SEBI Chairman Tuhin Kanta Pandey called upon mutual fund trustees to implement strong early detection mechanisms capable of identifying irregularities and enabling prompt corrective actions to protect investor welfare.

During his address at the Leadership Dialogue for Trustees of Mutual Funds, Pandey highlighted that trustees represent the primary defense mechanism for maintaining the reliability of systems and procedures in the mutual fund industry.

He encouraged them to move beyond being passive beneficiaries of Sebi's regulatory changes and instead take an active role in protecting investors.

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"This responsibility brings with it the ethical obligation to take decisive and courageous action in defending investor welfare." Characterizing trustees as the foundation of investor trust, he stressed that their function extends beyond symbolic representation. Rather, it encompasses fiduciary, ethical, and organizational responsibilities that require ongoing participation and responsibility.

Trustees, according to him, should actively participate by recommending "practical protective measures, proposing streamlined processes that maintain protective standards, and contributing extensive expertise throughout the consultation phases".

Pandey says, "Trustees must ensure robust early warning systems -- mechanisms that detect anomalies, track exceptions, and trigger timely interventions".

 

He further encouraged trustees to stay current with developing sectors including derivatives, ESG investment strategies, alternative investment options, and risk assessment tools, emphasizing that ongoing education and specialized development have become essential for successful supervision.

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"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 adds.

The head of Sebi emphasized recent regulatory measures designed to strengthen confidence and openness in the market. The regulatory body has clearly defined the responsibilities of trustees and boards of asset management companies. Trustees must now perform independent assessments and thorough investigations, while AMC boards are required to create a committee dedicated to protecting unitholders.

Additionally, trustees must implement organized systems to combat market manipulation, such as front-running, insider trading, and improper use of confidential information, ensuring equitable and clear operations throughout mutual fund organizations.

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Referencing the substantial expansion of the mutual fund sector, Pandey observed that the industry's assets under management have increased six times during the last ten years, rising from approximately Rs.12 lakh crore to Rs.75.6 lakh crore by September 2025. The count of individual mutual fund investors has similarly risen dramatically from roughly 1 crore ten years ago to more than 5.6 crore at present.

Monthly contributions through systematic investment plans, which were around Rs.3,000 crore in April 2016, have now exceeded Rs.28,000 crore, indicating growing individual investor involvement and trust in mutual fund investments.