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MF News SEBI asks fund houses to check operational risks

SEBI asks fund houses to check operational risks

Operational risks include discrepancies in calculation of NAV, allotment of units and doing KYC.
Nishant Patnaik Jul 10, 2018

SEBI whole time member, G Mahalingam has asked fund houses to check operational risks. He was speaking at an industry event held recently in Mumbai.

Operational risk is the possibility of a loss due to a failed process. Among others, such risks include discrepancies in calculation of NAV, allotment of MF units and doing KYC.  

Talking to fund officials, Mahalingam said, “In the last Mutual Fund Advisory Committee (MFAC) meeting, we have discussed risk management processes of AMCs. We appreciate the fact that fund houses did not have to place reliance on special window that RBI had provided to fund houses to meet liquidity requirement during currency devaluation between July 2013 and August 2013. The industry needs to live like that on a continuous basis.”

He further said, “In my view, the industry needs a comprehensive package to manage credit risk, market risk and most importantly operational risk. The operational risk has not been highlighted much but it has a huge impact on the industry. Such risks are getting highlighted in the banking industry. I think the MF industry should learn lessons from what banking industry is going through.”

He urged fund houses to ensure that they put in place the robust checks and balances to check operational risks.

An analysis of AMFI complaint data reveals that investors have generally raised complaints, which are operational in nature such as data updation, correction in investor details or discrepancy in statement of accounts.

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