What is the cause of the stock market crash? / Do investment funds violate?

According to Tejarat News, in the middle of March, the Board of Directors of the Securities and Exchange Organization approved the increase of the investment quorum of investment funds in securities with fixed income in stocks.

Based on this, investment funds “in fixed income securities” are required to invest at least 15% and at most 25% of the total value of the fund’s assets in stocks, preemptive rights and stock option contracts accepted in the Tehran Stock Exchange or the first and second over-the-counter markets. Iran is a commodity deposit certificate accepted in the stock exchange and investment units of investment funds.

Despite the announcement of this resolution, experts and capital market activists believe that failure to comply with the quota of funds is the reason for the excessive fall of the market. On the other hand, some experts and market activists say that the funds have bought enough and the market collapse has nothing to do with the funds.

The first group of experts who believe that non-compliance with the quota of funds is the cause of the excessive fall of the stock market, and according to the law, funds should have a maximum of 15% of shares.

The second group also says that this law is only for fixed income funds. Funds can buy up to 15% of shares with a note.

Investigations show that the opinions of two groups of experts have mistakes. First of all, the funds must comply with their legal requirements, and then the cause of the market crash can be investigated.

Violation of investment funds!

Amir Kavian, a capital market expert, said in a conversation with Tejarat News: Buying or not buying shares has nothing to do with the issue. We have a law and it must be followed. For example, experts can agree or disagree with the volume of the base, the expert’s opinion in favor or against has no effect on the volume of the current source because it is part of the law and market tools and should be used.

He explained: The same is the case with funds and the law must be followed. We have two types of fixed income investment funds, which include the first and second type of fixed income. In the first type of fixed income fund, the purchase floor or minimum purchase is 15%, which means that 15% of the assets of these funds must be allocated to buying stocks. But in the second type there is also no requirement.

Kavian emphasized: This is a law and many funds have not followed this law, and this non-compliance with the quorum is also available in the auditors’ official reports.

In the end, this capital market expert said: There is no expert or good or bad debate. The main issue is the non-compliance of the law by the funds, and the funds must compensate for this violation.

Do the funds make losses?

But on the other hand, some experts are of the opinion that one should think about the losses of the funds and this non-observance of the law also comes back to the interests of the funds. Soheila Naqipour, a capital market expert, told Tejarat News: “In recent days, we have seen the non-compliance of fund quorum by managers.” Managers of fixed income funds are forced to pay interest at the rate of bank interest. Therefore, in order to meet the quorum in the times of market decline, it causes loss to the unit holders or those who own the fund units.

He continues: Therefore, the managers of fixed income funds are willing to be fined or receive a notice from the organization, or they do not care about the market.

Naqipour continues: the quorum of fixed income funds is not enough to stimulate the market. It is normal not to observe the quorum of the funds during the fall. But the stock exchange organization is also responsible for following up on the quorum of funds to support small shareholders.