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SEBI seeks details of trustees from mutual funds

Mutual funds rule out any conflict of interest between its trustees and the asset management companies (AMCs) even as SEBI seek details of trustees from these companies, reports Sandeep Singh.

business Updated: Jul 08, 2008 20:47 IST
Sandeep Singh

Mutual funds have ruled out any conflict of interest between its trustees and the asset management companies (AMCs) even as market regulator Securities Exchange Board of India (SEBI) has sought details of trustees from these companies.

“A couple of months ago Sebi had sent an e-mail to fund houses asking for details of the trustees as it wanted to conduct independent discussions with them,” said an industry insider, who did not wish to be identified.

So far, Sebi has never discussed any issue separately with the trustees. “Sebi may call up the trustees and meet them independently,” he said.

The ministry of corporate affairs has asked Sebi to examine whether there are any issues of conflict of interest occurring between trustees, sponsors and the AMCs.

In a mutual fund organisation, trustees are independent members who are supposed to protect the interests of investors. They evaluate the product before it is sent for Sebi approval.

Trustees also have the responsibility of monitoring the investments of respective schemes and ensure that unit holders get their due returns.

Association of Mutual Funds in India (AMFI), the apex industry body of AMCs, however, ruled out any conflict of interest.

“It is a non-issue because trustees are the first level regulators and they oversee AMCs’ working,” said A.P Kurien, chairman, AMFI. “They work as per the terms of investment management agreement with the trustee, and in this sort of arrangement there can be no conflict of interest.”

Fund houses also echoed similar opinion and said the question of vested interest does not arise, as the trustees are not involved in the day-to-day operations.

“I don’t think there is a conflict of interest with the trustees as they function independently,” said Vikrant Gugnani, CEO, Reliance Capital Asset Management.

“They comprehensively examine any product before and give consent only after being fully satisfied about its legitimacy and need,” he said.

Former Sebi Chairman M Damodaran did seek trustees to have a look into the distributors’ role in selling new fund offerings from AMCs to protect investor interests.