SEBI Chairman Tuhin Kanta Pandey called on mutual fund trustees to implement effective early warning systems capable of identifying irregularities and enabling prompt interventions to protect investor interests. Speaking at the Leadership Dialogue for Trustees of Mutual Funds, Pandey stressed the vital role trustees play as the first line of defense in maintaining the integrity of systems and processes within the mutual fund sector.
He encouraged trustees to be proactive participants in SEBI’s reform efforts rather than passive recipients, highlighting their empowerment to question, escalate issues, and intervene when necessary. “This authority carries with it the moral duty to act decisively and fearlessly to protect the interests of investors,” Pandey stated.
Further emphasizing the importance of their role, he described trustees as the backbone of investor confidence, characterizing their responsibilities as fiduciary, moral, and institutional. They must continuously engage and remain accountable, contributing to the development of effective safeguards without compromising investor protection.
Pandey reiterated the necessity for trustees to propose “workable guardrails” and simplifications during the consultation process, while ensuring robust early warning systems are established. These mechanisms should detect anomalies, track exceptions, and trigger timely interventions to maintain operational integrity.
The chairman encouraged trustees to keep up with evolving areas like derivatives, ESG investing, alternative assets, and risk analytics, underscoring the importance of continuous learning and specialized training for effective oversight. As mutual funds expand into new areas such as passive funds, international exposure, tokenized assets, and AI-driven portfolio management, he emphasized that trustees will take on a more strategic role to balance innovation with integrity.
Pandey also highlighted SEBI’s recent regulatory measures aimed at enhancing trust and transparency within the mutual fund industry. The roles of trustees and Asset Management Company (AMC) boards have been clearly defined, with trustees expected to conduct independent evaluations and due diligence. Meanwhile, AMC boards are mandated to form a Unitholder Protection Committee.
Additionally, trustees are required to implement structured mechanisms to prevent market abuse, including front-running, insider trading, and misuse of sensitive information, ensuring fair and transparent practices across mutual fund houses.
Reflecting on the rapid growth of the mutual fund industry, Pandey noted that assets under management (AUM) have increased sixfold over the past decade, rising from approximately ₹12 lakh crore to ₹75.6 lakh crore as of September 2025. Moreover, the number of unique mutual fund investors has surged from around 1 crore ten years ago to over 5.6 crore currently.
Monthly systematic investment plan (SIP) inflows have also seen substantial growth, climbing from about ₹3,000 crore in April 2016 to over ₹28,000 crore, indicating a significant rise in retail participation and investor confidence in the mutual fund sector.
Published on October 13, 2025.
