While India is fortunate to be growing rapidly even as other countries are seeing a slowdown, there is a need to make sure that the growth is built on a strong foundation, SEBI chairperson Madhabi Puri Buch said on Thursday.
“We are a fortunate generation; All the problems that we are dealing with are related to growth. We need to make sure that this growth is stable, well-regulated, sustainable, and built on a strong foundation,” Buch said at an event organised by APMI, an industry body for Portfolio Management Service (PMS) players.
The PMS industry had grown by 21 per cent in the past year, with assets of ₹33.64-lakh crore at the end of April. Several underperforming schemes, however, have seen outflows in the recent past.
‘Built on trust’
The trust reposed by investors, be it institutional or retail, was important for the securities market to grow many times its size. “What has come till now is built on trust. What will take us to many times our size is trust. If that trust is belied at any point in time, the entire edifice can come down like a pack of cards,” said Buch.
She said there was a hierarchy of risk when it came to products and asset classes, and the entire PMS piece resided between mutual funds and AIFs. “We need to maintain the hierarchy,” Buch said.
The SEBI chief said the regulator’s principal approach was one of co-creation and that the regulator would not survive if it cannot co-create: “Regulations should not be crafted in ivory towers or boardrooms. They need to be crafted from real feedback from the ground.”
‘Alert the regulator’
Buch asked the PMS players and APMI to alert the regulator on potential mischief and fraud. Mischief is like playing at the edges, in the grey. If this assumes gigantic proportions and is done intentionally, it becomes fraud. The industry has a ringside view and can detect potential frauds a million miles away, she said. “One of the mandates of the association is to bring such mischief to the attention of the regulator so that it can take action early on. Else, it will have no option but to come back with norms to check that mischief,” the chairperson said.
The SEBI chief urged the industry to find common grounds to collaborate, citing the example of mutual fund industry body AMFI. AMFI, for instance, had collaborated on the ‘mutual funds are right‘ campaign and was also working together to set up a platform to detect front-running. By doing so, the PMS industry, too, can expand the market at a fraction of the cost and collaborate, especially in the areas of compliance and cyber security. “What are our areas of collaboration? I urge you to think of areas where members can work together,” said Buch.