Addressing the SEBI Leadership Dialogue for Trustees of Mutual Fund, SEBI Chairman Tuhin Kanta Pandey said the strength of India’s capital markets does not rest only on regulations or returns, but on the trust that the system will always act in the best interest of investors. His emphasis was clear: trustees are the backbone of investor confidence, and their role is not ceremonial but deeply fiduciary, moral, and institutional. Over the years, this collective trust has helped transform India’s mutual fund landscape into a transparent, scalable, and investor-centric system.
Pandey highlighted how rapidly the industry has evolved. A decade ago, India’s Assets Under Management stood at around ₹12 lakh crore. Today, they exceed ₹75.6 lakh crore as of September 2025. The number of investors, once around 1 crore, has surged to over 5.6 crore. Monthly SIP flows, which were barely ₹3,000 crore in 2016, now surpass ₹28,000 crore. Mutual funds have shifted from being a niche savings route to becoming a major wealth-building mechanism—empowering small households and SIP investors, while enabling large institutions to build long-term portfolios.
Mutual fund trustees as custodians of the trust
According to Pandey, the trustee’s responsibility revolves around three simple but powerful principles:
1. Independence — not just in name, but in judgment and action.
Trustees must exercise unbiased oversight, ensuring investors remain protected regardless of commercial pressures.
2. Oversight — not just reactive, but proactive.
Their accountability extends beyond regulatory compliance; trustees are responsible to every unitholder whose savings they safeguard. Proactive supervision signals maturity in governance.
3. Trustee’s expanding mandate — key dimensions of oversight.
The modern MF ecosystem demands a trustee who is vigilant, informed, and able to anticipate risks before they escalate.
Fiduciary and regulatory compliance
Trustees ensure that every AMC’s operation aligns with SEBI regulations and the fund’s stated objectives.
This alignment protects investor expectations and prevents mismanagement of funds.
1. Operational vigilance
From valuation practices and risk management to the appointment of custodians and RTAs, trustees are the first line of defence in ensuring the integrity of systems and processes.
Their vigilance keeps daily operations transparent and prevents systemic lapses.
2. Transparency and fairness
Trustees ensure that valuations are fair, that fees and expenses are justified, and that every investor—large or small—is treated equitably.
This fairness builds public trust and prevents discriminatory practices within schemes.
3. Action on behalf of investors
When needed, trustees are empowered to act—to question, to escalate, and, if necessary, to intervene.
This authority carries with it a moral duty to act decisively, especially when investor interests are at stake.
The evolving landscape — new challenges and imperatives
1. Bandwidth and expertise
Trustees today must keep pace with evolving areas like derivatives, ESG investing, alternative assets, and risk analytics.
The complexity of modern markets means continuous learning is not optional; it is essential for responsible oversight.
2. Rigorous internal controls
Even when compliance reports are submitted by AMCs, trustees must independently test controls, seek explanations, and challenge assumptions.
Oversight today requires depth, analytical ability, and meticulous documentation.
3. Red flags and escalation mechanisms
Trustees must ensure robust early-warning systems capable of detecting anomalies, tracking exceptions, and triggering timely interventions.
A strong escalation framework prevents minor issues from turning into major risks.
4. Ethics and independence
The credibility of the trustee structure rests on perceived and actual independence.
Even the appearance of conflict must be avoided because investor trust depends on absolute transparency.
Constructive engagement with regulation
Trustees should not be passive recipients of SEBI’s reforms. They must actively engage—proposing workable guardrails and offering insights that strengthen safeguards without hindering innovation.
Their practical experience makes them vital contributors to policymaking.
Regulatory developments — strengthening accountability
1. Clarifying roles and responsibilities
SEBI has clearly delineated the distinct roles of Trustees and AMC Boards. Trustees must undertake independent evaluation and due diligence, while AMC Boards must establish a Unitholder Protection Committee.
This segregation ensures clear accountability and reduces overlap in governance duties.
This ensures clarity of accountability — Trustees safeguard investor interest, AMC Boards ensure operational excellence, and together they create a stronger governance framework.
A two-tiered structure makes oversight more robust and transparent.
2. Institutional mechanisms against market abuse
AMCs are now mandated to establish structured mechanisms to prevent market abuse, including front-running, insider trading, and misuse of sensitive information.
This requirement enhances market integrity and protects retail investors from unfair practices.
Trustees are expected not just to verify the presence of such mechanisms but to ensure they function in spirit and substance.
This distinction is crucial because compliance must be real, not symbolic.
3. Realignment of AMC employees’ interests with unitholders
SEBI has relaxed requirements for minimum investments by AMC employees and reduced disclosure frequency and lock-in periods for employees who resign.
The intent is to align employee incentives with unitholder outcomes while easing operational compliance.
Here again, the trustee’s role is to ensure that regulatory relaxations do not erode internal discipline or dilute investor safeguards.
Trustees must confirm that flexibility does not lead to governance gaps.
Disclaimer:
This article is intended solely for informational and educational purposes. It should not be considered financial, investment, or legal advice. The views expressed here are based on publicly available information and regulatory updates as of the time of writing. Mutual fund regulations, industry practices, and oversight frameworks may change over time. We are not registered with SEBI, RBI, IRDAI, or any statutory authority as financial or investment advisors. Readers are advised to conduct their own research and consult a qualified financial professional before making any investment decisions related to mutual funds or regulatory compliance.