In a written reply to a question in the Lok Sabha, Anurag Thakur, Minister of State for Finance & Corporate Affairs said that SEBI found various irregularities in functioning of mutual funds.
Among these irregularities are failure to identify expenses in individual schemes, instances of borrowing for purposes other than allowed under mutual fund regulations, failure to comply with valuation norms, instances of close ended schemes holding securities having maturity beyond the maturity date of the scheme, non-adherence to sectoral limits in debt schemes and so on.
In fact, the Ministry said that SEBI issued 47 warning letters and 24 deficiency letters to fund houses last fiscal. In addition, the market regulator issued two warning letters against trustees of mutual funds and initiated adjudication proceedings against five AMCs.
While SEBI has sent 37 warning letters to fund houses in FY 2016-17, it issued 17 warning letters in FY 2017-18.
SEBI, in consultation with the government, examines various issues concerning mutual funds and reviews the regulatory mechanism to enhance transparency, reduce risk for investors and enhance regulatory supervision, said the ministry.
The ministry further said, “SEBI has also taken various steps during the last three financial years like mandating disclosure of performance related information in mutual fund advertisements, enhancing fund governance for mutual funds, rationalization of total expense ratio, norms for addressing the issue of potential conflict in case of shareholding and governance of mutual funds, categorization and rationalization of mutual fund schemes and cyber security and cyber resilience framework of mutual funds.”
