Level of fees paid by mutual funds remains highest: SECP chief

Chairman Securities & Exchange Policy Board Khalid Mirza said Tuesday that the level of fees paid by Pakistani mutual funds remains the highest in the world even after the large reduction in fees carried out by the Securities and Exchange Commission of Pakistan (SECP).

According to a statement of Khalid Mirza here on Tuesday, claiming that SECP will suffer a deficit for the current year ending June 30, 2020 is not correct.

The fact of the matter is that the carefully prepared budget for this year (which takes into account all reductions in fees and charges implemented by SECP) shows a surplus and not a deficit. It should be noted that even after the large reduction in fees carried out by SECP, the fact is that the level of fees paid by Pakistani mutual funds remains the highest in the world.

He said that substantial reduction in the unconscionably high level of fees previously charged by the regulator (which had clearly hindered growth of mutual funds) was a significant measure taken to benefit, directly and indirectly, mutual fund unit holders, to promote ease of doing business in the financial sector, and to boost the mutual funds industry. The question before both SECP and the newly constituted Policy Board was whether to slash fees payable with the prospect of long term beneficial consequences for the capital market and the economy, or alternatively, let the exorbitant fee structure remain as it was with the short gain of leaving intact the revenue thereby accruing to the regulator.

After careful consideration, it was decided to reduce substantially the fees payable by mutual funds seeking a facilitative business environment and longer term benefits rather than take a short term view defending the then revenue situation.

In taking this decision, SECP and the Policy Board projected that the growth simulated by the much lower fees would eventually recoup the revenue currently forgone.

Khalid Mirza said that, however, it is my intention to raise this matter in the next meeting of the Policy Board in February and it would be my recommendation that the reduction in fees payable by mutual funds which was implemented w.e.f. July 1, 2019 may be reversed with retrospective effect. The reversal (and consequent recoveries) would, of course, become effective if the recommendation is approved by the Policy Board and with the concurrence of the SECP.

As regards the costs of running the Policy Board, I would like to affirm that the costs incurred are fully in line with the prescribed rules and regulations, and are also moderate. Personally, I serve on a pro bono basis and receive no compensation for my services. Further, comparing the costs incurred in connection with the previous near-dormant Policy Board with the costs incurred in operating a pro-active Policy Board that is involved in the full range its functionalities does not make any sense, Khalid Mirza added.