Mumbai: Markets regulator Sebi Chairman Tuhin Kanta Pandey on Monday urged mutual fund trustees to adopt robust early warning systems that can detect irregularities and prompt timely interventions to safeguard investor interests.
Speaking at the Leadership Dialogue for Trustees of Mutual Funds, Pandey emphasised that trustees form the first line of defence in ensuring the integrity of systems and processes within the mutual fund ecosystem.
He asked them not to remain passive recipients of Sebi's reforms, but to engage actively to safeguard the investors.
"When needed, trustees are empowered to act - to question, to escalate, and, if necessary, to intervene," Pandey said.
"This authority carries with it the moral duty to act decisively and fearlessly to protect the interests of investors." Describing trustees as the backbone of investor confidence, he underlined that their role is far from ceremonial. Instead, it is fiduciary, moral, and institutional, demanding continuous engagement and accountability.
Trustees, he said, must engage actively by proposing "workable guardrails, suggesting simplifications that do not weaken the safeguards, and bringing wide experience during the consultation process".
Pandey said, "Trustees must ensure robust early warning systems -- mechanisms that detect anomalies, track exceptions, and trigger timely interventions".
He also urged trustees to keep pace with emerging areas, such as derivatives, ESG investing, alternative assets, and risk analytics, noting that continuous learning and specialised training are now indispensable for effective oversight.
"As mutual funds expand into new frontiers, including passive funds, international exposure, tokenised assets, and AI-enabled portfolio management, trustees will play an even more strategic role, balancing innovation with integrity," he added.
The Sebi chief also highlighted recent regulatory initiatives aimed at reinforcing trust and transparency. The regulator has clearly delineated the roles of trustees and AMC (asset management company) boards. Trustees are now expected to conduct independent evaluations and due diligence, while AMC boards must establish a Unitholder Protection Committee.
Trustees are further expected to put in place structured mechanisms to prevent market abuse, including front-running, insider trading, and misuse of sensitive information to ensure fair and transparent operations across mutual fund houses.
Pointing to the rapid growth of the mutual fund industry, Pandey noted that the sector's assets under management (AUM) have grown sixfold over the past decade from around Rs 12 lakh crore to Rs 75.6 lakh crore as of September 2025. The number of unique mutual fund investors has also increased sharply from about 1 crore a decade ago to over 5.6 crore currently.
Monthly systematic investment plan (SIP) inflows, which stood at about Rs 3,000 crore in April 2016, have now crossed Rs 28,000 crore, suggesting rising retail participation and investor confidence in the mutual fund space.
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