SEBI issues Risk Management Framework for Mutual Funds

The Securities & Exchange Board of India has revised the Risk Management Framework (RMF) for Mutual Funds vide circular dated September 27, 2021. The Circular provides a set of standards comprising the policies, procedures, risk management functions and roles and responsibilities of the management, the Board of Asset Management Companies (AMC) and the Board of Trustees. Key points of the Framework are:

  • The AMCs shall perform a self-assessment of their RMF and practices and submit a report to their Board along with the roadmap for implementation of the framework.
  • The elements of RMF have been segregated into ‘mandatory elements’ which should be implemented by the AMCs and ‘recommendatory elements’ which address other leading industry practices that can be considered for implementation by the AMCs.
  • The self-assessment must be completed and the necessary systems must be in place at the AMCs to enable compliance with the provisions of this circular with effect from 1st January, 2022. However, AMCs may choose to adopt the provisions of this circular before the effective date.
  • Compliance with the RMF should be reviewed annually by the AMC.
  • Reports of such reviews shall be placed before the Board of AMC and Trustees for their consideration and appropriate directions. Trustees may forward the findings and steps taken to mitigate the risk along with their comments to SEBI in the half-yearly trustee reports.
  • There shall be at least one CXO level officer identified to be responsible for the risk management of specific functions of the AMC/Mutual Fund.

The framework will be effective from January 01, 2022.

For details, refer to Risk Management Framework (RMF) for Mutual Funds.

 


*Tanvi Singh, Editorial Assistant has reported this brief.

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