Sebi enhances accountability of mutual fund' Trustees

economictimes.indiatimes.com:

Trustees in a bid to safeguard unitholders' interest. In addition, the regulator said that a unit holder protection committee (UHPC) by the board of an AMC would be constituted. This is part of Sebi's attempt to have an independent review mechanism for the decisions of AMC from the perspective of the unit holders' interest across all products and services.

The new framework would come into force from January 1, 2024, the Securities and Exchange Board of India (Sebi) said in a circular. The regulator has specified the «core» responsibilities of the Trustees of a mutual fund, wherein they will have to ensure that the AMCs have adequate systems to prevent mis-selling to increase their assets base. Also, Trustees need to ensure that AMC has a system to prevent market abuse by its employees and connected entities.

In addition, Trustees will be responsible for putting in place system-level checks at AMCs' end to prevent fraudulent transactions including front running by employees and mis-selling by distributors. Besides, they will have to ensure the fairness of the fees and expenses charged by the AMCs, review the performance of AMC in its schemes vis-a-vis the performance of peers or the appropriate benchmarks. Also, the Trustees would be responsible for periodically reviewing the steps taken by AMCs for the folios which do not contain all KYC attributes with bank details.

To focus on the core responsibilities, the Trustees can rely on professional firms such as audit firms, legal firms, merchant bankers, etc for carrying out due diligence on their behalf. In case a company is appointed as the Trustee of a mutual fund, the chairperson of the board of directors of that Trustee company would be an independent director. The