The Hindu Business Line : SEBI tightens norms for AMC directorship

THE Securities and Exchange Board of India (SEBI) has ruled that persons providing any type of professional services to a mutual fund, asset management company (AMC), trustee company and a sponsor can only be considered as an "associate" director on the board of an AMC or a trustee company.

"This move of the capital markets regulator is significant and is aimed at improving corporate governance standards in the mutual funds industry.

A person who has been considered as an `associate' under the SEBI regulations cannot be appointed as independent director even after he/she ceases to be an `associate' unless a cooling off period of three years has lapsed from the date of disassociation," a SEBI official pointed out.

The SEBI regulations already stipulate that 50 per cent of the board of an AMC should comprise "independent directors" and two-thirds of directors in a trustee company should be "independent."

SEBI has now also held that persons having any "material pecuniary relationship' with a mutual fund, AMC, trustee company and a sponsor - which in the judgement of trustees may affect the independence of directors - would be considered as "associate directors."

The latest move of the capital markets regulator is in addition to the announcements made in December 2001 where certain categories of persons were clarified as not being "independent directors."

SEBI had then clarified that relatives (as defined in the Companies Act) of sponsor or directors of the sponsor company or relatives of associate directors of the AMCs and trustee companies would be considered as associate directors.

Further, the nominees of the companies who are stakeholders in the sponsor company or AMC (even if they are not deemed sponsors by virtue of holding less than 40 per cent of net worth of AMC) are also considered to be "associate directors."

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