Sebi provides clarity to ICICI Prudential on associate director status

Company had appointed an independent director on its board with effect from July 23, 2008

Market regulator Sebi has informed ICICI Prudential Asset Management Company that an individual would be considered an associate director if that person is also on the board of the entity running the mutual fund.

The guidance has come in response to the Asset Management Company (AMC) query on whether an independent director with the firm, would become "non-independent" if he is appointed as an independent director on the board of sponsor company.

Citing regulations for mutual funds, Sebi said that in the instant case, the person being one of the directors of the sponsor company, who is otherwise satisfying the test of independence appears to qualify as an associate director.

Securities and Exchange Board of India (Sebi) made the observation in an informal guidance issued on Thursday.

As per rules governing mutual funds, an individual on the board of AMC would be considered as an "associate director" if, among others, he is a director of the sponsor firm. Such a person cannot be appointed as an independent director on board of an AMC.

Generally, a sponsor is referred to an entity that helps in organising the mutual fund.

ICICI Prudential had appointed an independent director on its board with effect from July 23, 2008. The person is a member of the entity's audit and risk committee.

As per the company, on May 8, 2013, this person was appointed as independent director on the board of its holding company, which is also one of the sponsors of the mutual fund.

The director is also a member of the audit committee of the sponsor entity.

According to Sebi norms, persons providing any type of professional service to the mutual fund, asset management company, trustee company and the sponsors shall be considered as associate director of AMC or trustee companies, as the case maybe.