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NEW DELHI: To facilitate growth and innovation in the mutual fund industry, the Securities and Exchange Board of India (Sebi) on Friday formed two working groups to review the role, eligibility and obligations of sponsors and trustees of asset management companies.
A sponsor establishes a mutual fund, along with any individual or body corporate, while the main role of a trustee is to ensure that the interest of the unit holders is protected.
In terms of a sponsor’s role, the markets regulator said there’s a need to expand the existing eligibility requirements to sponsor a mutual fund.
Accordingly, a working group has been constituted under the chairmanship of A. Balasubramanian, managing director and chief executive officer of Aditya Birla Sun Life AMC Ltd and chairman of the Association of Mutual Funds in India (Amfi).
The working group will recommend an alternative set of eligibility criteria for entities to act as sponsor; review the existing eligibility requirements for being a sponsor; recommend mechanisms for addressing conflict of interest that may arise if pooled investment vehicles or private equity act as sponsor.
The committee will also examine the need for sponsor to dilute its stake in the asset management company from the existing requirement of holding at least 40% of the net worth and the alternative pathways that may be adopted by the sponsors in this regard.
“This is expected to not only foster competition in the mutual fund industry but also facilitate consolidation in the industry through mergers and acquisitions so as to reap economies of scale and scope. This is also expected to facilitate fresh flow of capital into the industry and to foster innovation," Sebi said in a note on Friday.
The other members of the working group are J. Ranganayakulu, ex-executive director, Sebi and consultant; Cyril Amarchand Mangaldas; Nilesh Vikamsey; Khimji Kunverji & Co LLP Chartered Accountants; D P Singh, chief business officer, SBI Funds Management Ltd; and Alok Mundra, partner, EY India.
Further, the working group constituted for trustees will examine the obligations cast on trustees by various provisions of Sebi; identify those responsibilities for which trustees can avail the services of professional assurance agencies; and recommend required financial resources to be made available to Trustees to independently discharge their obligations.
The committee looking to streamline the role and obligations of trustees of mutual funds has been constituted under the chairmanship of Manoj Vaish, independent trustee, Mirae Mutual Fund.
Members also include Sunil Gulati, independent trustee, SBI Mutual Fund; Ramamoorthy Rajagopal, chief operating officer, DSP Mutual Fund; Supriya Sapre, chief compliance officer, HDFC Mutual Fund; and Padmaja Shirke, compliance officer, Union Mutual Fund.
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