Market regulator SEBI enhances governance for Mutual Funds

To strengthen the governance structure for mutual funds, markets regulator SEBI, on Thursday, put in place a framework for the tenure of independent trustees as well as directors. An independent trustee and independent director will hold office for a maximum of two terms, with each term not exceeding a period of five consecutive years, SEBI said in a circular. However, such individuals will be eligible for re-appointment after a cooling-off period of three years, it said. "During the cooling-off period, such individuals should not be associated with the concerned mutual fund, asset management company (AMC), and its subsidiaries and/ or the sponsor of the AMC in any manner whatsoever," the regulator noted. Existing independent trustees and independent directors will hold office for a maximum of 10 years (including all preceding years for which such individual has held office). Explaining further, the regulator said that individuals who have held office for less than nine years as on date may continue for the residual period of service. However, those who have held office for over nine years as on date may continue for a maximum of one year. With regard to auditors, SEBI said that no mutual fund will appoint an auditor for more than two terms of maximum five consecutive years. Such an auditor may be reappointed after a cooling-off period of five years. Further, during the coolingoff period, the incoming auditor will not include any firm that has common partner(s) with the outgoing audit firm.