Moneycontrol
Nov 30, 2017 10:43 PM IST | Source: PTI

Sebi enhances governance for mutual funds

To strengthen the governance structure for mutual funds, markets regulator Sebi today put in place a framework for the tenure of independent trustees as well as directors.

Investing in mutual funds (MFs) is the best option for those who want to take advantage of capital market to create wealth. The earlier you start, the better it is. Young investors in their 20s or 30s can take the benefit of rolling returns while investing money for a longer period of time. Here are 5 things which a young investor should keep in mind before investing in to MFs:
Investing in mutual funds (MFs) is the best option for those who want to take advantage of capital market to create wealth. The earlier you start, the better it is. Young investors in their 20s or 30s can take the benefit of rolling returns while investing money for a longer period of time. Here are 5 things which a young investor should keep in mind before investing in to MFs:

To strengthen the governance structure for mutual funds, markets regulator Sebi today put in place a framework for the tenure of independent trustees as well as directors.

An independent trustee and independent director will hold office for a maximum of two terms, with each term not exceeding a period of five consecutive years, the Securities and Exchange Board of India (Sebi) said in a circular.

The independent trustee or director will not hold office for more than two consecutive terms. However, such individuals will be eligible for re-appointment after a cooling-off period of three years, it said.

"During the cooling-off period, such individuals should not be associated with the concerned MF (mutual fund), AMC (asset management company) and its subsidiaries and/ or sponsor of AMC in any manner whatsoever," the regulator noted.

Existing independent trustees and independent directors will hold office for a maximum of 10 years (including all preceding years for which such individual has held office).

Explaining further, the regulator said that individuals who have held office for less than 9 years as on today may continue for the residual period of service. However, those who have held office for over 9 years as on today may continue for a maximum of one year.

With regard to auditors, Sebi said that no mutual fund will appoint an auditor for more than two terms of maximum five consecutive years. Such auditor may be re-appointed after cooling off period of five years.

Further, during the cooling-off period of five years, the incoming auditor will not include any firm that has common partner(s) with the outgoing audit firm and any associate of the outgoing audit firm which are under the "same network" of audit firms.

The term "same network" includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control.
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