SECURITIES AND EXCHANGE BOARD OF INDIA
INVESTMENT MANAGEMENT DEPARTMENT
Trustees on the Board of multiple Mutual Funds
The rights and obligations of the Asset Management Companies (AMCs) and the Trustees have been clearly laid down in the SEBI (Mutual Fund) Regulations, 1996 (Regulations).
Trustees have been made the first line regulators of mutual funds and due diligence is the primary responsibility of the trustees. While AMCs manage the operations of mutual funds, the trustees act as supervisors. AMCs are required to send periodical compliance reports to the trustees who in turn send reports to SEBI. Boards of AMCs and the trustees of mutual funds meet periodically to review the operations of mutual funds.
The Regulations require two thirds of the trustees to be independent persons. The role of independent trustees in the oversight of mutual fund is greater than that of associate trustees.
The extant Regulations allow
(i) An independent trustee of a Mutual Fund to act as an independent trustee on other Mutual Fund.
(ii) An AMC director (except Chairman) to act as a trustee of other Mutual Fund.
Trustees are privy to information pertaining to the conduct of the business by the AMC. The role of independent trustees is crucial to avoid conflicts of interests in a mutual fund.
Towards improving fund governance, SEBI is considering to amend the Regulations to disallow a trustee of a mutual fund from being:
(i) a trustee on other mutual fund;
(ii) a director on the Board of AMC of other mutual fund.
Interested people may send in their comments on this issue to ruchic@sebi.gov.in or by writing a letter addressed to SEBI, Investment Management Department, SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400051.