Amidst growing scale of the mutual fund industry, capital markets regulator Sebi has proposed to increase the role and accountability of the trustees in a bid to safeguard unitholders' interest.
In addition, the regulator has suggested to enhance the accountability of board of asset management company (AMC). Also, Sebi has proposed a common platform for dissemination of public announcements by mutual funds.
In order to have an independent review mechanism for the decisions of AMC from the perspective of the unitholders' interest across all products and services, Sebi has proposed to mandate that a "Unit Holder Protection Committee (UHPC) should be constituted by board of AMC".
In its consultation paper, Sebi has suggested that trustees of mutual funds should focus on market abuse by AMC, its employees and mis-selling by the AMC to increase the asset base. Also, trustees should be responsible for fairness of fees and expenses charged by the AMC, compare its performance with peers and ensure that AMC's sponsor is not getting any undue advantage. In addition to the core areas, the trustees should be responsible for periodically reviewing the steps taken by AMCs for the folios which do not contain all KYC attributes with bank details.
Further, Sebi has suggested that trustees and their resource persons should independently evaluate the extent of compliance by AMC and not merely rely on AMC's assurances. To facilitate trustees' supervision, AMCs should provide them with analytical information. Presently, the trustees primarily rely on the AMCs for ensuring compliance with the applicable rules.
Under the rules, trustees hold the property of the mutual fund in trust for the benefit of the unitholders.
The trustees appoint an AMC to float schemes for the mutual fund and manage the funds mobilised under various schemes, in accordance with the investment objectives.