Sebi issues circular on new framework to improve governance for mutual funds
Mumbai: Capital market regulator Securities And Exchange Board of India or Sebi, in a late night circular on Thursday, prescribed norms for enhancing governance at mutual funds.
In the circular, the market regulator prescribed norms on director and auditor rotation.
An independent director or independent trustee is now allowed to hold only two consecutive five-year terms.
An independent director will be eligible for reappointment after a cooling off period of three years. During the three years, the director cannot be associated with the asset management company (AMC), its subsidiary or parent company in any manner.
The AMC will also need to adopt an auditor rotation policy. No auditor will be allowed to audit the AMC for more than two consecutive terms of five years each. The auditor will be allowed reappointment after a cooling off period of five years.
During the cooling off period, the new auditors will need to be completely independent of the previous auditor and have no association in terms of common brand name, control etc.