Sebi on Friday announced formation of two working groups to review the role and eligibility of a sponsor of a mutual fund. The first group will look at an alternative set of eligibility requirements to enable new players, who otherwise may not have been eligible, to act as sponsors. The other group will look at streamlining the role and obligations of trustees of mutual funds.
Sebi said expansion and reviewing the current eligibility requirements for sponsors to mutual fund is necessary amid the changing dynamics of the mutual fund industry. Following which, the regulator has formed a working group under the chairmanship of A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC, and chairman of Amfi (Association of Mutual Funds in India).
The working group will further recommend to the regulator an alternative set of eligibility criteria for entities to act as sponsor, review the existing eligibility requirements for being a sponsor and recommend mechanisms for addressing conflict of interest that may arise if pooled investment vehicles / private equity act as a sponsor. Additionally, it will also examine the need for sponsor to dilute its stake in asset management company (AMC) from the existing requirement of holding at least 40% of the net worth.
This is expected to not only foster competition in the mutual fund industry, but also facilitate consolidation in the industry through mergers and acquisitions so as to reap economies of scale and scope. This is also expected to facilitate fresh flow of capital into the industry and to foster innovation, ”said Sebi on Friday.
The working group to streamline the role and obligations of trustees of mutual funds will be headed by Manoj Vaish, independent trustee, Mirae Mutual Fund.
The five-member working group will examine the obligations cast on trustees by various provisions of Sebi to determine whether certain obligations of operational nature can be delegated to AMC.