Sebi chief M. Damodaran with S.V. Prasad (extreme left), CEO of Birla Sun Life Asset Management Co, Farhad Forbes, director of Forbes Marshall, and Amfi chief A.P. Kurian (extreme right) at the Mutual Fund Summit 2006 in Mumbai on Thursday. (Fotocorp)

Mumbai, June 15: Mutual funds will no longer have the luxury of packing old wine in new bottle under the guise of a new fund offering (NFO). The Securities and Exchange Board of India (Sebi) will not clear NFOs that are similar to an existing scheme in a mutual fund’s portfolio.

NFOs that are different from an existing scheme of a mutual fund will only be cleared. The trustees will henceforth have to certify that the proposed scheme is not similar to an existing one, Sebi chairman M. Damodaran said today.

Damodaran was speaking at the Mutual Fund Summit 2006 organised by the Confederation of Indian Industry (CII). Damodaran said before launching a scheme, the players should first verify that the ambit was not already covered by one of their existing, older offerings.

His comments come after a recent spate of NFOs from various funds in the industry when the equity markets were booming.

Mutual funds welcomed Sebi’s move, but admitted that the number of NFOs could come down as there has to be a solid differentiation from now on.

Such a certificate from trustees is only one of the few measures that the market regulator is contemplating to make them more accountable. Damodaran added that questions such as whether a trustee of one mutual fund can be a director in another will have to be resolved.

Complimenting the industry on its growth performance over the past year, Damodaran wanted it to concentrate more on the retail investor, or “retailisation” as he called it. Damodaran wants the sector to look at the composition of its assets under management (AUM) and see how much is accounted for by genuine retail investors and how much is parked by companies.

Touching upon the massive slide seen in stock values in the past few trading sessions, Damodaran said while incidences of mis-selling have substantially reduced in the industry, they have not been eliminated entirely.

He asked mutual funds to alert investors about aspects like ups and downs in the stock markets.