The Chairman of the Securities and Exchange Board of India (Sebi), Tuhin Kanta Pandey, has praised the mutual fund industry for its role in channelling household savings, but cautioned against excessive risk-taking and operational lapses that could undermine investor confidence.
Speaking at an event to mark 30 years of the Association of Mutual Funds in India (AMFI), Pandey urged fund houses to exercise restraint when investing in microcaps or certain debt instruments arranged through bespoke deals.
“While there is a need to diversify beyond blue chips, mutual funds, as a retail product, should exercise caution,” he said, stressing the importance of maintaining proper documentation to ensure transparency and due diligence.
He also reminded the industry of the need to treat all investors fairly, particularly during subscriptions and redemptions. “By strictly adhering to the cut-off time for all classes of unit holders, the industry can instil a greater degree of confidence among investors,” Pandey noted.
Highlighting growing operational risks, the Sebi chief pointed to the rise of fraudulent redemptions by impersonators. He urged asset management companies (AMCs) to act swiftly when such cases arise and share information across AMCs and registrar and transfer agents (RTAs) to prevent recurrence. In this battle, speed of information is our greatest weapon, he emphasised.
On technology, Pandey warned that the increasing digitalisation of investor interactions had heightened vulnerabilities. “Even a single breach can cause lasting damage to investor confidence. Protecting that data is as important as protecting their money,” he said.
He further reminded the industry that outsourcing, while useful for efficiency, does not reduce accountability. Mutual funds remain fully responsible for the actions of vendors or partners. Agreements must ensure there is no scope for data leakage, Pandey cautioned.
While commending the sector’s achievements, he concluded with a reminder of its ultimate responsibility: “Amidst this exciting future, let us remember that our true benchmark is not just assets under management, but trust and stewardship.”