Informist, Friday, Aug. 22, 2025

MUMBAI – Mutual funds need to exercise some caution when investing in micro-cap companies and debt instruments, Tuhin Kanta Pandey, chairman of the Securities and Exchange Board of India, said at an event organised by Association of Mutual Funds in India. Fund houses need to diversify their investment options beyond blue-chip companies, but they also need to ensure diligence and transparency to tackle both investment and operational risks that may arise, he said.

"As fraudsters grow more creative, we must be more vigilant," Pandey said. "Each time such a case is detected, AMCs must act promptly and monitor the evolving patterns in such practices."

He also urged fund houses to take complete responsibility for the actions of vendors and third parties while outsourcing. As asset management companies enter into contracts with third parties, these companies are required to ensure there is no scope for any data leakages, Pandey said.

Pandey spoke vehemently about the need for protecting individual investors and ensuring that they are included in the financial ecosystem. Talking about the recent proposal to incentivise mutual fund distributors for investments from first-time individual investors in tier-2 and tier-3 cities, Pandey said, increasing penetration is a key priority. "This will not only bring new participants into the fold, but also extend the reach of mutual funds into under-represented regions, contributing to human financial inclusion," Pandey said.

Ensuring greater participation of women in mutual fund investments is also a priority for the sector, Pandey said. "Financial inclusion will remain incomplete unless women are equally represented, and we are thus also anticipating to introduce an additional distribution incentive for investments from first-time women investors," he said.

SEBI is also reviewing the categorisation of mutual fund schemes to provide greater flexibility for product innovation, improve clarity, and address the issue of overlap in portfolio of schemes, Pandey said. "Based on feedback received from the consultation process, next steps will be taken. These measures are expected to facilitate the industry to become more transparent and investor-friendly," he said.

As part of its ease-of-going business and compliance simplification measures, SEBI has reviewed the reports and filings submitted by mutual funds and based on this review, has decided to discontinue the requirement of filing of over 52 reports, notices, and addendums by asset management companies with the market regulator, Pandey said. "Going ahead, over the next few months, we will also be working towards a comprehensive simplification of mutual fund regulations. The aim is to ease compliance for the industry while continuing to safeguard investor interests," he said.

Pandey urged mutual funds to innovate responsibly and balance creativity with caution. End

Reported by Kabir Sharma

Edited by Ashish Shirke

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