Strengthen stewardship to give voice to retail investors: Sebi chief to MFs

Sebi chair Madhabi Puri Buch urged the mutual fund industry to strengthen stewardship in equity markets as retail investors still have no voice as shareholders.

“The reality is he (retail investor) does not have that consolidated power to really assert himself as a shareholder of the company,” Buch, chairperson of the Securities and Exchange Board of India, said at an event.

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"The stewardship code, which has been adopted by the industry, both ours and the insurance industry, we believe that there is huge value in this and, therefore, all the more that this as a vehicle of working towards ensuring that the investor has a voice and that that voice is heard and that the entire ecosystem works in the interest of the shareholders,” she said. “We have a lot of faith and a lot of expectations from this industry in respect of carrying forward and strengthening the stewardship code.”

Bharat Nivesh Yatra

Buch was speaking at the launch of the Bharat Nivesh Yatra organized by the Association of Mutual Funds of India (AMFI) on Thursday.

Sebi had mandated all mutual funds and all alternative investment funds to follow a stewardship code regarding their investment in listed equities from April 2020. That came as the regulator saw increased engagement as an important step towards improved corporate governance in the investee companies, which could provide a greater push to the protection of investor interest in such companies.

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As a part of the government's Viksit Bharat initiative, Buch said the industry will also aim at making sure that almost every citizen of the country participates in this huge wealth creation in the country. She highlighted the “sovereign trust” that the mutual fund industry has cultivated over time by becoming vehicles for financial inclusion that enable citizens to partake in wealth creation.

Bond market push

Buch emphasized the importance of developing the corporate bond market to achieve growth comparable to that of the equity market. She outlined initiatives taken taken towards this objective, including enhancing transparency, regulatory clarity, and establishing online platforms to facilitate retail involvement. While acknowledging challenges in the secondary market, she underscored positive developments in the primary debt market.

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Buch pointed out that pending approvals from the Reserve Bank of India (RBI) could enhance trading volumes on the AMC Repo Clearing (ARCL), which has already exceeded ₹20,000 crore in monthly turnover. Market participants have flagged that the ARCL is not classified as a qualified central counterparty (QCCP), limiting participation from banks and primary dealers, necessitating RBI approval for this classification.