Source: ET
Context:
The Securities and Exchange Board of India (SEBI) has emphasized the critical role of mutual fund trustees in ensuring fairness, transparency, and investor protection within the mutual fund industry.
Key Highlights:
- Fair Fees & Expenses:
- SEBI directed mutual fund trustees to ensure that fees and expenses charged to investors are fair, justified, and transparent.
- Empowered Role:
- Trustees are empowered to question, escalate, or intervene whenever required to protect investor interests. Pandey urged trustees to act “decisively and fearlessly” when irregularities arise.
- Who Are Mutual Fund Trustees?
- Mutual fund trustees are independent individuals or a board appointed to oversee a mutual fund’s operations, ensuring that it is managed fairly, transparently, and in compliance with regulations.
Governance and Oversight Measures
- Independent Oversight:
Trustees must independently verify compliance and not rely solely on reports from Asset Management Companies (AMCs).- Test internal controls
- Seek explanations for discrepancies
- Challenge management assumptions
- Early Warning Systems:
- Trustees should establish robust monitoring mechanisms to detect anomalies, track exceptions, and trigger timely interventions.
- New Role Clarity:
- SEBI recently delineated responsibilities between Trustees and AMC Boards:
- Trustees: Conduct independent due diligence and evaluation.
- AMC Boards: Must form a Unitholder Protection Committee (UPC) to safeguard investor interests.
- SEBI recently delineated responsibilities between Trustees and AMC Boards:
- Market Abuse Prevention:
Mutual funds are mandated to have structured mechanisms to prevent:- Front-running
- Insider trading
- Misuse of sensitive information
SEBI’s Broader Objective
- Strengthen investor confidence in the mutual fund industry.
- Enhance corporate governance and accountability among trustees and fund houses.
- Promote a culture of proactive supervision rather than reactive compliance.
