their votes.
Some funds are now considering outsourcing their voting job to specialist entities.
However, Sebi might wait for its proposed policy on outsourcing by market entities to come into place before taking any decision on any such proposal from the fund houses.
On their part, some MFs assert that they take utmost care in deciding on votes and they invest only in those companies where they have faith in the management’s decisions.
While large fund houses like Reliance MF and ICICI Pru did not reply to queries on their voting, Quatum MF said it decides carefully on each vote.
“At Quantum, we understand the responsibility of Proxy Voting. It is only after careful consideration of each proposal that we decide to vote for it or against it, or abstain from casting our vote,” Quantum AMC director I V Subramaniam said in an emailed statement.
“This year it could be a case where most resolutions deserved a ‘Yes´ than a ‘No´. Additionally, in the case of Quantum, we invest in good businesses with good managements. This itself allows us to avoid companies that have too many contentious issues to be voted on,” he added.