SEBI invites EOIs for 'empanelment of forensic auditors' for MFs, AMCs, trustee companies

With MF industry scaling new highs, unitholders' protection assumes even greater significance, SEBI had said on Feb 10 (Image: Reuters)

The Securities and Exchange Board of India (SEBI) on February 11 issued an advertisement, inviting expressions of interest (EOIs) for the "empanelment of forensic auditors" for mutual funds, asset management companies and trustee entities.

The auditors, after being empanelled, would be in charge of "conducting a forensic audit of MFs, its AMCs, trustee companies or board of trustees", the capital markets regulator stated in its advertisement.

The invitation of EOIs comes a day after SEBI proposed to increase the role and accountability of the trustees in a bid to safeguard unitholders' interest.

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 on February 10 proposed to mandate that a "Unit Holder Protection Committee (UHPC) should be constituted by board of AMC".

In its consultation paper, the market watchdog has suggested that trustees of mutual funds should focus on market abuse by AMC, and its employees and mis-selling by the AMC to increase the asset base.

Also, trustees should be responsible for the 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, it said.

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.

"In view of the increasing scale and reach of the mutual fund industry, trustees' role in respect of unitholders' protection assumes even greater significance," SEBI had stated.

Over the past decade, there has been a five-fold increase in the size of the mutual fund industry. The assets under management (AUM) has surged from Rs 7.93 lakh crore in November 2012 to Rs 39.89 lakh crore in December 2022.

Considering the enhanced role of trustees over the period of time, SEBI has suggested increasing the minimum number of trustees to adequately perform their functions. Presently, the minimum number of trustees prescribed is four.

The regulator also proposed that the existing MF Regulations on AMC and its obligations may be amended to include additional clauses with respect to the obligations of the board of AMC.

The proposed amendment may include a clause that casts an obligation on the board of AMC to ensure that all the activities of the asset management company are in accordance with the provisions of these regulations.

SEBI has sought comments from the public till February 24 on these proposals.

With PTI inputs