In order to strengthen the governance structure for mutual funds, SEBI has come out with a circular on the tenure of independent trustees and independent directors, and auditors of mutual funds.
In a circular issued today, SEBI said, “An independent trustee and independent director shall hold office for a maximum of 2 terms with each term not exceeding a period of 5 consecutive years. No independent trustee or independent director shall hold office for more than two consecutive terms, however such individuals shall be eligible for re-appointment after a cooling-off period of 3 years. During the cooling-off period, such individuals should not be associated with the concerned mutual fund, AMC and its subsidiaries and / or sponsor of AMC in any manner whatsoever.”
It also states that the existing independent trustees and independent directors shall hold office for a maximum of 10 years including all preceding years.
Similarly, in case of the auditors of mutual funds, SEBI says that no mutual fund shall appoint an auditor for more than two terms of maximum five consecutive years. Such auditor may be re-appointed after cooling off period of 5 years.
“Further, during the cooling-off period of five years, the incoming auditor may not include any firm that has common partner(s) with the outgoing audit firm and any associate / affiliate firm(s) of the outgoing audit firm which are under the same network of audit firms wherein the term “same network” includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control,” states the SEBI circular.
The existing auditors may be appointed for a maximum of 10 years including all preceding years.
