Mutual funds (MFs) should use the stewardship code to ensure that retail investors are heard at the general meetings of investee companies and increase participation, said Madhabi Puri Buch, chairperson, Securities and Exchange Board of India (Sebi).
Speaking at the launch of Bharat Nivesh Yatra by the Association of Mutual Funds of India (Amfi) on Thursday, Buch also emphasised the need to build the corporate bond market ecosystem so that it witnesses the kind of growth the equity segment has seen.
Focusing on the “sovereign trust” that the industry has gained over the years, Buch said that mutual funds are a vehicle for financial inclusion and a product suitable for citizens to participate in wealth creation.
The Sebi chairperson further urged the industry to use the stewardship code—the framework for MFs and insurance firms to monitor and engage with investee companies—to become the voice of retail investors.
“The reality is that the retail investor does not vote in the AGMs even today. The reality is that he does not have the consolidated power to assert himself as a shareholder of the company. The stewardship code, which has been adopted by the industry—we believe that there is huge value in it and therefore all the more, this as a vehicle of working towards ensuring that the investor has a voice, that the voice is heard, and that the entire ecosystem works in the interest of the shareholder,” said Buch.
The Sebi official also indirectly addressed the allegations levelled against her by Hindenburg Research and recently by the Congress party. She stated that whenever she talks of real estate investment trusts or ICICI, the issue of “conflict of interest” arises.
Buch has been at the centre of controversy amidst allegations of conflict of interest, which she and her husband, Dhaval Buch, have refuted, denying any wrongdoing.
On the corporate bond market, the Sebi chair detailed the steps taken to increase participation—including bringing transparency and regulatory clarity, along with online bond platforms to facilitate retail participation.
Buch added that while there are issues in the secondary market, progress has been made in the primary debt market.
She further mentioned that pending approval from the Reserve Bank of India (RBI) could help increase trading volumes on the AMC Repo Clearing (ARCL), which has surpassed Rs 20,000 crore turnover in a month.
According to market players, the ARCL is not classified as a Qualified Central Counterparty (QCCP), which restricts participation from banks and primary dealers, and the approval for the same is required from the RBI.
She also outlined the measures by the market regulator to use artificial intelligence (AI) to speed up the approval processes at Sebi.
First Published: Sep 26 2024 | 8:56 PM IST
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