The Association of Mutual Funds of India (Amfi)—the mutual fund industry’s trade body— elected Harshendu Bindal, president, Franklin Templeton Asset Management (India) Pvt. Ltd, as its board director in September 2011. But since Amfi is a trade body— and not a regulator—is Bindal’s appointment just a cosmetic addition? Has Amfi got as active in recent years as it appears? Bindal talks about the role Amfi plays, which he says is not only to engage with the regulator but also with distributors.
You were recently elected to the board of the Association of Mutual Funds of India (Amfi). How relevant is that appointment to you? Also, there’s been a lot of noise at Amfi in the last couple of years. But is Amfi still relevant?
Harshendu Bindal, President, Franklin Templeton Asset Management (India) Pvt. Ltd
Every industry requires an industry body. It’s just that when an industry comes in focus and there’s a lot of change in that industry, the industry body—Amfi in this case—also comes to the forefront and gets more active. But they have been active before as well. And clearly in a challenging environment, both in terms of regulatory as well as market changes, the industry association will speak out a lot more.
Amfi has a very important role to play since the MF industry is still evolving. Products are getting complex, selling is getting complex; distribution was not regulated all this while. There has been a lot of onus on fund houses to comply with the new and evolving regulations. But since it’s a relatively young industry, it needs a good trade body at its helm.
An industry association like Amfi consists of some big domestic companies, some big foreign companies (that’s where my representation comes in), some Indo-foreign joint-venture partners, important government-owned fund houses; they all represent a wide spectrum of the financial services industry and different areas of expertise. So a fund house like us, Franklin Templeton, has more expertise in the global environment, while some domestic fund houses have experience in the local environment. So Amfi takes the combined experience of all the members and puts together the views of everyone, their responses, suggestions or recommendations.
In fact, some of the changes we’ve seen have actually come because Amfi had recommended those changes to the Securities and Exchange Board of India, or Sebi. It’s not like Sebi has come up with all these changes on its own. Besides, any evolving industry goes through these changes. For instance, in the case of distributor regulations, Sebi has reached out to Amfi, which in turn took a combined view of all its members after engaging with the distribution community and will now present its view to Sebi.
But once the regulations come out, what is Amfi’s role? If certain regulations, for instance, are seen as a nuisance by some sections of the industry or distributors, what does Amfi do to soften the “blow”?
Amfi continues to be a bridge between fund houses and distributors, given that we’ve been interacting with the distributors for asset management companies to grow. I think hopefully the regulator will take the views into account and come at a stage where non-acceptance doesn’t happen and I think the regulator is willing to engage. Regulations also evolve, you know.
Amfi’s role is also to engage with the regulators. If the regulations are evolving, we try and explain to the distributors precisely that and that hopefully in the next stage of evolution, the regulations will take account for more of their concerns. The one big positive is that for the first time, distributors are actually getting regulated. This is a good thing. I don’t think fund houses are in a position to regulate distributors because there is a commercial relationship and I don’t think that is Sebi’s intention either. I think that Sebi just wants us to play a bit more active role in the interim till it puts in place a full-fledged distributor regulation.
What do you think of the fund house’s voting pattern as part of corporate governance that Sebi advocated earlier this year? Many fund houses have “abstained” from voting on most of the resolutions. Is there a problem with understanding the resolutions?
Some people view it as a mere housekeeping activity because they feel they are minority shareholders. So they aren’t as focused on this area. As far as abstinence is concerned, they can either say “yes” or “no” to a resolution or “abstain” from voting. Besides “abstained from voting” is also one form of protest. They may not be focused in this area but Sebi’s intention was to get all the fund houses to take up voting on company resolutions in companies in which their schemes are invested in, and to that extent, it has had this effect.
Are fund houses facing any operational difficulties?
I think that’s why you have the development of third-party agencies that track all this. These agencies track the resolutions proposed by companies. Fund houses then consult them and cast their votes accordingly. Such firms exist globally. In India, we don’t have many such firms and that is why fund houses are doing it themselves for now. But once domestic firms in this sector start to develop, fund houses here too will start using their expertise. It’s evolution.