With the critical decision of the Securities and Exchange Board of India (SEBI) directing fund houses, to disclose their votes as shareholders of several firms, it has become clear that mutual funds remain inert towards the proposals put forth by companies. With this trend becoming observant in several market leaders like Reliance Mutual Fund and ICICI Prudential, it has been understood that while these mutual funds enjoy importance in key voting decisions of listed companies, when crucial decisions are in question, they either vote in favor of their listed company, or abstain from voting altogether. This disturbing trend does not shy away from disclosing that there are abnormally low instances wherein a mutual fund has voted against the proposal of its listed company.
With the Securities and Exchange Board of India’s public resolve last year, directing all fund houses to disclose their voting details, it has become clear that mutual funds are expected to act as ‘moral keepers’ of listed firms, exercising their votes in an objective and unbiased manner towards the entrepreneurial decisions of a company.
It has been observed that in some cases, investors lose out on all their savings not because of their wrong judgment, but because they fall trap to malign practices followed by their fund house. As a prudent investor, it is very important for you to review your portfolio at least once every year, thus averting yourself from the possibility of opting for debt like personal loans, home loan etc to finance your requirements. Re assessing and reviewing your portfolio will give you the information as to how much and by how far is your fund reaching its desired goal. Try not to shift between funds too often as that too will hamper your growth and not enable you to acquire fruit full returns which would have been possible otherwise. So, make sure that you move your funds out of a fun only if there is a possibility that the particular fund is forecasted to be a poor performer for a long period of time. Else, you can be assured for safe returns depending upon the type of your investments.
Coming back to the point, with an eye on the trend, it is safe to say that the SEBI needs to harden its grip around elusive companies, who do not refrain from such unethical practices. Although several fund houses have kept up with SEBI’s demands of disclosure, officials at the securities board say that the information provided is “unsatisfactory”. In several instances, fund houses in such reports, have failed to even provide the name of the company or the adequate voting details of mutual funds. Thus, in order to regulate such malpractices, the SEBI has decided to alter its rules by making it mandatory for all organizations to be specific in their disclosures, mentioning intricate details like why their mutual fund has abstained from voting for a proposal and so on.
A closer look at the ICICI Prudential’s disclosures bring to light that it has steered clear from voting for all proposals, except for those by UCO Bank, Union Bank and Canara Bank, the three prominent public sector lenders of the country. It also did not vote against a single proposal of the companies where it had its investments, revealing awry intentions.
Reliance Mutual Funds, another key market player in the country, voted widely in favor of its listed companies, abstaining from voting on a few occasions. It is important to note that the fund house has never exercised its vote against any of the proposals. The disclosures of a host f other fund houses also hold true to this trend.
It will be interesting to note SEBI’s action plan to control such defiant actions of fund houses, so as to secure an objective system of voting by mutual funds.