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SEBI has asked mutual fund trustees to put in place a mechanism to prevent mis-selling in AMCs to increase AUM and market valuation. SEBI said, “The Trustees shall ensure that the AMCs have put in place adequate systems to prevent mis-selling to increase assets under their management and valuation of the AMCs.”
Further, SEBI has also asked trustees to review the performance of schemes and see if the AMC justifies the fees and expenses charged from investors. They have to review the scheme performance with respect to the respective benchmark and peers.
Earlier, SEBI Chairperson Madhabi Puri Buch said that trustees should evaluate the performance of a mutual fund scheme and if it is underperforming peers and benchmark, they should ask AMCs to reduce the fees.
According to SEBI, MF trustees should ensure:
- Prevent misconduct including market abuse or misuse of information by employees, AMC and connected entities
- Prevent fraudulent transaction including front running, form splitting and mis-selling by distributors
- Ensure that operations of AMCs are not influenced AMC sponsors, associates and stakeholders
- Ensure that AMC does not give any advantage to associate or group companies
- Address conflict of interest if any between unitholders and sponsors/associates/share holders
- Evaluate nature and adequacy of alerts raised and how AMC dealt with it
- Review steps taken by AMCs to undertake KYC
- Oversee operations of MF schemes independently
- Discharge role of custodian of assets on behalf of unitholders
- Review net worth of AMC periodically
Further, SEBI has allowed MF trustees to take help of external agencies such as audit firms and legal firms to carry out due diligence.
