US Stocks: Wall Street jumps on hopes of smaller Fed rate hikes U.S. stock indexes jumped on Friday after a report said the Federal Reserve will likely debate on signaling plans for a smaller interest rate hike in December, reversing declines set off by social media firms after Snap Inc’s ad warning. Some Fed officials have begun sounding out their desire to slow down the pace of increases soon, according to the Wall Street Journal, and how to signal plans to approve a smaller increase in December. Stock markets have been hammered by worries of aggressive rate-hiking cycle tipping the U.S. economy into a recession, with the benchmark 10-year U.S. Treasury yield hitting fresh 15-year highs earlier in the session. Traders are still widely expecting a fourth 75-basis-point hike at the central bank’s November meeting. The report helped markets recoup declines from earlier in the session when Snap Inc lost 28.96% after posting its slowest quarterly revenue growth in five years as advertisers cut spending due to inflation and geopolitical woes. Other companies that rely heavily on ad revenue like Alphabet Inc and Meta Platforms Inc fell 0.24% and 2.40%, respectively, pulling the S&P 500 communication services sector index down 0.4%. Also Read: US Stock Market: FED Beige Book helps identify emerging trends in the economy “It’s not uncommon for companies to cut back on advertising spending during concerns of an economic slowdown,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “Right now you don’t want to be in a Snap or a Meta, and it’s probably going to transfer over to Alphabet.” At 10:17 a.m. ET, the Dow Jones Industrial Average was up 345.00 points, or 1.14%, at 30,678.59, the S&P 500 was up 38.54 points, or 1.05%, at 3,704.32, and the Nasdaq Composite was up 77.29 points, or 0.73%, at 10,692.13. Third-quarter reporting season so far has been better-than-feared, prompting analysts to nudge up their earnings expectations for S&P 500 companies to a 3.1% increase from 2.8% earlier in the week, according to Refinitiv data. It is still well below the 11.1% rise that was forecast at the start of July. Thanks to the earnings-driven gains from earlier this week, the S&P 500 and the Nasdaq are set for their best week in six, while the Dow eyed its biggest weekly gain since late June. Among Dow components, Verizon Communications Inc shed 5.1% as its profit slid 23% and the carrier missed estimates for wireless subscriber additions. American Express fell 5.7% after it built bigger provisions to prepare for potential defaults as an economic downturn looms. Advancing issues outnumbered decliners by a 2.08-to-1 ratio on the NYSE and by a 1.57-to-1 ratio on the Nasdaq. The S&P index recorded five new 52-week highs and 29 new lows, while the Nasdaq recorded 12 new highs and 196 new lows.
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In its consultation paper, Sebi has suggested that trustees of mutual funds should focus on market abuse by AMC, its employees and mis-selling by the AMC to increase the asset base.
Also, trustees should be responsible for fairness of fees and expenses charged by the AMC, compare its performance with peers and ensure that AMC’s sponsor is not getting any undue advantage.
In addition to the core areas, the trustees should be responsible for periodically reviewing the steps taken by AMCs for the folios which do not contain all KYC attributes with bank details.
Further, Sebi has suggested that trustees and their resource persons should independently evaluate the extent of compliance by AMC and not merely rely on AMC’s assurances.
To facilitate trustees’ supervision, AMCs should provide them with analytical information.
Presently, the trustees primarily rely on the AMCs for ensuring compliance with the applicable rules.
Under the rules, trustees hold the property of the mutual fund in trust for the benefit of the unitholders. The trustees appoint an AMC to float schemes for the mutual fund and manage the funds mobilised under various schemes, in accordance with the investment objectives.
“In view of the increasing scale and reach of the mutual fund industry, trustees’ role in respect of unitholders’ protection assumes even greater significance,” Sebi said on Friday.
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Over the past decade there has been a five-fold increase in the size of the mutual fund industry. The assets under management (AUM) has surged from Rs 7.93 lakh crore in November 2012 to Rs 39.89 lakh crore in December 2022.
To ensure that trustees devote time and attention to their core responsibilities, Sebi has suggested that for fulfilling other responsibilities, trustees may rely on professional firms such as audit firms, legal firms, merchant bankers for carrying out due diligence on their behalf.
The Sebi also listed some duties trustees can delegate to AMCs. This include ensuring that all systems are in place prior to the launch of any scheme by the AMC, and calculating any income in the mutual fund due to the fund and any income received in the mutual fund for unitholders.
The regulator has proposed to provide a one year time to existing trustees with board of trustee structure to convert into a trustee company, from governance point of view.
Presently, two structures for trustees are permitted — corporate and board of trustees structure. Moreover, there are a few mutual funds which have the board of trustees structure while the trustees of all other mutual funds have adopted the structure of a trustee company.
Considering the enhanced role of trustees over the period of time, Sebi has suggested to increase the minimum number of trustees to adequately perform their functions. Presently, the minimum number of trustees prescribed is four.
Also, it has been proposed that the chairperson of the trustee company should be an independent director.
Sebi has suggested that apart from the meeting of the audit committee of AMCs and trustees (which mostly comprises of independent directors), the board of AMCs and the board of trustees may be mandated to meet at least once a year to discuss the issues concerning the mutual funds.
The regulator proposed that the existing MF Regulations on AMC and its obligations may be amended to include additional clauses with respect to the obligations of the board of AMC.
The proposed amendment may include a clause which casts an obligation on the board of AMC to ensure that all the activities of the asset management company are in accordance with the provisions of these regulations.
The Securities and Exchange Board of India (Sebi) has sought comments from public till February 24 on these proposals.