Coronavirus: Sebi extends implementation of stewardship code till Jul 1

Easing compliance burden on mutual fund houses and alternative investment funds (AIFs), Sebi on Monday extended the deadline till July 1 for implementation of stewardship code, which is applicable for investments in listed equities.

The code was to come into force from April 1.

Sebi said the decision has been taken after it received requests from the Association of Mutual Funds of India (AMFI) and the Indian Association of Alternative Investment Funds (IAAIF) for extension of the deadline for implementation of the code.

The associations said the prevailing situation resulting from the coronavirus pandemic makes it challenging to effectively monitor and intervene at appropriate situations with the management of the investee companies and engage with the boards of the investee companies.

After taking into consideration the representations, the Securities and Exchange Board of India (Sebi), in a circular, said it has decided to extend the implementation of the stewardship code to July 1, 2020.

The markets regulator had mandated all mutual funds and alternative investment funds in the country to adopt a stewardship code.

Under the code, institutional investors need to monitor investor companies and intervene in these firms in case of any requirement through meetings with the management. Also, they need to have a policy on voting and disclose the voting behaviour.

Stewardship code is a principles-based framework that assists institutional investors in fulfilling their responsibilities to help them protect and enhance the value of their clients and beneficiaries.

Adherence to the code by institutional investors will enhance the corporate governance of the investee companies.

Stewardship obligations are becoming more important due to increased institutional investor ownership of various companies and a large portion of such institutional investors, directly or indirectly, represent public funds.

Globally, Britain was the first to recognise stewardship obligations way back in 2010, followed by Japan and Malaysia.