The Securities and Exchange Board of India (SEBI) has initiated a process of collecting details of salaries of mutual fund employees, especially top officials, to calculate the cost of funds of asset management companies.
The capital market regulator also plans to come out with a structure to decide on salaries paid to the top officials of the asset management companies, like in the case of employees of private and foreign banks implemented by the Reserve Bank.
The issue has brought to the notice of the regulator as many mutual funds, especially, foreign asset management companies were paying fancy salaries, which results in erosion of capital of these companies.
Several times, SEBI Chairman, U. K. Sinha had warned asset management companies on the cost of their funds. The Reserve Bank had implemented a compensation policy for the whole-time directors and chief executive officers of domestic private sector and foreign banks in 2013. It also had restricted paying guaranteed bonuses to them. “Guaranteed bonuses are not consistent with sound risk management or the pay-for-performance principles and should not be a part of the compensation plan,” RBI had said in a notification. The RBI had told these banks to set a remuneration committee to oversee the framing, review and implementation of the policy. Before issuing guidelines, the RBI had sought information from banks on how they decided the salaries and bonuses of people heading the organisation and other key departments like treasury.
“A similar exercise has been initiated by the capital market regulator”, said one person who is aware of these developments but preferred anonymity. According to him, some funds pay fancy salaries to their heads and other officials, resulting in erosion of capital, which ultimately affect the investor adversely.
