Mutual fund regulation to be revised
KATHMANDU,JUNE 14:
A revised Mutual Fund Regulation will be out in a few days as the Finance Ministry has given a green signal for revisions.
“An amendment to the Mutual Fund Regulation 2067 has received approval from the Ministry of Finance (MoF) and we hope the amendment will be able to address the shortcomings of the existing regulation,” said chairman of Securities Board of Nepal (Sebon) Baburam Shrestha during the inaugural ceremony of ‘Training on Mutual Funds’.
Sebon had sought an amendment to revise provisions regarding experiences of fund managers and supervisors and registration fee, in addition to introducing a clause that will allow Non Resident Nepalis (NRNs) to invest in the Nepali capital market through mutual funds.
According to the existing regulation, fund supervisors need to have a minimum of 15 years of experience in the relevant field and chief executive of the fund manager needs to have 10 years of relevant work experience. The requirements have been considered impractical.
Moreover, the amendment will allow an NRN investment company to establish a mutual fund and channel their investment in Nepal through the fund. “Mutual funds will be an effective channel to mobilise small savings into huge investments, as savings are being accumulated and banks are troubled with liquidity surplus with no viable projects to finance,” pointed out Shrestha.
Mutual funds invest pooled cash of small investors to meet the fund’s stated investment objective –– especially in stocks, bonds and money market instruments. These funds issue units to investors in accordance with the amount of money invested by them.
The Mutual Fund Regulation 2067 finally came into operation in September 2010 after a long homework spanning more than a couple of years. Though Siddhartha Bank’s merchant banking arm –– Siddhartha Capital –– and Nabil Bank’s Nabil Invest have already received a licence for mutual fund, they are yet to start operation.
They are waiting for mutual fund guidelines to provide them functional clarity. “Mutual fund being a novel concept in the Nepali capital market, there is a need to disseminate proper information and benefits of the instruments to the public along with enhancing the capacity of the professionals involved in it,” pointed out advisor to the finance ministry Prof Dr Sriram Paudel.
The capital market regulator and prospective mutual funds have been asking the government to make investments in a mutual fund tax free instrument in order to garner more interest from the public. “The upcoming budget will address the issue of tax but the particulars will only be revealed in the budget,” informed joint secretary of MoF Baikuntha Aryal.
The government had opened Citizen Investment Trust (CIT) to work as a mutual fund to integrate small investments and become a market maker but difficulties at the policy level has left it as a mere institutional depositor, said Aryal.
Source: THT
