SEBI Whole Time Member Amarjeet Singh's advice to MFs: Apply family test before selling a product

Amarjeet Singh, Whole Time Member, SEBI

Mutual fund industry participants, including asset management companies and distributors, should apply the "family test" before selling a product, said Securities and Exchange Board of India whole time member Amarjeet Singh.

"Apply the family test. Ask yourself whether you would be doing and saying exactly the same thing if your family member was the investor," said the senior SEBI official while speaking at the Moneycontrol Mutual Fund Summit here in Mumbai.

He made the comment in the context of enhancing the trust level of the industry at a time when an increasing number of investors are coming to mutual funds and trusting the fund managers with their money.

"More and more people are coming to mutual fund industry. They are trusting us with their money. Maintaining trust is important... As a regulator we can go only up to a point. We can create frameworks. We need effective self-regulation," said Singh while highlighting the fact that the regulator is working with industry body AMFI on this matter.

While we grow let us also continue to strengthen our systems so there is no loss of trust of the investors, said Singh.

He further said that mere lip service to ethical conduct is not enough and that there is a need for effective implementation. Demonstrate evidence of commitment to fair & ethical behaviour to inspire trust of regulators and other stakeholders, he added.

The Sebi whole time member further said that failings in ethical culture is root cause of numerous frauds and that rule-based compliance often leads to only box-ticking.

Ethical practice is fine but what if there is no transparency, he said adding that outcome based collaborative regulation is important.

"We have been working very closely with AMFI and we want to focus on outcomes," said Singh while adding that investor outcomes and market integrity built on a foundation of mutual trust and respect is what really matters.

He further added that the industry needs to avoid "short termism" and focus on creating "long term investor value".