Sebon prepares Mutual Fund guidelines draft
KATHMANDU, NOV 4:
The capital market regulator is gearing up to bring Mutual Fund guidelines at the earliest.
“The finalised draft for guidelines will be forwarded to the board within a month,” said director of Securities Board of Nepal (Sebon) Niraj Giri.
He informed that the guidelines is currently going through last finishing touches. Sebon — the capital market regulator — needs to finalise the guidelines for Mutual Funds in order to provide functional clarity to the Funds that will be starting their business in the near future.
“The regulator needs to clarify the conditions and rules to be followed depending on the type of Mutual Funds — open ended or closed ended — what types of schemes to be allowed and so forth, that only guidelines can explain,” he pointed out.
Mutual Fund Regulation 2067 has only specified requirements for starting of the Funds paving the way for the establishment of companies interested to sponsor and operate Mutual Funds.
Among four banks that have applied for the permission to operate Mutual Fund, the regulator has already provided license to Siddhartha Bank. The bank will work as the sponsor while its merchant banking subsidiary — that is in the offing — will act as the asset management company according to the regulations.
There are three more commercial banks that are waiting for Sebon’s green signal to start Mutual Funds. NMB Bank, Nabil Bank and Laxmi Bank’s merchant banking subsidiaries have applied for license to operate Fund.
“The finalised guideline has to be out before the Mutual Fund that has been licensed start to sell the units to public,” he said.
The guideline will spell out the ways of determining preliminary expenses and most importantly the ways to valuate the schemes.
“It will also spell out the way to calculate Net Asset Values (NAV) of the Mutual Funds to make sure that Fund will follow standard criteria to calculate NAVs so that investors will not be taken for ride,” he said, adding that it will also ensure the uniformity in calculation among different schemes. The NAV is the value of a collective investment fund like Mutual Funds based on the market price of securities held in its portfolio.
Mutual Funds invest pooled cash of small investors to meet the Fund’s stated investment objective, especially in stocks, bonds and money market instruments. The Funds issue units to the investors in accordance with amount of money invested by them. Entry of Mutual Fund in domestic capital market is expected to bring much needed equilibrium in the demand and supply factors. The market that is being weighed down by over supply of shares but lack of demand is supposed to be infused with demand from institutional investors like Mutual Funds.
Source: THT
