Regulator Sebi releases revised risk management framework for MFs

Markets regulator Sebi on Monday came out with revised risk management framework for mutual funds with certain mandatory and recommendatory elements.

Asset management companies (AMCs) need to perform a self-assessment of their risk management framework and practices and submit a report to Sebi along with the roadmap for implementation of the framework, Sebi said in a circular.

This exercise must be completed and the necessary systems must be in place at the AMCs to enable compliance with the circular with effect from January 1, 2022. AMCs may also choose to do so even before that.

The recommendations of mutual funds advisory committee have been suitably incorporated

in the revised risk management framework (RMF), it added.

The review was necessitated against the backdrop of significant developments in the mutual fund industry and in the financial markets as a whole, including in the area of product innovation, investment in newer asset classes, distribution landscape, technological evolution, investor penetration and awareness, increase in risk elements, among others.

"With the overall objective of management of key risks involved in mutual fund operation, the revised Risk Management Framework (RMF) shall provide a set of principles or standards, which inter alia comprise the policies, procedures,risk management functions and roles & responsibilities of the management, the Board of AMC and the Board of Trustees," the markets watchdog said.

Compliance with the framework should be reviewed annually by the AMC and review reports has to be placed before the board of AMC and trustees for their consideration and appropriate directions, if any.

Further, the trustees may forward the findings and steps taken to mitigate the risk along with their comments to Sebi in the halfyearly trustee reports.