Mutual funds may soon face some tough questions from market regulator Sebi regarding the exercise of their vote on key business proposals of the companies in whose shares they have put in investors' money.
The market watchdog is irked by the casual approach adopted by most of the funds when it comes to voting on proposals put forth by the company management for shareholder approval, as also the disclosure of these votes, a senior official told PTI. The current dispensation at Sebi, with chairman UK Sinha coming from a mutual fund background, is looking at measures like distributor incentives and making MFs a preferred stock market route for retail investors.
The regulator also wants funds to adopt the role of conscience-keeper for listed firms by actively raising their voice on the listed companies' corporate governance practices, the official added. Mutual funds collect money from investors and put the capital in shares of various listed companies and thus become their major institutional shareholders.
This gives them significant voting power in key decisions of listed firms, but they have so far mostly acted as yes-men or indifferent when proposals are put to vote by the companies.
This passive stance of fund houses, including by leaders like ICICI Prudential and Reliance MF, has come to fore after Sebi pushed them to make public their votes as shareholders.
Sebi is considering changes in its rules and might ask the funds to be more specific, including about reasons behind their votes.
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