Edited by: Namit Singh Sengar
Last updated: February 11, 2023, 9:02 AM IST
The Securities and Exchange Board of India (Sebi) has released a consultation document on the role and obligations of mutual fund managers.
It seeks views on issues related to the assessment of the trustees’ role and obligations and provides clarity on the role and responsibility of asset management company (AMC) boards of directors to protect the interests of unitholders, across all products and services.
Mutual funds in India are funds established in the form of a trust to raise funds through the sale of units to the public or a portion of the public under one or more schemes for investing in securities and other assets and instruments as specified by Sebi occasionally.
Mutual Funds in India have a three tier structure consisting of the Mutual Fund, the Trustees and the AMCs. The role of the Trustees and AMC is governed by the Sebi (Mutual Funds) Regulations, 1996.
Also Read: Confused About Types Of Mutual Funds? What is equity, debt or hybrid funds; Check details
Sebi has proposed, among other things, to strengthen the accountability of the board of an AMC through amendments to the mutual fund regulations to make the board of the AMC responsible for compliance with the regulations.
Under the existing regulatory framework, the Trustees hold the property of the Mutual Fund in trust for the benefit of unitholders. The Trustees appoint an AMC to release schemes for the Mutual Fund and manage the funds mobilized under different schemes, consistent with each scheme’s investment objectives and asset allocation pattern.
“Given the increasing scale and reach of the mutual fund industry, the role of trustees in protecting unitholders becomes even more important,” it said in the consultation paper.
At present, there are two structures allowed for trustees under mutual fund regulations, corporate structure and board structure.
“It may be desirable to have a trustee corporate form for the purpose of perpetuity and financial independence. In this regard, it is proposed that existing trustees with a board structure be given a period of one year to convert them into a trustee company, from the point of view of governance and consistency in the applicability of provisions.
Until 24 February, stakeholders have been asked to comment on the consultation document.
Recently, Sebi has also proposed an institutional mechanism that will require stockbrokers to put systems in place to detect and prevent market abuse.
Sebi’s consultation paper seeks market participants’ views on a proposal requiring brokerage firms and their senior management to be responsible for such detection/prevention of fraud or marker abuse, by establishing robust monitoring and control systems and ensuring appropriate escalation and reporting mechanisms.
This proposal also lists some common examples of market abuse that brokers should look for to detect/prevent, the entities that should be overseen and the accountability that comes with it.
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