Sebi wants mutual fund trustees to be more accountable

The Securities and Exchange Board of India (Sebi) wants trustees and independent directors to become more proactive in the functioning of fund houses and enhance their roles to ensure investor protection.

The market regulator aims to make trustees and independent directors of asset management companies (AMCs) familiar with the best practices and keep them updated with the technical know-how of the mutual fund (MF) business.

To achieve this, Sebi plans to conduct workshops for trustees and independent directors of AMCs, through National Institute of Securities Markets (NISM).

The first workshop, here on September 15, is to cover topics such as discharging fiduciary duties, insight into debt and money markets and reviewing fund performance beyond returns.

“This is a step towards making trustees more accountable in the functioning of AMCs,” said Aditya Agarwal, country head of Morningstar India, an MF tracking firm.

Sebi also wants trustees to have more involvement in reviewing the performance of MF schemes. In a recent event organised by Tamil Nadu Investors’ Association, K N Vaidyanathan, executive director of Sebi, who is in charge of MFs, had said trustees should question the variations in performance of similar types of MF schemes offered by a fund house.

“A lot of regulatory changes have come in the MF industry in the recent past. Sebi’s objective is to make trustees and independent directors more knowledgeable about the business,” said the managing director of an MF house. NISM will run at least three workshops every year, which will focus on technical subjects and the regulatory perspective.

Sebi norms require at least four trustees to supervise the functioning of an MF house and at least two-thirds of them need to be independent persons, not associated with the sponsors or the AMC. The general power of monitoring and directing an AMC is vested with the trustees, who have a fiduciary responsibility to investors.