Asset management companies (AMCs) are complying with a Securities and Exchange Board of India (Sebi) diktat that came in October 2020 that all calls made or received by executives taking investment decisions will have to be recorded, provided they happen during market hours, 9 am to 3.30 pm.
Not only are fund managers aghast at the idea that private conversations with family and friends are getting recorded, they are also complaining that vital work-related calls are getting affected, too. Because companies and government officials, knowing their conversations will be recorded, are refusing to talk to AMC executives. And this may, fund houses fear, affect investment decisions.
ET spoke to eight mutual fund officials including CEOs, CIOs and senior fund managers, who discussed the issue on condition of anonymity. An email query sent to Sebi seeking comments went unanswered.
Impact first felt after Q3 results
Sebi’s October 2020 notification says “all communication” during market hours by executives involved in the fund’s investments must be done through “recorded modes and channels” only. This means money managers can talk only on recorded lines between 9 am and 3:30 pm on trading days.
The aim is to curb illegal trades by mutual funds’ investment team. But the impact has been much wider — affecting both personal and professional spaces, say investment houses.
“The intention is to maintain appropriate evidence in case of a dispute or investigation but this does create a challenge and raises privacy concerns in case a fund manager has a personal conversation during market hours…this could include a conversation with his family or his bank,” said Moin Ladha, partner, Khaitan & Co.
The big impact in fund houses was first felt after December quarter results. Companies that held investor calls in January and February declined to talk to fund managers in recorded calls. People familiar with the issue said government officials too were unwilling to discuss anything.
“The big risk is we might end up missing out on key inputs that we gain from investor calls,” said a senior fund manager at one of the top mutual funds. “Companies will not alter their call timings for a few of us.”
In a recent investor conference organised by a large brokerage, officials of as many as 35 companies declined to talk on recorded lines, said two fund managers familiar with the development.
“As a fund manager these days, I am not doing anything much between 9 am and 3:30 pm…actually I should be using this time productively by talking to more companies,” said the CIO of a fund house.
Mutual fund officials are concerned over the open-ended wording of the Sebi rule and its “regulatory overreach”, said lawyers. Last month, a senior investment executive with a leading fund house, who was on a family holiday, got a call from the fund’s compliance officer. He was told that his calls will continue to be recorded despite being on vacation.
“The executive was not comfortable with the idea and hence we were asked for a legal opinion,” said a leading securities market lawyer. “Unfortunately, there is no exception to the rule, and we told AMC the same.”
