SEBI constitutes working groups to review roles of sponsors, trustees of mutual funds

A sponsor establishes a mutual fund with any individual or body corporate, while the main role of the trustee is to ensure that the interests of the unit holders are protected.

With reference to the role of a sponsor, the market regulator said there is a need to expand the existing eligibility requirements for sponsoring mutual funds.

Accordingly, Aditya Birla Sun Life AMC Limited’s Managing Director and Chief Executive Officer and Association of Mutual Funds in India (Amfi) President A.K. A working group has been constituted under the chairmanship of Balasubramaniam.

The Working Group will recommend an alternative set of eligibility criteria for entities to act as sponsors; Review the current eligibility requirements to be a sponsor; Recommend mechanisms to address conflicts of interest that may arise when pooled investment vehicles or private equity act as sponsors.

The Committee will also examine whether the sponsor is required to reduce its stake in the asset management company from the existing requirement of having at least 40% net worth and the alternative avenues that may be adopted by the sponsors in this regard.

“This is expected to not only boost competition in the mutual fund industry, but also facilitate consolidation in the industry through mergers and acquisitions so as to regain economies of scale and scope. It is also expected to encourage fresh inflows of capital and innovation in the industry, Sebi said in a note on Friday.

Other members of the working group J. Ranganayakulu, former Executive Director, SEBI and Advisor; Cyril Amarchand Mangaldas; Nilesh Vikramse; Khimji Kunwarji & Company LLP Chartered Accountants; DP Singh, Chief Business Officer, SBI Funds Management Limited; and Alok Mundra, Partner, EY India.

In addition, the Working Group for Trustees will examine the obligations imposed on the trustees by the various provisions of SEBI; Identify the responsibilities for which trustees can take advantage of the services of professional assurance agencies; and to make available the necessary financial resources to the Trustee to discharge its obligations independently.

The committee has been constituted to streamline the roles and responsibilities of trustees of mutual funds under the chairmanship of Manoj Vaish, independent trustee of Mirae Mutual Fund.

Members include Sunil Gulati, Independent Trustee, SBI Mutual Fund; Ramamurthy Rajagopal, Chief Operating Officer, DSP Mutual Fund; Supriya Sapre, Chief Compliance Officer, HDFC Mutual Fund; and Padmaja Shirke, Compliance Officer, Union Mutual Fund.