Sebi issues guidelines for boosting risk management in the MF industry

Sebi has directed asset management companies (AMCs) to constitute a technology committee to review the cyber security and resilience framework of the MF industry

The Securities and Exchange Board of India (Sebi) on Thursday issued two circulars aimed at boosting the risk management systems in the Rs 24-trillion mutual fund (MF) industry. The regulator directed asset management companies (AMCs) to constitute a technology committee to review the cyber security and resilience framework of the MF industry. Sebi said that the tech committee should have at least one independent external expert with experience in the area of technology in the MF and financial industry.

“With rapid technological advancement in securities market, technology is playing a very important role in asset management business and have a major impact on the various processes and controls designed and implemented by AMCs. The role of technology related aspects has become even more critical in managing risks related to asset management business,” Sebi said in a circular.

In a separate circular, the regulator issued revised guidelines on a system audit framework for MFs.

The framework includes an audit of the fund accounting system for the calculation of net asset values (NAVs), financial accounting and reporting system, funds flow process, system processes for meeting regulatory requirements, among other things.

According to the guidelines, fund houses will have to get a systems' audit done by an independent auditor every year.