The Securities and Exchange Board of India (Sebi) is considering amending regulations so that a trustee of a mutual fund (MF) is debarred from holding trusteeship in other MFs.Sebi also proposes to bar a director on the board of an asset management company (AMC) from holding board membership of other mutual funds. In a discussion paper on the subject released today, Sebi said trustees were the first line of regulators of mutual funds and due diligence was the primary responsibility of the trustees. "While AMCs manage the operations of mutual funds, the trustees act as supervisors. AMCs are required to send periodical compliance reports to trustees who in turn send reports to Sebi. Boards of AMCs and the trustees of mutual funds meet periodically to review the operations of mutual funds," a discussion paper titled `Trustees on board of multiple mutual funds', said.The regulations require two-thirds of the trustees to be independent persons. In this context, the role of independent trustees in the oversight of mutual fund is greater than that of associate trustees, Sebi said. Trustees are privy to information pertaining to the conduct of the business by the AMC. The role of independent trustees is crucial to avoid conflicts of interests in a mutual fund, the discussion paper said.
