PROTECTING UNIT HOLDERS

SEBI's push to create unit holder protection committees is a welcome move amid a rising number of mutual fund investors. Especially when many are investing directly with the asset management companies

The rising number of mutual fund investors has prompted the Securities and Exchange Board of India (SEBI) to protect the interests of the unit holders, leading to a directive to each of the asset management companies (AMCs) to set up a Unit Holder Protection Committee (UHPC). It will come into force on January 1, 2024.

According to a SEBI circular, which clarifies the roles and responsibilities of the trustees and board of AMCs, the UHPC has the following mandate: review the various compliance issues relating to the protection of interests of unit holders, and keep them well-informed of mutual fund products, investor charter, and complaint-handling procedures. The circular further states that the UHPC will ensure compliance with laws and regulations, and other related processes with specific reference to the operations of mutual fund houses. It will also make recommendations for protecting the interests of investors as well as monitor implementation. It will report its findings to the board of directors of the AMC along with recommendations for action.

This directive brings investors to the forefront, making it important for AMCs to take their interests seriously. At the same time, it also provides unit holders with a clear route to take up their concerns with the AMC once they start investing.