MFs need fully independent board of trustees: Quantum

New Delhi, June 13: There is a need for a fully independent board of trustees that will ensure that markets regulator Sebi's rules are complied with and the interests of the small investors are protected, said Quantum AMC founder Ajit Dayal.

He said it should act as another check and balance that will further strengthen the mutual fund industry.

This could be a significant step after Franklin Templeton AMC has been found guilty of violating regulatory norms in the winding up of six debt schemes.

In a telephonic conversation with PTI, Dayal said that if one person of an asset management company (AMC) is sitting on the board of trustees then we are compromising the interest of investors. "The presence of that one member will make the board of trustees less independent."

"If you want to ensure that investors are welllooked after then you should have 100 per cent independent trustees," he said.

He further said the board of trustees is the most underutilised body.

In his opinion, Sebi should make a regulation that only independent trustees should be on the trustees board, not anyone from AMC, or anyone linked to the management.

"I think this is an oversight from Sebi that they have not put this rule. This should have been done from 1993 but they haven't done it so far," he added.

The trustees job is to ensure that the funds are actually managed in the interests of the shareholders.

Quantum MF is probably the only fund house where the board of trustees is totally independent.

When asked whether Franklin Templeton-like episode could have been avoided if such a measure was in place, Dayal said "it is difficult to say whether we could have avoided such a situation but in theory, yes".

"In theory, yes, because if the trustees have the right information, if the trustees keep on comparing the information they have with what is stated in the prospectus or offer document then possibly if there is a mismatch, they can immediately correct it," he said.

Dayal said a lot of that also depends on the way the trustees take their job. He said they should take their job seriously as representative of investors, not as friends of the AMCs.