Decline in Ethical Standards - And what we need to do ... ... ...

Decline in Ethical Standards - And what we need to do ... ... ...

I've unfortunately been reading disturbing articles about HDFC Mutual Fund. Apparently, they've been signing consent orders with SEBI, choosing to pay a fine without necessarily admitting guilt on charges of, among other things, frontrunning by their fund managers.

Considering the high ethical standards that one associates with the house of HDFC, I'm deeply disappointed and upset about the whole matter.

Especially, considering the fact that I'm not talking about some small fund house not even in the "Top 10 Fund houses in terms of Assets under Management". On the contrary, I'm talking about what happens to be THE largest Fund house in terms of Assets under Management as per the latest available records.

I would like to know about:

• The exact nature of charges, and the number of HDFC MF personnel who have been accused
• The essence of internal investigations by HDFC MF and what punishments have been meted out, if any, to those found to be indulging in activities considered potentially inappropriate (even if such activities may not be strictly considered guilty enough to be proven in a court of law)
• The kind of systemic changes that HDFC MF has introduced to ensure that such "activities" are atleast detected internally at a nascent stage even if they cannot be prevented completely
• The number of such consent orders signed by other large fund houses with SEBI, say, in the last three years
• The details of such consent orders

I tried to find answers to the above queries by "googling around".

The HDFC Mutual fund website had nothing on the above that I could locate.

I had virtually the same experience with the SEBI website. No useful info that I could locate.

All that I could find were a few articles in newspapers and blogs.

So much for transparency.

So much for concern for the "Small Investor".

What should we do in these times of declining ethical standards?    Unfortunately, we can't really do much! There are a few things, however, that we ought to be doing. Stick to your Asset Allocation Diversify across fund houses, across sectors, across market cap Restrict your investments to larger fund houses - They are more likely to Have somewhat better systems & processes Be bailed out in case of major goof-ups Remain under the glare of the media & judiciary Keep reviewing your investments with a hawk-eye In case of need and/or suspicion, don't hesitate to walk out with your money.

Take care!

Regards,

N

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