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K.R. Srivats

NEW DELHI, Oct. 30

THE capital markets regulator, SEBI has tightened the noose around asset management companies (AMCs) and trustee companies in the mutual funds industry. It has now stipulated that an AMC and a trustee company would have to necessarily appoint "independent directors" in place of the outgoing independent directors within a period of three months from the date of the latter's resignation.

SEBI has also advised mutual funds to maintain a panel of eligible independent directors, who could be appointed as independent directors as and when required. SEBI's regulations on mutual funds currently 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."

The latest directive of SEBI, through a circular, is aimed at enforcing its regulations on the minimum number of independent directors in AMCs in "letter and spirit". It also comes in the wake of observations made by the regulator that AMCs and trustees do not have the required minimum number of independent directors, especially in cases of resignation of independent directors. It has been noticed that an unduly long period of time lapses, in certain cases, before the outgoing independent director is replaced.

SEBI has even suggested that mutual funds may consider appointing more than the required minimum number of independent directors in order to enhance the standards of corporate governance and also meet the regulatory requirement in case of resignations of an independent director.

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