Indian market regulator toughens risk management rules for mutual funds
MUMBAI, Sept. 27 (Reuters) – India’s market regulator on Monday tightened risk management rules for mutual funds, including specifying guidelines for identifying, measuring and reporting various risks, in a bid to protect interests investors in a rapidly growing sector.
The new rules require the appointment of a risk manager, the creation of risk management committees and the maintenance of measures such as investment risk, liquidity risk and credit risk for each program, the program said. Securities and Exchange Board of India (SEBI).
The new framework comes a month after banning Kotak Mahindra Asset Management, one of the country’s largest mutual fund managers, from launching Fixed Term Plans (FMP) for six months and sentencing it to a fine for breaking the rules. Read more
SEBI also banned Franklin Templeton in India in June from launching new debt programs for two years after discovering “serious defaults and breaches” of the company when it decided to suddenly shut down several programs. Franklin appealed the decision, but agreed that he would not be launching new debt funds at this time. Read more
In its new rules on Monday, SEBI provided detailed guidance on risk management roles for the board of directors, trustees, chief executive officer, chief investment officer, other senior officials and fund managers of a asset management company.
The mutual fund industry has grown rapidly in India, especially with the interest of retail investors in systematic investment plans that allow a fixed amount to be invested in programs on a regular basis.
Assets under management by Indian mutual fund companies rose to around 36 trillion rupees ($ 487.72 billion) in August, from nearly 28 trillion rupees a year earlier, according to the Association of Mutual Funds in India (AMFI).
SEBI said fund houses must adhere to the new risk management rules from January 1 and review their compliance annually.
($ 1 = 73.8130 Indian rupees)
Reporting by Abhirup Roy; Editing by Angus MacSwan
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