Gap Between Letter and Spirit in the Role of Mutual Fund Trustees
Trustees of asset management companies (AMCs) have a fiduciary duty to manage the interests of mutual fund (MF) unitholders. Trustees must ensure that there is no breach of compliance or procedures that could lead to failures in the investment process and, therefore, be detrimental to investors. Recent episodes of liquidation of some MF programs and alleged malpractices in MF houses such as front-running, tailgating and kickbacks to distributors have shed light on the role of trustees who are the regulators first level of ₹Industry of 38 billion MF. These incidents call into question the responsibilities of trustees under the market regulator Securities and Exchange Board of India (Sebi) MF Regulations 1996, which include ensuring due diligence in the operations and compliance of AMCs of so that the interests of investors are protected.